LG considers LCD deal with Sharp
By Kim Yoo-chul
LG Electronics, the world’s second-largest maker of flat-screen television, is in advanced talks with Sharp over buying liquid crystal displays (LCDs) from its Japanese rival to use in its large-sized TVs, according to industry sources.
LG Electronics has relied on LG Group affiliate LG Display and a number of Taiwanese makers for LCD supplies, but buying parts from Sharp is a new option that the company is considering as it strengthens its efforts to cut costs.
LG Electronics believes that buying LCD screens from Sharp could allow it to make cheaper large-sized TVs with 60-inch or bigger screens.
``LG has been in talks with Sharp to use its LCDs for its strategic models. The two companies are still talking over price,’’ a top-ranking LG Electronics official said on condition of anonymity.
He said that Sharp has been offering competitive panel prices to LG Electronics, which recently sent executives to the Japanese company’s new 10th generation LCD manufacturing plant.
``It was the first time Sharp opened the highly advanced manufacturing line to officials from a Korean company. This shows that the company is committed to forming a business relationship with LG,’’ he said.
``If the deal goes through, LG with Sharp’s advanced LCDs will be in the market by the first-half of next year.”
LG Electronics is the top shareholder in LG Display with a stake of 37.9 percent. LG Electronics and Sharp’s Korean office both declined official comment.
Talk of a potential LG Electronics-Sharp deal comes at a time when major television makers are pressured to cut costs to adjust to the decimated demand for electronics products, affected by economic woes in the United States and Europe.
LG Electronics has cut its television sales target to 30.5 million for this year from a previous projection of 40 million.
LG Display CEO Kwon Young-soo recently told The Korea Times that his company will cut its LCD investment next year and has no plans to build new LCD-producing factories.
LG Electronics has been struggling to close the gap on consumer electronics with domestic rival Samsung Electronics, the world’s largest maker of flat-screen television.
The company appears to be working harder to improve diversity in parts procurement, which would make its finished products more cost competitive.
``The partnership with Sharp is further proof that the short-term outlook for the consumer electronics sector is bad. Sharp wouldn’t have been considered as a parts supplier if the situation was better,’’ said another senior industry executive.
LG insiders stress the possible LG Electronics-Sharp linkup doesn’t necessarily mean that LG Electronics and LG Display are facing dire times.
Signing a deal with LG Electronics would also be critical for Sharp, which is facing pressure to reduce its inventory in large-size LCDs.
Sharp has been boosting its production for large-size screens at its 10th generation factory, where operations were temporarily halted after the massive earthquake in March.
``Because LG Electronics is pushing television with three-dimensional performance, it needs more large-sized panels, and Sharp is offering good quality at reasonable prices,’’ said the LG Electronics executive.
He also said that Sharp is also approaching Samsung for a similar deal, although Samsung declined to confirm.
DisplaySearch, a market research firm, said the panel price for 42-inch full high-definition (HD) LCD TV was the lowest at $215 per unit in early September, a drop of 37 percent from early last year.
Samsung Electronics and LG Display have been cutting their factory output rates below 75 percent and analysts think that global LCD panel and TV markets will remain bearish through the first half of next year.
``The LG-Sharp deal makes sense and LG Electronics is expected to buy displays from other Taiwanese LCD makers as well as part of its diversification strategies for parts-procurement,’’ said Park Young-joo, an analyst at Woori Investment & Securities, a leading local brokerage.