Updated: JAPAN: Sony confirms plans to boost LCD joint venture with Sharp are on hold
Sony has confirmed it's shelved plans to increase its involvement in Sharp Display Products Corporation. The joint venture between Sony and Sharp was founded in July 2009, and Sony holds a 7% stake, having invested Y10bn (almost £75m) in December of that year.
The company had been expected to increase its holding to 34%, as laid out in the original joint venture agreement, but recent reports from Japan had suggested it was reconsidering that move.
Today's statement from Sony and Sharp confirms such plans are on hold, and says that "Under the original JV Agreement, Sony was to make additional capital injections to SDP, resulting in a maximum 34% ownership by Sony of SDP by the end of April 2011.
"Sharp and Sony have now agreed to amend the JV Agreement to suspend those contributions and plan to continue to discuss any future contributions by Sony to SDP until the end of March 2012."
Reports from Japan say Sony has put the brakes on its plans to increase its stake in Sharp's huge LCD production plant in Sakai, Osaka Prefecture (above).
At the moment Sony has a 7% interest in the Sharp Green Front Sakai facility, which started production in October 2009 and has a capacity of 72,000 10th-generation glass substrates, each measuring 2.88x3.13m, per month.
The glass, using Sharp's own UV2A technology, is particularly suited to making large – 40in+ – LCD screens.
Having already invested Y10bn (£74.5m) in December 2009, Sony had planned to ramp up its stake to 34%, but now the plans are on hold – not least because there's oversupply in the LCD display market and Sony reckons it can buy panels for less elsewhere.
Manufacturers in South Korea and Taiwan are investing heavily in LCD panel production, as are Chinese companies, which means there's much greater supply capacity than demand, especially in the face of a relatively weak global TV market.
The other problem is the ongoing strength of the Yen, which is currently sitting at around Y82/£1, meaning that the price of imported panels is becoming ever more attractive for Japanese companies.
The reports say that Sony will continue to hold talks with Sharp for another year regarding potential investment, but may scrap its plans completely; Sharp says it will continue to seek investment from Sony in order to secure stable contracts for the sales of its panels.
The Sakai plant, along with Sharp's other LCD panel facility in Mie Prefecture, hasn't been operational since the March 11 earthquake and tsunami: neither was directly affected by the disaster, but Sharp says it's proving difficult to get reliable supplies of natural gas to fuel them.
It expects the factories will be back in production in the next few weeks, but says it has sufficient stockpiles of LCD panels to meet demand for at least a month, not least because domestic Japanese demand for TVs has understandably been slack since March 11.
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