Samsung and Sony: a mutually beneficial LCD partnership
Industrial collaboration between the two technology giants brings tangible benefits on the merciless market for large-screen flat-panel TVs.
On the one hand, a dynamically developing South Korean company that has managed to rise to the highest level and achieve world recognition only in the last decade. On the other - the legendary consumer electronics giant from Japan. Samsung Electronics and Sony are ruthless competitors from the industry, where success can often be achieved only through the failures of others. It was they who established one of the most interesting and fruitful cooperation in the field of high technologies in the joint production of liquid crystal display panels (LCD panels). The emerging alliance changed the balance of power throughout the industry.
The foundation of cooperation was laid in 2004, when two companies established a S-LCD joint venture in Tangjeong, 88 kilometers south of Seoul. There were doubts on both sides, especially since Sony had to withdraw from the Japanese government-sponsored group on LCD research and development.
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In the early stages, Sony had doubts about the quality. The company not only sent its specialists to a joint venture for careful acceptance of LCD panels, but also insisted that each panel made for it was first supplied to an LCD TV factory in Inazawa (next to Nagoya), Japan. Before adding related electronic components, such as digital tuners, power supplies, etc., the panels underwent another serious testing and only after that were used to assemble TVs or were shipped as modules to assembly plants in Spain and Mexico.
Oh marvelous, new bravia
Now the panels are being sent to assembly plants directly from the S-LCD, and even Sony executives admit that the joint venture has played a key role in promoting the extremely successful line of Bravia LCD TVs, which has become one of Sony’s few recent successes.
In turn, Samsung has significantly advanced its own business of production and sale of LCD TVs. Not without the help of Sony technologies, which provided a high-quality and clear image, the Korean company became one of the trendsetters in the LCD panel industry. At the moment, Sony and Samsung, along with the company Matsushita Electric Industrial, which owns the Panasonic trademark, are fighting for the title of leader in the production of thin widescreen TVs.
“The Sony and Samsung alliance is beneficial for both,” said Lee Sang Wan, Samsung’s LCD division, confidently. Sony's vice president, Katsumi Ihara (Katsumi Ihara), who led the television division and was recently responsible for key consumer electronics products, also believes that the alliance has helped revitalize and return success to the LCD TV business.
Plasma inferior
In April 2006, at a meeting with a group of Tokyo journalists, he said: “If the S-LCD joint venture did not take place, we would not have been able to take that place on the LCD TV market that we have.”
The alliance created transformed the entire industry, especially in the 40-inch (101.6 cm) segment of televisions. Until the company S-LCD began to offer LCD panels at prices comparable to plasma panels, plasma TVs dominated the market of large screens. In the third quarter of 2006, about 2.32 million LCD TVs were sold. This is the first time when plasma TVs sold in the amount of 1.96 million, have given way to liquid crystal. DisplaySearch predicts that the gap will only increase in the fourth quarter: 3.68 million LCD TVs versus 2.65 million plasma televisions.
Global sales in the segment of LCD TVs are growing faster than in other segments. According to DisplaySearch, in July-September 2006, the level of sales of LCD TVs doubled compared with last year, reaching 10.8 million units, and for the first time Samsung has become the leader in sales.
New Heroes
In quantitative terms, sales of LCD TVs account for 24% of the global sales of TVs and this is two percent more compared to the previous quarter. Consumers continue to change bulky TV sets with kinescopes to elegant models with large screens.
In terms of value, the share of LCD TVs in global sales is 48%. Revenue growth compared with last year was 84%, while sales in the last quarter were a record 11.9 billion dollars.
The birth of S-LCD has made a change in the current hierarchy of manufacturers of LCD TVs. Two years ago, the Japanese company Sharp and its Aquos models were the sole leaders. And although in analog times, Sony Trinitron models dominated the market for decades, the company underestimated the potential of flat panel technologies, which ultimately led it to buy expensive panels on the side. This state of affairs was the cause of Sony's growing losses in the TV market, and the emergence of the S-LCD helped to halt the overall business in the TV market.
