Sony Corp, the world's No. 2 consumer electronics maker, and Samsung Electronics Co said they are close to agreeing on a ?200 billion (US$1.8 billion) venture to make flat-screen displays used in televisions and computers.
"We expect to make an announcement in the next few days," Chu Woo Sik, Samsung's head of investor relations, said on a conference call. "We still have to make the final decision."
Surging sales of flat-panel televisions and other digital entertainment products helped consumer electronics companies such as Sharp Corp and Canon Inc predict record annual earnings.
Tokyo-based Sony doesn't make liquid-crystal display panels and risked lagging rivals in offering competitive flat-screen models, said Satoru Oyama, an analyst at Lehman Brothers Japan Inc.
"The TV is the king of consumer electronics," because it is a central offering in a company's product line and one of the most expensive items a family will buy, said Oyama, who rates Sony shares at "underweight/neutral."
Flat-panel TVs are also commanding better margins than traditional models, Oyama said.
The companies are finalizing details for the venture, said Mitsuru Ohki, Sony's corporate executive vice president, commenting on an earlier Nihon Keizai Shimbun report that Samsung, the world's biggest maker of LCDs, and Sony will each invest about ?100 billion in the venture.
Factory shipments of LCD televisions in Japan rose 51 percent last month to 108,000 units, said the Japan Electronics and Information Technology Industries in a statement last month.
As consumers replace bulky cathode-ray-tube televisions, the global market for flat TVs will reach 37 million units, or a fifth of total TV shipments, worth US$19.7 billion, by 2007, according to US market researcher DisplaySearch.
"The LCD television market grew faster than we thought and so did the technology," said Kei Sakaguchi, a Sony spokesman, without commenting on the specifics of the agreement.
The Sony-Samsung joint venture will be set up in South Korea and will have a Samsung official as chief executive, the newspaper reported.
Construction of a factory will begin next year on land Samsung has purchased in Asan, South Korea, and completed possibly as early as 2004, Nikkei said.
The factory -- a so-called seventh-generation plant capable of producing larger-sized sheets of glass from which screens are cut -- will be capable of making 100,000 LCD panels a month, the report said.
On Friday, Samsung Electronics posted an unexpected gain in third-quarter profit as sales of flat-panel displays and memory chips surged.
The company forecast record fourth-quarter profit.
Net income rose 6 percent to 1.84 trillion won (US$1.6 billion) in the three months ended Sept. 30, from 1.73 trillion won a year ago. The Seoul-based company said sales rose 15 percent to a record 11.26 trillion won.
Samsung, which spent 5 trillion won this year boosting its capacity in memory chips and liquid-crystal screens, will increase capital spending this year to 7.03 trillion won, almost 4 percent higher than the 6.78 trillion won budgeted.
"We are very confident about the fourth quarter," Samsung's Chu said in a telephone interview. "We look forward to reporting a record."
Samsung's chief executive Yun Jong Yong has vowed to outspend rivals to outfit Samsung with the latest production equipment so the South Korean chipmaker is better placed to exploit increases in demand for electronic components.
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