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By Reuters
Published: February 25, 2008, 5:16 AM PST
New alliances reshaping the LCD industry
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Competition in the LCD industry is shaping up as a battle between two groups of major manufacturers, each of which has struck alliances designed to reduce production costs and guarantee supply.
On Monday, reports that Sony was planning to start buying LCD television display panels from electronics maker Sharp sent Sharp's shares up 5.2 percent. And an Asahi newspaper report that electronics manufacturer Pioneer plans to stop making 42-inch plasma display panels helped push its shares up 4.3 percent Monday.
Such a move by Sharp, the world's No. 3 LCD TV maker, and Sony, the second-largest, would underscore the importance of securing enough display panels to meet fast-growing LCD TV demand.
"The (LCD panel) industry is finally splitting up neatly into two groups," said Nikko Citigroup analyst Kota Ezawa.
The deal would create a larger alliance between Sharp, Sony, and Samsung Electronics, which currently runs an LCD panel joint venture with Sony, along with Toshiba, which said in December that it would buy large LCD panels from Sharp.
Meanwhile, Panasonic maker Matsucrapa Electric Industrial and Hitachi hold a large stake in joint venture IPS Alpha Technology, which makes large LCD panels. Matsucrapa also announced earlier this month it would spend 300 billion yen ($2.79 billion) to build an LCD panel plant by 2010.
Still, Ezawa noted that the potential deal wasn't without risk for Sharp.
"By providing panels to its television competitors, Sharp faces the risk of its own televisions not selling well," he said.
For Sony, the procurement from Sharp is expected to help it secure enough panels without making heavy capital investment.
Sony's shares rose 2.4 percent to 5,140 yen ($47.94), compared with the benchmark Nikkei's 3.1 percent gain.
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Shares of Sharp ended at 2,100 yen ($19.59).
On the plasma television side, whose market share has gradually been eaten away by LCD TVs, Pioneer will procure 42-inch and smaller panels from Matsucrapa or Hitachi, the Asahi newspaper said Saturday.
The company has been struggling to compete with larger rivals with better production efficiency, such as Matsucrapa and LG Electronics.
Goldman Sachs said in a report to clients that such a move would be positive for Pioneer, helping it cut losses in its plasma display panel segment.
Pioneer will end output of such panels at a plant in southern Japan by March 2009 and focus on making panels 50 inches or larger at other plants, the Asahi said.
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