The proposed liquid-crystal-display (LCD) joint venture between Sony and Sharp is expected to bring positive impact on the overall industry but limited negative influence to Taiwanese flat panel makers, Citigroup said yesterday.
Sony Corp and Sharp Corp announced yesterday in a statement that they had signed a non-binding memorandum of intent to set up a joint venture to manufacture and sell large-sized LCD panels and modules.
The joint venture -- which is scheduled to be established in April of next year and start operation by the end of that fiscal year -- will be 34 percent owned by Sony and 66 percent by Sharp, according to a statement posted on Sony's Web site. Each company will receive supplies corresponding to their respective investment, the statement said.
"This type of strategic alliance [or consolidation] is generally good for everyone, as it can help control supply growth and stabilize panel prices," George Chang (
"Ideally, panel makers can `swap' or `exchange' their capacity to better manage the cyclicality and seasonality of the TFT [thin-film-transistor] industry," they said.
The planned venture will be established by splitting out a generation-10 LCD panel plant from Sharp which is now under construction in Sakai City, Osaka Prefecture, the companies said.
The generation-10 plant refers to a LCD fab that is adopting the so-called 10th-generation mother glass substrates technology to produce screens measuring as much as 60 inches diagonally.
The plant will have a production capacity of 72,000 substrates per month, following an initial production of 36,000 substrates a month, the statement said.
The two companies did not disclose financial details. But both Bloomberg and AP newswires said yesterday that Sony planned to invest ?100 billion (US$927 million) in the plant, citing an earlier report carried by Japan's Nikkei Shimbun newspaper. In July last year, Sharp said it would invest ?380 billion to build the factory, Bloomberg said.
Shares of AU Optronics Corp (友達光電) and Chi Mei Optoelectronics Corp (奇美電子) appeared little influenced by the news yesterday, despite market concerns that they may obtain less orders from Sony once the venture is established.
AU Optronics, the world's third-largest flat panel makers, saw shares rise 3 percent to NT$61.2 (US$1.96), while those of Chi Mei Optoelectronics, the nation's second-largest flat panel producer, edged up 0.9 percent to NT$42.4 on the Taiwan Stock Exchange. Chunghwa Picture Tubes Inc (中華映管), the nation's third-biggest maker of LCD displays, also surged 4.4 percent to close at NT$10.65.
Citigroup analysts said the impact "will be minimal" because "Japanese customers have always tended to outsource the more `commoditized' panels to Taiwan," in a reference to mainstream 30-inch TV panels.
Chang and Rhee noted that this trend would not change anytime soon and expected both Sony and Sharp to target the more high-end segments via the commencement of the new generation-10 fab.
They maintained that AU Optronics was still one of their top picks along with LG.Philips LCD Co, a joint venture between South Korea's LG Electronics Inc and Royal Philips Electronics NV, due to their "more diversified product mix, stronger balance sheets and cash flow and better earnings momentum."
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