Seoul - A unit of Philips, the Dutch company, tied up with South Korea`s LG
Electronics yesterday to form the world`s largest supplier of flat-panel
displays, officials said.
The $1,6 billion deal marked the first major foreign investment in South
Korea``s electronics market since late 1997, when the country slipped into a
foreign-exchange crisis.
Under the deal, Philips Flat Display Systems would buy a 50 percent stake
held by LG Electronics in its liquid crystal display (LCD) business, the
two firms said in a statement.
"As the world``s largest manufacturer of colour picture tubes, this
agreement extends our commitment in display technologies," said Gerald
Kleisterlee, Philips Components`` chairman.
LG said the new LCD firm would dominate the global market when LG``s
diversified production skills combined with Philips`` capital and technology.
But Samsung Electronics, the world``s largest producer of LCDs, played down
the ambitious bid by Philips and LG, saying it would retain its dominant
position.
"LG``s expansion is feared to cause a glut in the booming market," an
official at Samsung said.
"So far, the LCD market has been controlled by South Korean firms. But
low-priced Taiwanese products will hit the market next year, prompting us
to upgrade products," he said.
The two partners would provide the high-volume manufacturing capacity
needed to minimise the global shortage of high-quality flat-panel displays,
a key component used in desktop monitors, notebook computers, consumer
electronics and multimedia and business applications.
With Philips`` investment, LG would have an opportunity to strengthen its
worldwide leadership in marketing and technology in the active matrix LCD
industry, the statement said.
The deal would give LG access to Philips`` existing global marketing and
distribution network, with which it would have stronger marketing
initiatives.
"Combining the advanced research and development technologies of the two
parties will provide the new joint venture with the most competitive
technology potential," it said.
LG Electronics last month sold a controlling stake in its sister
semiconductor firm to the rival Hyundai Group in a $2,1 billion deal. LG
said the money from Philips would be used to reduce its debt and develop
digital televisions.
Last year LG posted 9,85 trillion won (R50 billion) in sales and 112
billion won in net profit. The company forecast 5,1 trillion won in sales
in the six months to June.