Partnership of Two Rivals to Boost Competitiveness

It is unusual for the nation's two major electronics makers to have forged a partnership to sharpen their competitive edge over foreign rivals. Samsung Electronics and LG Electronics said last week that they have agreed on a cross-purchasing deal for flat TV screens. Under the agreement, Samsung plans to buy 37-inch liquid crystal display (LCD) panels from LG's affiliate, LG Display, while the latter will purchase 52-inch panels from the former.

There is no doubt that the deal is designed to help the two electronics giants survive the ever-fierce competition in the panel-manufacturing sector. They have so far purchased LCD panels from Taiwanese makers since they could not meet global demand with their own products. In this situation, Taiwanese producers took up 42 percent of the global flat panel market, threatening to catch up with South Korean manufacturers with a 44-percent share.

First of all, the Samsung-LG tie-up is likely to put the brakes on the Taiwanese firms, which have enjoyed rapid growth. It is also expected to help the local makers to strengthen their positions against their Japanese rivals. It goes without saying that the cross-purchasing plan is a win-win strategy for Samsung and LG. It will lead to the replacement of LCD panel imports, the reduction of manufacturing costs, and the revitalization of the local TV screen industry.

The deal will also contribute to cutting the nation's trade deficit, while promoting investment in the local LCD panel industry. In addition, Samsung and LG have agreed to jointly develop mobile television technology aimed at becoming the industry standard in the North American market. Executives of the two companies said they plan to present their proposal to the Advanced Television Systems Committee (ATSC), an international group developing technology standards for digital televisions used in the United States and Canada.

The Samsung-LG collaboration comes before the ATSC's U.S. office is scheduled to pick a mobile television standard in the first half of next year. The joint action is expected to set the stage for domestic companies to move from rivalry to partnership in order to cooperate in developing technology, making products and exploring overseas markets.

Korean companies have been leading in the world's semiconductor, shipbuilding and some other industrial sectors. However, they are increasingly sandwiched between technology-savvy Japanese makers and rapidly-growing Chinese manufacturers. It's time for local companies to refrain from engaging in dog-eat-dog competition at home and abroad. Instead, they are required to team up with each other to increase synergistic effects and raise their global competitiveness.