In the summer of 2005, an intensive advertising campaign with a multi-million dollar budget focused on the high quality of the image of Bravia models. New models have become an absolute hit of the season in the USA. By the end of 2005, Sony soared to first place among manufacturers of LCD TVs. As it turned out, the palm passed to Sony only for a while. In the alliance or not, but in the arena of widescreen TVs, Samsung and Sony are fighting for the right to be called a leader.
Noticeable profit
Samsung’s response was a new model, Bordeaux, which helped the Korean company to get 15.6% of global LCD TV sales in the third quarter of 2006, ahead of Sony from 15.2% and Sharp from 11.5%. A year earlier, Samsung’s share was only 10.3%. Expansion of sales brought a significant profit.
In July-September 2006, the Samsung LCD panels division earned $ 167 million with sales of 3.14 billion. Thus, the profit was 5% - not very impressive, but quite respectable level for the industry, in which merciless competition led to a rapid fall in prices. Such a profit contrasts sharply with the $ 341 million loss of the competing company LG.Philips LCD located literally by the side, which in January 2006 began mass production of LCD panels with a diagonal of 42 and 47 inches (106.7 and 119.3 cm).
Samsung executives pay tribute to Sony for good performance. “Working with Sony has allowed us to take advantage of a favorable set of circumstances: the success of the Bravia TVs spurred sales of LCD panels, the increase in volumes led to lower costs and prices, which in turn further increased the sales of LCD TVs,” says Cho Yeong Duk, Samsung's vice president, responsible for the development of LCD panel business, and adds, "while competition with Sony helped us offer the market more advanced LCD models."
LG.Philips: could be better
The S-LCD joint venture (and Samsung’s own LCD panel manufacturing plants) benefits from the fact that Sony and Samsung are the largest manufacturers of LCD TVs and their need for panels is enormous. Of the 10 million panels produced by the joint venture (and another Samsung plant), 80% were supplied to Sony and Samsung divisions engaged in the production of televisions.
Compare these figures with those of the LG.Philips LCD enterprise, which is controlled jointly by the Dutch company Philips and the Korean LG Electronics. Only 40% of its products are sent to major shareholders. “A significant part of our customers are plasma specialists, and their LCD TVs are not the most confident in the market,” admits Lee Bang Soo, vice president of LG.Philips, the largest manufacturer of LCD panels a year ago.
No doubt, the joint venture LG.Philips is having a hard time. Due to lower demand, the company has already cut its capital investment program by more than $ 1 billion. Plans were also postponed for the construction of a plant of the so-called eighth generation, which will focus on the production of 50-inch (127 cm) or even large LCD panels. Instead, the company is building a plant of the “fifth and a half generation”, which will produce a mixture of panels for computer monitors, laptops and TVs with small screens, adjusting the output to market demand.
Building a new plant
For comparison, the S-LCD only moves forward. The joint venture, having spent $ 2.6 billion on the construction of the seventh generation plant for the production of 40 inch panels, is currently building the eighth generation plant for $ 3 billion. After a couple of years, the S-LCD will throw a glove in the face to manufacturers of plasma TVs in a class of 50-inch models. “We expect a class of 50 inch models to sell at least 2 million LCD TVs in 2008,” says Lee Sang-wang. "By then, consumers will be able to buy 50-inch TVs at current prices of 40-inch."
Analysts believe that the emerging investment gap between the S-LCD and all the other competitors in the industry will certainly provide strong leadership of the joint venture Sony and Samsung in the market for LCD TVs. “This is a typical Samsung strategy to rely on a large industry partnership, and then enjoy guaranteed profits,” said Rhee Namuh, head of Merrill Lynch research unit in Seoul.
Sony also remains in profit. By reducing production costs, the company has the opportunity to constantly improve such popular models of LCD TVs, like Bravia. And although Sony is currently trying to find a supplier for small LCD panels outside the S-LCD joint venture, it seems that this strange alliance between the sworn competitors still works perfectly for both parties.
Published November 28, 2006. Despite the fact that the translation was delayed for six months and the original on the BusinessWeek website is almost unreadable, the article seems to me to be still interesting and in some ways quite relevant. I would welcome any comments.
