Samsung, LG Philips: new association to fight competitors

Samsung Electronics Co. and its domestic rival LG Philips LCD Co. are joining forces to better compete against Japanese and Taiwanese display panel manufacturers, who are gaining ground on the South K…

Samsung Electronics Co. and its domestic rival LG Philips LCD Co. are joining forces to better compete against Japanese and Taiwanese display panel manufacturers, who are gaining ground on the South Korean firms. The two companies, along with two other major South Korean display panel makers, have formed the Korea Display Industry Association, which will hold its first meeting of the executive board on 25 June 2007. At the meeting, Lee Sang-wan, the chief of the association as well as president of Samsung Electronics, together with senior officials of LG Philips, Samsung SDI Co. and LG Electronics Inc. will discuss the selection of other board members and specific ways to cooperate in certain fields. The group aims to build a collaborative relationship among member companies in eight areas, with task forces to be set up by the end of June 2007 on three of them: patent cooperation, standardization and mutual purchase of panels. In regard to patent cooperation, the association plans to share new patents on technologies and products developed as part of national projects among member firms. While Sony Corp. and Samsung Electronics have entered into cross-licensing agreements for the use of each other“s patents, as have Sharp Corp. and Chunghwa Picture Tubes Ltd. of Taiwan, South Korean firms have not yet taken this step. Standardization will also be high on the agenda since the need to use different manufacturing equipment and materials according to the size of the glass used in making panels pushes up costs. The association is looking to bring glass sizes and specifications of manufacturing equipment and materials in line with global standards. In August 2007, the group intends to set up a strategic technology committee to draw up a road map over the next 10 years for the development of LCD, plasma and organic electroluminescence panels as well as decide the subjects of joint development between member companies. The agreement by Samsung and LG to cooperate reflects their strong sense of urgency, as Taiwanese rivals in partnership with Japanese firms are quickly closing in on them. In 2006, Taiwan managed to join South Korea as the world“s number one seller of LCD panels, both nations having a market share of 36%. “For South Korean display panel makers to rise to the next level, Samsung and LG must cooperate with each other”, said Samsung President Lee, a view echoed by LG executives. The corporate interests of the two leading LCD panel makers, however, will inevitably clash as they negotiate the details of their cooperation, observers said. LG Philips had once competed with Samsung Electronics for global leadership in LCD panels and aggressively developed sophisticated technologies. However, a fall in business results forced the firm to drop out of the race. It only recently decided to build an advanced eighth-generation panel plant while Samsung“s joint venture with Sony will put such a plant onstream in summer 2007. LG Philips now appears to be counting on Samsung to develop new technologies in the hope that it will be able to use them effectively to make products at low cost, South Korean panel industry observers said. The collaboration between the two companies, at a time when the performance gap between them is widening, could end up as a de facto rescue of LG by Samsung.