By Kim Yoo-chul
Staff Reporter
The partnership between Samsung Electronics and Sony is facing a serious test, with Sony drawing first blood, testing samples of LCD panels manufactured by LG Display, Samsung's rival, a source said, Tuesday.
"Sony has approached LG Display to test LG's 32-, 37- and 42-inch panels for its TV sets," he told The Korea Times, adding that LG Display may supply its panels to Sony from the second half of the year.
Spokespersons for both Sony and LG Display declined to comment.
Since 2004, Samsung has been running an LCD joint venture with Sony in Korea's provincial city of Tangjeong, in South Chungcheong Province.
The facility is the key to helping Samsung maintain its global television leadership.
The venture is engaged in the production of seventh-generation and the first and second phases of eighth-generation panels. The two have also been in talks for further investment in the next-generation 11th panels.
A panel facility with a higher generation leads to the production of larger-sized screens, enabling TV set makers to manufacture more pricey and advanced TVs.
Panel costs take up as much as half of television production costs.
"Sony's TV business is plummeting. Sony wants to find an alternative supply for LCD panels with cheaper prices," another high-ranking industry official said.
Bruised by a combination of falling sales and a rising yen, Sony is now projecting the biggest operating losses in its history and vowing to shake up its electronics business, but analysts say cuts may not "go deep enough" to restore profitability over the next several years.
In a recent press conference, Sony Vice Chairman Ryoji Chubachi vowed to change strategy in receiving TV panels from S-LCD, citing profitability.
A Samsung spokesman declined to comment.
For panel makers, securing a stable source of demand is the key to improving profitability.
"If LCD panel prices are favorable, it is highly likely that Sony will restore relations with LG Display," an analyst at Woori Investment & Securities said. Sony cut the partnership with LG in 2004.
LG Display's key clients are Japan's Panasonic, Apple and Chinese TV makers, while Samsung supplies Sony and Dell. LG's relatively weaker client bases are cited as a stumbling block to its expansion.
LG Electronics, the biggest shareholder of LG Display, aims to overtake Sony in the global LCD TV market in terms of sales.