Sanyo, Quanta to form flat TV joint venture

Kiyoshi Takenaka and Baker Li

OSAKA/TAIPEI: Japan's Sanyo Electric Co. and Taiwan's Quanta Computer Inc. said they have agreed to set up a joint venture to make and sell flat TVs, taking aim at the fast-growing market.

They will invest up to $65 million in total in the venture, which will design, make and sell both plasma and liquid crystal display (LCD) TVs, Quanta Computer said.

The venture, to be established in July, will make Sanyo-branded TVs as well as TVs for other brands. Details such as the ownership structure of the venture have yet to be decided.

The announcement came after the Japanese and Taiwanese stock markets closed. But talk about the joint venture sent shares in both Sanyo and Quanta higher.

"By working with Quanta, which has a panel-making unit, costs can be reduced drastically and competitiveness can be strengthened," Sanyo director Mitsuru Honma told a news conference in Osaka, western Japan.

Quanta Computer has an LCD unit, Quanta Display Inc. Although Sanyo currently offers both LCD and plasma televisions, it procures flat panels for those models from outside suppliers.

"After the spin-off with Sanyo, we predict that flat TV shipments will at least (double)," said Michael Wang, Chief Operating Officer at Quanta Computer.

Quanta Computer shipped 350,000 flat TVs in 2005.

Analysts said established flat TV makers such as Sony Corp. and Matsushita Electric Industrial Co. Ltd., the maker of Panasonic-brand electronics, are unlikely to lose much sleep over the deal.

"It's going to be an uphill battle. They don't have a brand name or much economies of scale," Mizuho Securities senior analyst Koichi Hariya said.

ANOTHER TIE-UP ON THE WAY?

Sanyo had a 1.5 percent share in the global LCD TV market in the final quarter of 2005 in unit terms, according to research firm DisplaySearch. That is far behind top LCD TV maker Sony's 14.6 percent and No.2 Philips's 14.2 percent.

In the plasma TV market, which is dominated by Matsushita, LG Electronics Inc., Samsung Electronics Co. Ltd. and Philips, Sanyo only held a 0.3 percent share.

The agreement is the latest in a series of restructuring efforts at Sanyo, which is facing mounting losses.

The Osaka-based firm embarked on a sweeping restructuring plan last year, saying it would cut 15 percent of its group work force, close factories, halve its debt and streamline unprofitable business areas.

Nokia, the world's largest mobile phone maker, and Sanyo said earlier this year they plan to form a mobile phone joint venture, giving Sanyo a shot in the arm.

Sanyo makes 6.5 million TV sets a year, but most of them are cathode ray tube (CRT) models. The company, whose major clients for its TV operations include Wal-Mart Stores Inc., the world's biggest retailer, said it plans to keep its CRT TV operations.

After implementing restructuring steps in its mobile phone and TV operations, investors are now waiting for potential turnaround measures for its semiconductor and white goods operations.

A similar tie-up with Asian manufacturers could be one option for Sanyo's white goods business, analysts said.

Shares in Sanyo closed up 2.7 percent at 307 yen, outperforming the Tokyo stock market's electrical machinery index, which gained 1.18 percent.

In Taiwan, Quanta Computer's stock ended up 4.3 percent at T$52.00, and Quanta Display finished up 5.8 percent at T$11.90, while the main TAIEX share index rose 0.36 percent.

(Additional reporting by Sheena Lee and Roger Tung in Taipei, Yumi Horie, Kunihiko Kichise and Osamu Tsukimori in Tokyo)