Samsung Electronics Co, the world's second-largest maker of liquid crystal displays, and Sharp Corp, Japan's biggest producer, will supply screens for Sony Corp's PSP portable game player, boosting sales from their older plants.
Samsung and Sharp won a "huge" order for screens measuring four to five inches diagonally, said a Sharp official, who asked not to be identified and declined to give details. The order may generate combined annual sales of US$400 million for the two suppliers, said IDC analyst Stanley Jeong.
Sony, maker of the best-selling PlayStation 2 home video-game console, aims to topple Nintendo Co's dominant Game Boy in the portable market when it begins selling PSPs in Japan last December. For Sharp and Samsung, the order helps utilize older plants that are unsuited for making larger television screens.
"This is good news for the LCD makers. The game market is very big and its prospects look bright," said Kim Hee-gook, who has Samsung Electronics shares among the US$170 million in assets he helps manage at Tong Yang Investment Trust Management Co in Seoul.
"It's natural for LCD makers to shift production of their older plants to smaller screens. Sony's order helps the effort," Kim said.
Samsung Electronics said when it announced fourth-quarter earnings in January that the company was working on a "big project" related to LCDs less than 10 inches diagonally. The project would make game devices and personal digital assistants the main products using the screens, displacing mobile phones.
The Sony deal "will give Samsung a big push into the small-size panel market, as Samsung will offer a wider variety of products," said Yoshio Tamura, vice president at market researcher DisplaySearch.
Jeong, who tracks the LCD industry for the Framingham, Massachusetts-based researcher, said he expects both companies to sell as many as 6 million screens to Sony annually at about US$80 each.
"Considering how big Japan's game business is, this is a really big deal for both companies," said Jeong, who covers the LCD industry for technology-industry researcher IDC.
"The order will probably help Samsung and Sharp to secure more contracts to supply chips that go along with those LCDs," Jeong said.
Samsung Electronics sold 2 trillion won (US$1.7 billion) worth of LCDs in the fourth quarter, accounting for 15 percent of the company's overall revenue under the stewardship of Lee Sang-wan, 54, who is president of Samsung's LCD division.
The company said in January it expects the shortage in global LCD supplies to last until the first half of this year.