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South Korean flat panel makers in cooperation pact

Mon May 14, 2007 6:02am EDT

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SEOUL, May 14 (Reuters) - Four major South Korean flat panel makers announced on Monday they were forming an alliance in order to enhance their competitiveness as a price war with Japanese and Taiwan makers shows no signs of abating.

Samsung Electronics Co. Ltd. (005930.KS), LG.Philips LCD Co. Ltd. (034220.KS), LG Electronics Inc. (066570.KS) and Samsung SDI Co. (006400.KS) resolved to cooperate on research and development, buy panels from each other and adopt common industrial standards.

A price war involving liquid crystal display (LCD) panels, championed by Samsung and LG.Philips, and plasma display (PDP) panels led by LG Electronics and Samsung SDI has saddled the latter three companies with losses and raised doubts about the future of the PDP industry.

"This move by Korean panel makers is in line with our industry rebound scenario of PDPs and LCDs strategically allocating themselves to create a healthier market situation," said James Kim, an analyst at Lehman Brothers, in a research note.

The four South Korean panel makers compete against Japan's Matsushita Electric Industrial Co. (6752.T) in plasma and Sony (6758.T) and Sharp Corp (6753.T) in LCDs. Taiwan's AU Optronics Corp. (2409.TW) (AUO.N) and Chi Mei Optoelectronics Corp. (3009.TW) also make LCD panels.

"We believe that Samsung and LG will work together to position PDPs for the 50"+ segment and LCDs for the 40"+ segment," Kim said.

"The alliance should be particularly favourable to LG.Philips as it will have an easier time securing cheap parts and will now count Samsung among their customers," said Song Myung-sup, an analyst at CJ Securities.

((Reporting by Marie-France Han, editing by Alan Raybould; mf.han@reuters.com; Reuters Messaging: mf.han.reuters.com@reuters.net;+82-2-3704-5667)) Keywords: DISPLAY KOREA/COOPERATION

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