Sharp and Toshiba on Friday said they would sell each other LCD TV components as part of a collaboration agreement that could spark a realignment in the market for high-definition televisions.
Under the deal, Sharp would sell LCD, or liquid crystal display, panels of 32 inches and larger to Toshiba, which would in turn sell large-scale integration circuits (LSI) to Sharp. LSIs are key technology in image processing in LCD TVs.
Financial terms were not disclosed, but Sharp said it plans to buy about half of its LSIs from Toshiba by 2010. The latter company plans to purchase 40% of its LCDs from Sharp in the same time frame.
The partnership between the two rivals is a reflection of the increasingly competitive LCD TV market. While unit sales have taken off, prices have been falling, forcing vendors to sacrifice margins for volume sales.
These market dynamics were behind the Sharp-Toshiba deal. "It would be difficult for one company to do everything on its own," Toshiba president Atsutoshi Nishida told a news conference in Japan, according to the Reuters news agency. "It's necessary to join forces with others that have complementary strengths."
Toshiba is expected to become a major customer of the $3.4 billion LCD factory Sharp is building in western Japan, Reuters said. The factory is scheduled to open in 2010.
LCD TV sales have outpaced all other high-definition TVs. Market researcher iSuppli predicts LCD TV shipments will increase at a compound annual growth rate of 31.9% through 2011 to 165.3 million units. Revenue is expected to increase at a 19.4% CAGR to $116.2 billion.
Nishida told reporters that Toshiba may sell its 15% interest in LCD maker IPS Alpha Technology, which is a joint venture with Hitachi and Matsushita Electric Industrial, Reuters said. Matsushita is best known outside of Japan for its Panasonic brand.
If Toshiba sells it stake, then Matsushita could take control of IPS and move faster into the LCD TV market. The company is considering such a move, Reuters said, quoting an anonymous source. Matsushita is the largest maker of plasma TVs, which is a weak second-place competitor to LCD TVs.
Plasma TVs are forecast to reach only 19.3 million units by 2011 from 9.3 million in 2006, while revenue fell to $14 billion from $15.9 billion. The drop will be caused by deep cuts in average selling prices to keep plasma TVs competitive with LCD TVs, according to iSuppli.
Along with shifting alliances, LCD TV vendors have been increasingly more protective of intellectual property, which helps them differentiate their products in the competitive market. Sharp this month sued Samsung Electronics for allegedly infringing on three Sharp patents related to LCDs.