In the great technology transition from analog to digital broadcasting there have been winners and losers. Perhaps the hardest-hit of all high-profile CE makers was Sony, which stumbled in the great digital migration and was caught without owning a piece of the biggest thing to hit television since color - flat-panel display manufacturing (either LCD or PDP).

Steve Sechrist
Senior Analyst and Editor
of Projection Monthly &
Microdisplay Report

But the company has come roaring back, forming a critical LCD joint venture with Samsung and launching the Bravia line of LCD-TVs, which includes-rear-projection LCD and SXRD sets. As a result, Sony reported record third quarter profit and revenue numbers, and booked its highest-ever quarterly net profit and second-largest-ever operating profit ($1.5B and $1.8B) on revenues of $64.3B.

Sony COO Nobuyuki Oneda attributed the record-breaking quarter to its Bravia-brand LCD-TVs that saw brisk sales all over the world and is the top LCD-TV brand in the US. The company boasts a 30% share of the US market, but is still playing catch-up with rival Sharp in the Japan market, where Sony is number two with a 25% market share.

If Sony had not initiated the LCD joint venture with Samsung, the digital transition could have sounded the company’s death knell. Indeed, Sony’s courting of its Korean rival was a brilliant stroke on several levels. It would have been far easier - both economically and culturally - for Sony to look to the Taiwanese, and with Sony’s revenues towering over that of the Taiwan tigers, the Japanese company could have leveraged a sweet deal with any one of the Taiwanese manufacturers.

But in making its choice of partner, Sony seemingly focused, and rightly, on the better technology. Samsung had been pouring billions of dollars into LCD R&D and manufacturing and had the best shot at duking it out toe-to-toe with Sharp - a rival that, at this time, a little over two years ago, had already been working on Kameyama 1, a 6G (1500×1800mm) fab with monthly capacity of 45K substrates optimized for 32- and 37-inch displays. Sony needed to do something quickly.

Samsung is also to be lauded. It simply could have turned its back on Sony, but the Koreans realized the power of a known brand, particularly a brand as strong as Sony’s - and particularly in the US market.

The move paid off for Sony as the company got back to basics in launching the new Bravia brand for the LCD line and leveraged the famous Sony brand in general. Remarkably, the brand had remained relatively untarnished in the US, even while losing some luster in Japan because of past marketing and production missteps.

And let’s not forget to come back to Samsung. The company gained immensely from the Sony partnership, particularly in growing its Gen 7 production investment and gaining a first-class brand partner in worldwide markets. The S-LCD joint-venture fab helped push Samsung’s unit share to 20.7%, just slightly over LG.P’s 20.1% market share in 4Q’05. The JV will also go a long way to helping Samsung establish its 40-inch LCD size as an industry standard against rival LG.Philips’ 42-inch.

So Sony is back in the money, but it didn’t come cheap. Prior to the profitable quarter, Sony’s restructuring plan included 10K announced job cuts and the shutdown of 11 manufacturing plants. A bitter pill to swallow for the past missteps of a CE giant that prides itself on innovation, new technology and setting the pace for the next new trend in consumer electronics.

We may have lost the ABIO robotic dog, but we gained the Bravia brand. -SS

Insight Medi a, 203-831-8464, steve@insightmedia.info