On the one hand, a dynamically developing South Korean company that has managed to rise to the highest level and achieve world recognition only in the last decade. On the other - the legendary consumer electronics giant from Japan. Samsung Electronics and Sony are ruthless competitors from the industry, where success can often be achieved only through the failures of others. It was they who established one of the most interesting and fruitful cooperation in the field of high technologies in the joint production of liquid crystal display panels (LCD panels). The emerging alliance changed the balance of power throughout the industry.
The foundation of cooperation was laid in 2004, when two companies established a S-LCD joint venture in Tangjeong, 88 kilometers south of Seoul. There were doubts on both sides, especially since Sony had to withdraw from the Japanese government-sponsored group on LCD research and development.
')
In the early stages, Sony had doubts about the quality. The company not only sent its specialists to a joint venture for careful acceptance of LCD panels, but also insisted that each panel made for it was first supplied to an LCD TV factory in Inazawa (next to Nagoya), Japan. Before adding related electronic components, such as digital tuners, power supplies, etc., the panels underwent another serious testing and only after that were used to assemble TVs or were shipped as modules to assembly plants in Spain and Mexico.
Oh marvelous, new bravia
Now the panels are being sent to assembly plants directly from the S-LCD, and even Sony executives admit that the joint venture has played a key role in promoting the extremely successful line of Bravia LCD TVs, which has become one of Sony’s few recent successes.
In turn, Samsung has significantly advanced its own business of production and sale of LCD TVs. Not without the help of Sony technologies, which provided a high-quality and clear image, the Korean company became one of the trendsetters in the LCD panel industry. At the moment, Sony and Samsung, along with the company Matsushita Electric Industrial, which owns the Panasonic trademark, are fighting for the title of leader in the production of thin widescreen TVs.
“The Sony and Samsung alliance is beneficial for both,” said Lee Sang Wan, Samsung’s LCD division, confidently. Sony's vice president, Katsumi Ihara (Katsumi Ihara), who led the television division and was recently responsible for key consumer electronics products, also believes that the alliance has helped revitalize and return success to the LCD TV business.
Plasma inferior
In April 2006, at a meeting with a group of Tokyo journalists, he said: “If the S-LCD joint venture did not take place, we would not have been able to take that place on the LCD TV market that we have.”
The alliance created transformed the entire industry, especially in the 40-inch (101.6 cm) segment of televisions. Until the company S-LCD began to offer LCD panels at prices comparable to plasma panels, plasma TVs dominated the market of large screens. In the third quarter of 2006, about 2.32 million LCD TVs were sold. This is the first time when plasma TVs sold in the amount of 1.96 million, have given way to liquid crystal. DisplaySearch predicts that the gap will only increase in the fourth quarter: 3.68 million LCD TVs versus 2.65 million plasma televisions.
Global sales in the segment of LCD TVs are growing faster than in other segments. According to DisplaySearch, in July-September 2006, the level of sales of LCD TVs doubled compared with last year, reaching 10.8 million units, and for the first time Samsung has become the leader in sales.
New Heroes
In quantitative terms, sales of LCD TVs account for 24% of the global sales of TVs and this is two percent more compared to the previous quarter. Consumers continue to change bulky TV sets with kinescopes to elegant models with large screens.
In terms of value, the share of LCD TVs in global sales is 48%. Revenue growth compared with last year was 84%, while sales in the last quarter were a record 11.9 billion dollars.
The birth of S-LCD has made a change in the current hierarchy of manufacturers of LCD TVs. Two years ago, the Japanese company Sharp and its Aquos models were the sole leaders. And although in analog times, Sony Trinitron models dominated the market for decades, the company underestimated the potential of flat panel technologies, which ultimately led it to buy expensive panels on the side. This state of affairs was the cause of Sony's growing losses in the TV market, and the emergence of the S-LCD helped to halt the overall business in the TV market.
