UPDATE 4-Sony to own one-third of Sharp's $3.5 bln LCD plant
(Adds Sony, Sharp presidents' comments)
TOKYO, Feb 26 (Reuters) - Sony Corp (6758.T) said on Tuesday it would take a one-third stake in Sharp Corp's (6753.T) $3.5 billion LCD panel plant set for completion by March 2010, to meet rising demand for flatscreen televisions.
It is the latest in a wave of alliances among Japanese flatscreen TV makers as they try to secure enough panels while keeping initial investments in check to fight steep price falls.
Sony wants a new panel supply source on top of its LCD venture with Samsung Electronics Co Ltd (005930.KS), while the deal gives Sharp a partner that shoulders part of the hefty investment and helps keep the factory busy.
Sharp, which offers Aquos LCD TVs, plans to turn the liquid crystal display factory, which will be the world's largest, into a joint venture, with the Osaka-based company owning 66 percent and Sony the remainder.
Both companies declined to say how much they would invest.
"This agreement is a very big step for Sony as we strive to become the world's No.1 TV maker," Sony President Ryoji Chubachi told a news conference.
Sony and Sharp are the world's second- and third-largest LCD TV makers behind South Korea's Samsung, according to DisplaySearch data for 2007.
The joint venture will also make LCD modules, display units equipped with parts such as a backlight and LCD driver chips.
DOUBLE SOURCING
Chubachi said Sony's panel venture with Samsung, S-LCD, will remain vital to its flatscreen TV business. "We continue to see S-LCD as our core supplier for LCD panels and modules, and we will keep running it jointly," he said.
He said global LCD TV demand is expected to hit 100 million units in the business year starting April, and Sony aims for 15 to 20 percent market share, or 15 million to 20 million units, up from its sales forecast for the current year of 10 million.
"As Sony expands TV production, it is natural to seek to diversify panel sources," said Park Hyun, an analyst at Prudential Investment & Securities.
Sharp's new factory will be the world's first plant using so-called 10th-generation glass substrates, which can yield more panels than earlier versions, improving production efficiency and helping both firms offer attractively priced flatscreen TVs.
"If Samsung proposes to build and operate a 10th-generation plant jointly, that would be worth considering as long as the project can produce competitive panels," Chubachi said.
OVERSUPPLY CONCERNS
Sharp has said 15 of the 40-inch panels can be cut from the new motherglass, against eight panels from eighth-generation motherglass at its existing plant.
"Our joint effort will boost the quality and cost competitiveness of LCD panels, making Japan's LCD industry stronger as a whole," Sharp President Mikio Katayama said.
The announcement follows Toshiba Corp's (6502.T) decision late last year to buy LCD panels from Sharp, while Panasonic maker Matsushita Electric Industrial Co Ltd (6752.T) said this month it would spend $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."
Shares in Sony closed up 1.2 percent at 5,200 yen, while Sharp was flat at 2,100 yen. The Tokyo stock market's electrical machinery index .IELEC.T rose 0.3 percent. ($1=107.94 Yen) (Additional reporting by Edwina Gibbs in Tokyo, Rhee So-eui in Seoul; Editing by Mike Miller/David Hulmes)
