Yesterday, Sanyo Electric Co. and Quanta Display Inc. (QDI) agreed to form a joint venture for the manufacturing of flat-screen TVs, according to The Nihon Keizai Shimbun.

Ken Werner
Senior Analyst and Editor
of HDTV Retailer

The Sanyo Group will lose about ¥233B in the fiscal year ending March 31, but has a (primarily) CRT-based TV business that is profitable and contributes about ¥120B (or 5% of group sales). The company sold 6.9M TV sets in 2004 (of which only about 200K had flat screens) and 6.8M sets in 2005 (of which 400K had flat screens). Well, it doesn’t surprise anybody that the CRT-TV business is declining, but if that’s your business you had better look elsewhere - and quickly.

Sanyo’s situation is complicated by the fact that its brand name in the television arena, while respectable, is not gold-plated. Sanyo, to put it bluntly, is the low-priced spread of Japanese consumer electronics. (It’s products are displayed prominently at Wal-Mart.)

QDI is the fourth of Taiwan’s “Five Tigers” - the island’s five largest LCD panel makers. Although QDI has been prospering in the recent LCD boom, only the top two tigers can rely on remaining profitable when times get hard, as they do on a rather predictable cycle in the LCD business. One response is to shift production from LCDs for monitors and notebook computers to LCDs for TVs, where the margins are somewhat less thin, and QDI has been doing that.

So a joint flat-panel TV operation makes sense for both of these companies. Struggling Sanyo gets help in developing a modern TV operation and obtains access to a reliable supply of LCD panels at (presumably) favorable terms. Quanta gets Sanyo’s TV-making expertise and internationally recognized brand, as well as its sales and distribution network - including the formidable Wal-Mart - and a (presumably) reliable customer for its increasing output of LCD-TV panels.

My colleague Steve Sechrist is impressed by the fact that this will be a JV between a Japanese and Taiwanese company. Not long ago, a Japanese company would look to the homeland for a partner, or perhaps to Korea or the U.S. or Europe. It’s a validation of Taiwan’s increasing technological, as well as manufacturing prowess, that Sanyo is reaching out to “The Land of the Morning Calm.” As if to underline Steve’s point, QDI has also inked a deal to supply 26- and 32-inch TV panels to Sharp, after Sharp stated that such a deal would occur only if the quality of QDI’s panels is equivalent to Sharp’s own.

QDI currently only operates LCD lines up to G5, so it ability to economically produce LCD TVs bigger than 32 inches is dubious. But that is OK for Sanyo, which has tended to favor smaller-sized screens anyway.

So, is this a match made in heaven? Time will tell, but it’s a sensible business agreement between two Osaka-based companies.