In the summer of 2005, an intensive advertising campaign with a multi-million dollar budget focused on the high quality of the image of Bravia models. New models have become an absolute hit of the season in the USA. By the end of 2005, Sony soared to first place among manufacturers of LCD TVs. As it turned out, the palm passed to Sony only for a while. In the alliance or not, but in the arena of widescreen TVs, Samsung and Sony are fighting for the right to be called a leader.
Noticeable profit
Samsung’s response was a new model, Bordeaux, which helped the Korean company to get 15.6% of global LCD TV sales in the third quarter of 2006, ahead of Sony from 15.2% and Sharp from 11.5%. A year earlier, Samsung’s share was only 10.3%. Expansion of sales brought a significant profit.
In July-September 2006, the Samsung LCD panels division earned $ 167 million with sales of 3.14 billion. Thus, the profit was 5% - not very impressive, but quite respectable level for the industry, in which merciless competition led to a rapid fall in prices. Such a profit contrasts sharply with the $ 341 million loss of the competing company LG.Philips LCD located literally by the side, which in January 2006 began mass production of LCD panels with a diagonal of 42 and 47 inches (106.7 and 119.3 cm).
Samsung executives pay tribute to Sony for good performance. “Working with Sony has allowed us to take advantage of a favorable set of circumstances: the success of the Bravia TVs spurred sales of LCD panels, the increase in volumes led to lower costs and prices, which in turn further increased the sales of LCD TVs,” says Cho Yeong Duk, Samsung's vice president, responsible for the development of LCD panel business, and adds, "while competition with Sony helped us offer the market more advanced LCD models."
LG.Philips: could be better
The S-LCD joint venture (and Samsung’s own LCD panel manufacturing plants) benefits from the fact that Sony and Samsung are the largest manufacturers of LCD TVs and their need for panels is enormous. Of the 10 million panels produced by the joint venture (and another Samsung plant), 80% were supplied to Sony and Samsung divisions engaged in the production of televisions.
Compare these figures with those of the LG.Philips LCD enterprise, which is controlled jointly by the Dutch company Philips and the Korean LG Electronics. Only 40% of its products are sent to major shareholders. “A significant part of our customers are plasma specialists, and their LCD TVs are not the most confident in the market,” admits Lee Bang Soo, vice president of LG.Philips, the largest manufacturer of LCD panels a year ago.
No doubt, the joint venture LG.Philips is having a hard time. Due to lower demand, the company has already cut its capital investment program by more than $ 1 billion. Plans were also postponed for the construction of a plant of the so-called eighth generation, which will focus on the production of 50-inch (127 cm) or even large LCD panels. Instead, the company is building a plant of the “fifth and a half generation”, which will produce a mixture of panels for computer monitors, laptops and TVs with small screens, adjusting the output to market demand.
Building a new plant
For comparison, the S-LCD only moves forward. The joint venture, having spent $ 2.6 billion on the construction of the seventh generation plant for the production of 40 inch panels, is currently building the eighth generation plant for $ 3 billion. After a couple of years, the S-LCD will throw a glove in the face to manufacturers of plasma TVs in a class of 50-inch models. “We expect a class of 50 inch models to sell at least 2 million LCD TVs in 2008,” says Lee Sang-wang. "By then, consumers will be able to buy 50-inch TVs at current prices of 40-inch."
Analysts believe that the emerging investment gap between the S-LCD and all the other competitors in the industry will certainly provide strong leadership of the joint venture Sony and Samsung in the market for LCD TVs. “This is a typical Samsung strategy to rely on a large industry partnership, and then enjoy guaranteed profits,” said Rhee Namuh, head of Merrill Lynch research unit in Seoul.
Sony also remains in profit. By reducing production costs, the company has the opportunity to constantly improve such popular models of LCD TVs, like Bravia. And although Sony is currently trying to find a supplier for small LCD panels outside the S-LCD joint venture, it seems that this strange alliance between the sworn competitors still works perfectly for both parties.
Published November 28, 2006. Despite the fact that the translation was delayed for six months and the original on the BusinessWeek website is almost unreadable, the article seems to me to be still interesting and in some ways quite relevant. I would welcome any comments.
Source: https://habr.com/ru/post/31041/
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