The Influence of Sony’s Investment in Sharp’s LCD TV Panel Factory
March 10th, 2008by David Hsieh, Vice President, Greater China Market
At the end of February, Sony and Sharp announced that they will form a joint venture to build a Gen 10 TFT LCD fab, targeting large size LCD TV panels of 40” and above. Sony and Sharp will invest ¥100 billion and ¥380 billion, respectively; Sony will have 34% share of the new company, and Sharp will have 66%. Obviously the future output of this Gen 10 factory, which is to be launched for production in 2010, will have similar allocations to Sony and Sharp with the stock share. The joint venture is not only influencing Samsung TFT LCD, which is Sony’s current TFT LCD panel investment partner, but also Taiwanese panel makers who also supply large numbers of LCD TV panels to Sony.
Why did these two panel makers decide to join forces? Sony did not have mature enough LCD TV panel development or production technologies. Therefore, three years ago, Sony invested 50% for the first Gen 7 with Samsung, forming a company called S-LCD to reallocate the output, and increasing purchases from AU Optronics in Taiwan. Sony then invested another 50% in Samsung’s first Gen 8 fab. With this new joint venture with Sharp, Sony owns significant stakes in three fab generations: Gen 7, Gen 8 and Gen 10—not to mention Sony’s continuous leveraging the power of Samsung by buying more panels from AU Optronics in Taiwan, which has become its strategic panel supplier for 32”, 40” and 46” panels. Sony has been successfully securing its panel sources, and now the company is aggressively targeting sales of over 18 million units in 2008, representing 90% growth from the 9.5 million it shipped in 2007. Several indications are that Sony will target over 30 million for 2009, another growth of more than 60%.
For Sharp, having a partner share the risk is a good thing, since the company cannot rely on its own brand to consume the huge panel capacity forever. The company has been adjusting its policy to allocate more then 30% of its LCD TV panel output in 2008, during which the ratio was only 10% to 15% of other LCD TV makers. Sharp shipped 8 million of LCD TVs in 2007, less than Sony’s 9.5 million and Samsung’s 13.4 million units, and the company is also facing competitive pressure from other, smaller brands. With everybody buying panels from everybody, the Sony and Sharp joint venture seems to be just the latest in a string of recent LCD TV panel industry alliances and mutual procurement happening in Asia.
Now other LCD TV brands may be threatened, with a powerful Sony with many bullets will start to shoot at the market, including Samsung. How about the pure LCD TV panel makers (with no brands or set manufacturing) in Taiwan? Sony buys 35% of its LCD TV panels from AUO in Taiwan, who has no Gen 10 plan yet. AUO’s new fab is Gen 8, and will start production in Q2’09. AUO, the largest panel maker in Taiwan, has been continuously playing a role of independent panel supplier. Of course, Sony has also allocated considerable panel output from AUO’s Gen 8, as AUO is still an important strategic supplier for Sony, who can successfully leverage the power of Samsung (or S-LCD). But Sony’s joint venture with Sharp on Gen 10 and their plan to acquire many 40″+ panels from Sharp in two years means that they may want to think twice about investing in AUO beyond Gen 8.
Interestingly, Samsung also sources 30% of its LCD TV panels from AUO. It will be interesting to see if AUO can continue investing for more capacity when customer bases are limited. The market has been foreseen to be more concentrated in 2010, and in today’s fiercely competitive climate in the LCD TV market, keeping neutral means you have to face risks alone.
3 Responses to “The Influence of Sony’s Investment in Sharp’s LCD TV Panel Factory”
By Richard Clode on Mar 11, 2008 | Reply
Further developments in Japan include Toshiba sourcing panels from Sharp’s planned 10G fab and Matsushita investing heavily in IPS Alpha to fund a new 8G fab. Both are customers of LG Display and the Taiwanese. Without strong in-house brands I think pure panel makers will see more volatility as significant new supply comes onstream from 2009 and demand for LCD TVs matures. Interestingly Sharp is indicating it plans to be competitive at 40″ with its 10G fab. This is the first time I have heard of a new generation fab competing with prior generations and not just moving to larger size TVs although is remains to be seen whether this strategy will be cost competitive.
By Paul Gray on Mar 15, 2008 | Reply
I wonder if the are seeing the first signs that Sony and Sharp sense that the ‘bigger is better’ driver of LCD TVs to consumers is ending. Fundamental issues of space (home size) and consumer preference mean that there is a finite size limit, regardless of pricing. Maybe it’s sooner rather than later?
By David Hsieh on Apr 7, 2008 | Reply
LG Display, one of the largest LCD TV panel makers, announced today (2008/4/7) that it will form a strategic alliance wit Skyworth, one of the leading television makers in China. The alliance will be focusing on the LCD TV backend module co-operation since Skyworth will invest in LG Display’s LCD module lines in Guangzhou in the southern China where most of the Skyworth’s LCD TV assembly lines are located. Meanwhile, both companies will set up a joint R&D center. The alliance of LGD and Skyworth is viewed to be positive for both companies in terms of the panel supply and marketing risk sharing, especially for LCD TV market in China. However, LG Display also sells many LCD TV panels to other China TV companies therefore it will be interesting to see the reactions of other LG Display’s Chinese customers. Besides with Skyworth, many words circulating in Asia are also indicating that LG Display is planning to form an alliance with AmTRAN or Vizio. Apparently, LG Display is trying to get more friends to explore the market opportunities as well as share the risk, especially when the others (such as Samsung and Sony, Sony and Sharp, Panasonic and Hitachi) are getting together.