Sony And Samsung End LCD Panel Joint Venture

Samsung will become Sony’s supplier as it acquires S-LCD, the two companies’ panel manufacturing joint venture

Electronics giants Sony and Samsung have signed an agreement to transition the current business relationship with respect to LCD panels. Under the agreement, Samsung will acquire all of Sony’s shares of S-LCD, the two companies’ venture in TV and monitor panel manufacturing, making S-LCD a wholly-owned subsidiary of Samsung.

Under the terms of the share transfer, Samsung will pay Sony approximately $940 million (£607m). Concurrently, the two companies have entered into a new strategic agreement for the supply and purchase of LCD panels, with a goal of enhancing their competitiveness.

Money for Sony, control for Samsung

The companies said the agreement also allows Sony and Samsung to continue co-operative engineering efforts focused on LCD panel technology.

“For Sony, this transaction will enable it to monetise its shares in S-LCD and aims to secure a flexible and steady supply of LCD panels from Samsung, based on market prices and without the responsibility and costs of operating a manufacturing facility,” a company statement explained. “With whole ownership of S-LCD, Samsung anticipates heightened flexibility, speed and efficiency in both panel production and business operations.”

Established in April 2004, S-LCD manufactures LCD panels for both its parent companies, contributing to the expansion of the respective parties’ TV businesses, and the large-sized LCD TV market overall. However, the companies determined that LCD panel and TV market conditions have changed since they forged the deal.

In order to respond to such challenging conditions and to strengthen their respective market competitiveness, the two companies have agreed to shift to a new LCD panel business alliance. The share transfer and payment are targeted to close by the end of January 2012, subject to necessary approvals from regulatory authorities.

As a result of the transaction, Sony expects to incur a non-cash impairment loss of approximately $845 million (£546m) in the third quarter of the fiscal year ending March 31, 2012, due to the re-evaluation of its S-LCD shares. Despite this one-time loss, Sony estimated that the transaction would result in substantial savings on and after January 1, 2012, with respect to costs associated with its procurement of LCD panels.

The current estimate of the yearly savings with respect to such costs is approximately $640 million (£414m), compared with LCD panel procurement costs estimated for the fiscal year ending March 31, 2012.