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Samsung Electronics is facing a serious crisis as it comes under joint attack from Japanese rivals that are resolved to overtake the Korean giant. The Japanese electronics companies are launching a united offensive against Samsung at a time when the top management of Samsung Group is distracted by a special counsel probe into a corruption scandal.
Major Japanese newspapers including the Nihon Keizai Shimbun and the Mainichi Shimbun on Sunday reported that Sony, which has long worked with Samsung Electronics in operating a jointly-owned LCD panel manufacturer, has decided to purchase 10th-generation LCDs from Sharp of Japan. Top Sony executives reportedly informed their Samsung Electronics counterparts recently of their plan to cooperate with Sharp.
Samsung Electronics and Sony established the joint LCD maker S-LCD in Tangjeong, Asan, South Chungcheong Province with an investment of W2 trillion (US$1=W949) in 2003. The two maintained a honeymoon relationship for the past four years, with Samsung buying half of S-LCD's output and Sony the other half.
Following its latest decision, Sony will likely announce a plan to officially sever ties with Samsung Electronics in the 10th-generation LCD market, according to business circles. Sony reportedly purchased around W2 trillion to W3 trillion worth of LCD panels from S-LCD annually.
¡ß Japanese firms launch crafty attacks
According to the Japanese newspapers, Sony decided to switch to Sharp because it wants to cut costs by diversifying business partners. Sony reportedly felt the need to enhance its cost competitiveness as competition grows fiercer in the global LCD TV market. Up until recently, Sony had bought most of its LCD panels from S-LCD.
But Korean business circles think differently: they believe the Japanese firms dislike their Korean rivals since the Koreans edged them out of the top spots in major global sectors, including digital electronics.
Sony in particular has been troubled by the widening gap between itself and Samsung since it lost its lead in the global digital TV market, which it had dominated until the early 2000s, to the Korean company.
Ban Dong-wook, a researcher at Daishin Securities, said, "Sony may have an antipathy toward Samsung Electronics as it has recently been overtaken by Samsung in its main business lines, such as TVs."
There is an emerging trend of opposition to Samsung Electronics and LG Electronics by Japanese electronics firms. In the global LCD market, where the Korean companies rank first and second, Sharp, the fifth-ranking firm, has revealed an ambitious plan to invest trillions of won.
Japanese conglomerate Matsushita, which once focused only on PDP TVs, is now stepping up its LCD TV business, while founding an LCD panel factory in a joint venture with Hitachi and Toshiba.
Under these circumstances, Sony has decided to join hands with Sharp, creating an environment of unity among Japanese enterprises. After it established S-LCD with Samsung in 2003, Sony had been left out in the cold by other Japanese conglomerates.
¡ß Is management vacuum at Samsung the reason?
Samsung Electronics appears embarrassed. Sony was its stable business partner for the past few years, including 2005 when the LCD business was particularly sluggish. Samsung will now have to look for a new partner as solid as Sony. A Samsung Electronics executive said, "We're not worried right now, because there's so much demand for LCDs. But the problem will be felt two or three years down the line."
Above all, Samsung Electronics is worried about the possibility of similar incidents occurring during the management vacuum at Samsung Group. Min Hoo-sik, managing director at Tempis Capital Management, said, "It seems likely that Sony has decided to sever ties with Samsung Electronics now because it believes this is a good chance to dodge Samsung's challenge as best it can while Samsung's top management is not functioning properly."
(englishnews@chosun.com )
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