Sanyo quits LCD venture

Fierce competition with South Korean and Taiwanese rivals combined with “price erosion beyond forecasts” has forced Sanyo to make a surprise exit from the liquid crystal panel business.

The troubled Japanese electronics maker is facing a third consecutive year in the red and is fighting hard to pull off a sweeping restructuring of its business. The recall of 1.3m mobile phone batteries last week further dented the company’s battered image.

Fund managers said on Wednesday that the move strongly appeared to be the initiative of the three banks that rescued Sanyo with a Y300bn ($2.5bn) bail-out in January. Goldman Sachs, Daiwa Securities and Sumitomo Mitsui Financial Group each now have staff on Sanyo’s board charged with pushing the company toward reform.

Sanyo said Wednesday that it would sell its entire 45 percent stake in an LCD joint venture to partner Seiko Epson by the end of December. It declined to give financial details but said the sale would not affect earnings for the current financial year.

The Japan-based joint venture, Sanyo Epson Imaging Devices, revealed on Tuesday that it was being investigated as part of a global probe by regulators into price fixing in the LCD panel market.

The anti-monopoly investigations are being conducted in Japan, the US and South Korea, where industry giants Samsung and LG Philips are being quizzed on alleged anti-competitive activities. The perceived risk that the investigations could end in heavy fines pushed shares in LG Philips down 1.16 per cent Wednesday.

At least 10 Japanese companies – mostly joint ventures such as Toshiba Matsushita Display – are under scrutiny by the Japan Fair Trade Commission. Investors sold Sharp shares down heavily Wednesday, with the stock ending 1.45 per cent lower on news the company, Japan’s largest LCD panel maker, is also under investigation.

Sanyo Epson was established in 2004 to boost both companies’ production capacity in LCD screens of the sort used in mobile phones, PDAs and PC monitors. Panel prices were already falling at that time, but smaller screens turned out to be an area where LCD panels became commoditised particularly quickly, with prices falling sharply in line with swelling levels of supply.

Sanyo is viewed by many investors as a poorly managed company that has been far too slow to exit failing businesses. Condemned by analysts as “vague and probably too sluggish”, the group’s restructuring programme involves reducing its portfolio of businesses from 300 to 200 within the next three years.

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