South Korean Display Panel Makers Forge Alliance To Fight Rivals

Samsung Electronics and LG Philips will cooperate on patents and research.

A top economic official on May 15 supported a decision by South Korea's display panel makers to forge an alliance to counter challenges from foreign rivals. Two liquid crystal display (LCD) rivals -- Samsung Electronics and LG Philips LCD -- and two plasma display panel (PDP) makers -- Samsung SDI and LG Electronics -- launched the Korea Display Industry Association. They pledged to cooperate in various fields, ranging from patents and joint research and development to cross-purchasing of panels from each other, according to the commerce ministry which encouraged the move.

The firms will consider lifting a ban on parts suppliers providing some products to their local rivals and will try to standardize panels, equipment and materials.

Commerce and Industry Minister Kim Young-Ju said the alliance should not be seen as setting the stage for collusion or price fixing. "The companies are not seeking mergers or a cartel to fix prices," Kim told a meeting of anti-trust regulators on May 15. He said South Korea should ease tight anti-trust rules to help local firms compete with foreign rivals through strategic tie-ups.

By standardizing panels, local suppliers will no longer have to invest to meet differing standards of the Samsung and LG units. They will reduce research and development costs and gain benefits from economies of scale, analysts said.

"In the LCD market the unending competition among local manufacturers banned them from purchasing panels from one another, which led Taiwanese rivals to meet their needs instead," said Bookook Securities analyst Chang In-Beum. "In the PDP market, the exhausting rivalry between LG Electronics and Samsung SDI drained their competitiveness when they should together stand against Japanese makers."

Samsung and LG jointly account for some 40% of the global market for display panels, about the same as Taiwan, and Japan takes up the remaining 20%.

But Samsung and LG depend heavily on Japanese parts since local firms had to supply one or the other but not both. "The alliance will help lead the suppliers of Samsung and those of LG to sell their products to both sides and thus gain from economies of scale," Yoo Jong-Woo, an analyst with Korea Investment Securities said.

Copyright Agence France-Presse, 2007

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