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Sony and Samsung Electronics have agreed to increase production of liquid crystal display panels at their joint venture, adding further pressure to the flat-panel TV market where already fierce competition has spurred huge price falls.
The two groups, which have been manufacturing LCD panels at S-LCD, their joint venture in South Korea, will invest $2bn in a state-of-the-art eighth generation facility.
S-LCD?s new factory line is expected to begin mass production in the autumn of 2007 with an initial capacity of 50,000 panels a month. This would add to S-LCD?s current capacity of 75,000 panels a month.
The production ramp-up comes as Sharp is poised to start production at its Y150bn eighth generation facility in Mie prefecture in Japan in October, which will focus on making panels of 40-inches and larger.
The decision by Sony and Samsung to increase LCD production highlights both the outlook for continued strong growth in the LCD TV market and the shift to larger-sized panels. Sony said the new facility would focus on panels of 46 inches and over in size.
Although prices are forecast to fall about 30 per cent, following a similar decline last year, the LCD TV market is expected to almost double this year.
DisplaySearch, the industry consultancy, forecasts the LCD TV market will continue to grow strongly to 111m in 2010 from 41.7m units this year.
?No other market is growing as fast as this,? says Hisakazu Torii, DisplaySearch analyst in Tokyo. He added that although prices were likely to continue declining, big manufacturers with capacity to meet growing demand would see their losses offset by a larger market overall.
Meanwhile, LCD manufacturers are shifting production to increasingly larger screen TVs, a market segment, which has hitherto been dominated by plasma TVs and rear-projection TVs.
The additional investment, which will be equally shared by the two groups, also reflects the recovery of Sony?s TV business.
Sony grabbed the top spot in global LCD TV sales by value in the last quarter of 2005, with a 14 per cent market share, and the top spot for all flat panel TV sales in unit terms, at 14.7 per cent, according to DisplaySearch.
James Kim at Lehman Brothers said the additional joint investment decision was "not bad, timing-wise," as Sony was posting bigger LCD TV sales. "It will ease Samsung's burden in expanding capacity because the company has a secure buyer," he said.?? ?
Mr Kim said the decision was likely to force competitors such as LG Philips LCD to advance their expansion plans. "Now, they will be hard pressed to expand their capacity fast."
LG Philips LCD has said it would start investing in its eighth-generation line this year to roll out 50-inch screens.?