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TOKYO - Sony said it would take a one-third stake in Sharp's $3.5 billion (NZ$4.28bn) LCD panel plant set for completion by March 2010, in an effort to meet fast-growing demand for flat televisions.
The move is the latest in a wave of alliances among Japanese flat TV makers as they try to secure enough panels while keeping initial investments in check to fight steep price declines.
Sharp, which offers Aquos LCD TVs, plans to turn the liquid crystal display factory, which would be the world's largest, into a joint venture, with the Osaka-based company owning 66 per cent and Sony taking the remainder.
Besides LCD panels, the joint venture will also produce LCD modules, which are display panels equipped with components such as a backlight unit and LCD driver chips.
Sony and Sharp are the world's second and third-largest LCD TV makers, behind South Korea's Samsung Electronics.
The two Japanese companies plan to hold a joint news conference where Sony President Ryoji Chubachi and Sharp President Mikio Katayama will speak.
"For Sharp, this is a positive step since it means a major buyer that would keep the 10th-generation factory busy," Daiwa Institute of Research analyst Kazuharu Miura said.
Sharp's new factory would use so-called 10th-generation glass substrates, which can yield more panels than earlier-generation, smaller glass substrates, improving production efficiency and helping both firms offer attractively priced flat TVs.
Global LCD TV sales are likely to more than double to 155 million units by 2012, according to the Japan Electronics and Information Technology Association.
"Sony needed an extra source of panels because the large-size LCD TV market is growing faster than it had expected. As Sony expands TV production, it is natural to seek to diversify panel sources," said Park Hyun, an analyst at Prudential Investment & Securities.
"Sony is likely to continue the partnership with Samsung.... Therefore Sony's diversification strategy won't have a negative implication for the alliance with Samsung."
Sony, which aims to sell 10 million units of its Bravia LCD TVs in the current business year to March 31, runs another LCD joint venture, S-LCD, with Samsung.
The announcement follows Toshiba Corp's decision late last year to buy LCD panels from Sharp, while Panasonic maker Matsushita Electric Industrial Co Ltd said earlier this month it would spend 300 billion yen ($2.8 billion) to build an LCD plant in the face of robust LCD TV demand and tight panel supplies.
Aggressive investments in panel capacity, however, have raised investor concerns about a potential supply glut.
"The problem will be 2010 and 2011. Just when TV demand is likely peaking, Sharp's 10th-generation plant will come onstream, and so will Matsushita's new factory," Shinko Securities analyst Hideki Watanabe said.
"Today's deal gives Sharp good risk hedging."
- REUTERS
