By now, you’ve likely heard that Sharp and Sony are going ahead with a new LCD manufacturing joint venture, to be known as Sharp Display Products. This entity will come to life on April 1 and will be capitalized to the tune of 66% by Sharp and 34% by Sony.

Peter Putman
ROAM Consulting

What you may not have heard is that Sony is also talking to LG Display (LGD) about sourcing 32-inch, 37-inch, and 42-inch LCD panels for Bravia TVs for the 2nd half of 2009. According to a story in the Korea Times, testing is already under way at Sony of LGD’s current S-IPS offerings in those panel sizes.

Not surprisingly, mum’s the word from both LGD and Sony on the possibility of renewing an OEM relationship between the two companies that predates the 2004 Samsung-Sony S-LCD joint venture. In case you may have forgotten, Sony — with no large LCD fabs of its own at the time — was frantic to find a reliable source of LCD glass as the worldwide flat panel TV market was heating up, which is why it sowed up its deal with Samsung.

Sony is currently looking at the biggest operating losses in its corporate history and possibly several years of red ink. That, combined with declining TV market share and relentless downward pricing pressure from brands like Vizio, is forcing the company to slash costs wherever it can — and apparently LGD may be able to offer lower LCD panel prices than Samsung.

An analyst with Woori Investment and Securities was quoted in the Times story as saying, "If LCD panel prices are favorable, it is highly likely that Sony will restore relations with LG Display." LGD already sources LCD panels to Panasonic and Apple, and would love to add Sony’s business to its portfolio. The extra cash would also help with LGD’s future expansion plans.

In the meantime, LGD’s parent LG Electronics is making a concerted effort to surpass Sony in global LCD TV sales. Unlike Samsung and Japanese rival Sharp, LGD uses S-IPS glass exclusively, and there are a few analysts who believe S-IPS makes for a better picture than the PVA glass that both Sharp and Samsung currently offer.

For what it’s worth, both Panasonic and Sony use IPS glass exclusively in their broadcast and professional LCD monitor products, including Sony’s $25,000, 23-inch BVM-L230 Trimaster reference video monitor.

However, a $25K LCD monitor is a tough sell these days in the broadcasting business. With ad revenue down and TV ratings in decline, several TV networks aren’t even allowing employees to travel to NAB 2009, and most capital spending on infrastructure improvements at network-owned and affiliated TV stations has been trimmed, postponed, or cut out of budgets entirely.

That’s definitely not good news for Sony’s professional video products division, which has also shown a 42-inch Trimaster LCD monitor (BVM-L420) prototype at past NAB shows, but has yet to commercialize it. Even though the BVM-L230 is currently homegrown, there’s no reason why LGD couldn’t also be the source of
panels for this product.

It’s obvious that Sony is playing more than one hand of cards right now in a high-stakes LCD OEM game. Recall that, in the recent past, Sony has also sourced smaller LCD TV glass sizes from Chinese fabs (as has Sharp) in order to keep up with consumer demand. Now, it appears cost cutting is the primary motivation.

The question is, how will a Sony-LGD OEM relationship affect Samsung’s profitability and plans for future growth in LCD manufacturing and sales? And what impact will it have on the new Sony-Sharp joint venture? Stay tuned…