LG Philips LCD, the world's second-largest flat-screen maker, is selling a 19.9 per cent stake in its Polish plant to Japan’s Toshiba for Y5.5bn ($46m) in the latest sign that Asian manufacturers are positioning themselves to exploit a booming European market for liquid crystal display TVs.
But the deal’s announcement came as the South Korean company reported a second consecutive quarterly loss due to lower panel prices and presented a gloomy outlook ahead amid fears of a looming price war.
The strategic alliance is expected to benefit LG Philips by broadening its customer base while helping Toshiba secure a stable panel supply to expand its business in the fast-growing European flat-screen TV market.
LG Philips – a joint venture between Korea’s LG and Philips of the Netherlands – is building an LCD module line with annual production capacity of 3m units in Wroclaw in Poland, which will be completed by the first quarter of 2007.
The company, like other flat-screen manufacturers, is trying to find new growth momentum in the European market by building a production base closer to the booming market.
Toshiba is also building a separate LCD TV plant in Poland while Sony is looking to build a new assembly plant in Slovakia and Sharp is set to launch an assembly line in Spain in January.
According to DisplaySearch, a market researcher, Europe accounted for 41 per cent of the global LCD TV market last year.
It forecasts the European market will grow 35.4 per cent this year and expand more than threefold by 2009.
LG Philips on Tuesday reported a net loss of Won321bn ($333m) in the third quarter following a Won321.5bn loss in the previous quarter and a Won227bn profit a year ago. However, sales increased 1.2 per cent on year to Won2,773bn.
LG Philips’s average selling prices fell 11 per cent in the three months to September from a year earlier.
The company expected shipments to increase by a mid-20s percentage in the fourth quarter from the previous quarter but those average selling prices are forecast to decline.
Such price pressures have become increasingly common in the flat-screen market as manufacturers ramp up production.