Sony may invest more in Samsung LCD venture

Nathan Layne

TOKYO: Sony Corp. is considering making an additional investment in its liquid crystal display (LCD) joint venture with South Korea's Samsung Electronics Co. Ltd. to meet fast-growing demand for LCD TVs, its president said on Tuesday.

Sony and Samsung formed a $2 billion joint venture in 2004 to mass-produce LCD panels for large televisions. Called S-LCD, the venture began shipments of panels in April and is expected to reach full capacity next year.

"We are studying (an additional investment in S-LCD). It would be the most reasonable choice," Ryoji Chubachi told a roundtable with reporters. "Our main goal right now is to fully utilise our existing manufacturing site at S-LCD."

Chubachi said that nothing concrete had been decided, but his comments suggest that Sony may be leaning towards an investment in S-LCD over other options such as buying another LCD maker to secure enough panels for its LCD TVs.

Even with S-LCD up and running, Sony still has to procure some of its panels from other firms. That makes it less efficient than rivals like Sharp Corp. that produce their own LCDs.

Last week Sony unveiled a restructuring plan under which it aims to cut 10,000 jobs, or about 7 percent of its global work force, and sell 120 billion yen ($1.07 billion) worth of real estate, stocks and other non-core assets.

It also said there were 15 unprofitable businesses in its loss-making electronics unit that would either be downsized, disposed of or spun-off into a joint venture, although it has declined to say exactly which ones were being targeted.

The strategy calls for a hefty jump in sales. Sony aims to boost group revenues to 8 trillion yen by the business year to March 2008, or roughly 10 percent above its forecast for 7.25 trillion yen in 2005/06.

Chubachi said he expected flat TVs, including both LCD and rear projection models, to account for "several hundred billion yen" of that rise. He also believes DVD recorders, digital cameras and portable music players will be key growth drivers.

The president said Sony planned to write down about 60 billion yen ($534.2 million) worth of cathode ray tube television assets in the business year to next March as it shifts resources to more promising flat TVs.

Sony officials said the impact was already included in the company's earnings forecast for the business year.

Chubachi became president in June as part of a reshuffling of management that also saw Welsh-born Howard Stringer replace Nobuyuki Idei as CEO.

Some analysts have criticised the restructuring plan as lacking teeth or a viable formula for growth. Another worry for investors has been reports suggesting the management team may not be on the same page.

Stringer was quoted by the Financial Times over the weekend as saying he would have liked to target more unprofitable businesses, but Japanese sensitivities towards job cuts and opposition within Sony forced him to tone down the plan.

Chubachi said it was natural for people from different backgrounds to bring different opinions to the table, but stressed that he and Stringer were in agreement about corporate strategy.

"I don't feel like there is a big gap," in opinion among management, he said. "Rather a sense of team spirit has emerged."