Sony, NEC to form optical disk drive joint venture

TOKYO: Japanese electronics makers Sony Corp. and NEC Corp. said on Thursday they had agreed to set up a joint venture for optical disk drives, aiming to better weather intense price competition.

Sony and NEC will transfer their optical drive businesses to a new entity due to start operations on April 1. Sony will hold a 55 percent stake in the venture, which will design and make DVD and CD drives for personal computers and other products.

Combined revenues of the two firms' optical disk drive businesses came to about 220 billion yen ($1.85 billion) in the business year ended in March. NEC is the smaller partner with about 70 to 80 billion yen in sales.

The venture will control some 20 percent of the global market, second only to Hitachi-LG Data Storage (HLDS), a venture between Japan's Hitachi Ltd. and South Korea's LG Electronics Inc., an NEC spokesman said.

"The market is growing quite strongly, but competition is tough and prices are falling rapidly. We decided to join forces with Sony to strengthen our operations," the NEC spokesman said.

A Hitachi spokesman estimated that HLDS controlled about 28 percent of the global optical disk market, which was poised to expand to about 271 million units in 2005, a rise of some 8 percent from 250 million units last year.

Sony and NEC said the venture would combine NEC's LSI technology with Sony's expertise in optical pickups. They hope to expand sales and take the top spot from Hitachi-LG.

NEC would not disclose whether its optical disk business was profitable. Sony said its operations were profitable.

The move comes as the latest consolidation in the industry.

South Korea's Samsung Electronics Co. Ltd. and Toshiba Corp. formed a joint venture for their optical disk operations in 2003.