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Sony¡¯s announcement Tuesday that it has agreed to set up a joint venture with Sharp for the manufacture of next-generation liquid-crystal display panels has put Samsung Electronics, Sony's long-time partner in LCDs, on red alert. Huge losses, tangible or intangible, seem inevitable for the Korean conglomerate, which is already battered by a corruption scandal.
Since establishing LCD panel joint venture S-LCD in 2003, Samsung and Sony have maintained a close relationship, bearing an equal share of expenses in the construction of new factories. When new plants were built in 2004 and 2006, Sony invested some W1 trillion to W1.3 trillion each time (US$1=W947).
But Sony's latest decision leaves Samsung alone to invest in S-LCD's 10th-generation production line and it will cost an estimated W5 trillion to build.
Above all, Samsung stands to lose its biggest buyer in the 10th-generation LCD market. S-LCD's new line, when put into operation, was expected to bring annual sales of W4 trillion, of which Sony was expected to buy half. For the past four years, Sony bought around W2-3 trillion worth of LCD panels annually from S-LCD.
Samsung also worries about possible damage to its brand image. When S-LCD was established in 2003, the Korean electronics giant consolidated its high-tech image by supplying LCD panels to Sony, then the world's largest digital TV maker. This eventually helped Samsung take the top spot in the global LCD TV market.
Although Samsung ranks first in the global LCD panel and TV markets, its breakup with Sony is unlikely to help its image, especially when competition is growing ever fiercer among the big players. S-LCD means a lot to Samsung: Lee Jae-yong, the only son of Samsung Group chairman Lee Kun-hee, is the official director of S-LCD.
The new alliances among the Japanese rivals has prompted calls for closer cooperation among Korean enterprises. Several companies led by the Korea Display Industry Association have laid out plans to work together in the development of display panels, equipment, parts and materials.
Samsung, for its part, faces criticism over its slow response. There have been plenty of signs indicating shifting alliances in the global LCD market. For instance, Sony refused to invest in S-LCD's new line late last year and instead increased procurement from Taiwan. Meanwhile, Sharp, Japan's largest LCD maker, had been looking for a new partner since it announced last year it is building the 10th-generation line. But Samsung ignored the signs and allowed itself to be caught off guard, critics say.
(englishnews@chosun.com )
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