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Electronics companies form LCD alliance

NEC and SVA are creating a joint venture in China that will focus on a plant that can handle large LCD panels, a move that might be followed by others in the industry.

NEC and SVA see liquid crystal displays in China's future.

The two electronics companies on Wednesday said they have signed an agreement to create a Shanghai-based joint venture by June 2003. SVA, the largest electronics group in China, is a holding company with interests in product development, manufacturing and sales of household appliances and LCD displays.

The forthcoming company, which is thus far unnamed, will plan, develop and manufacture thin filament transistor LCD panels and modules for PCs, monitors and displays primarily for the Chinese market. NEC and SVA invested 50 billion yen, or just over $416 million, in the company, with 75 percent coming from SVA and 25 percent from NEC.

A fifth-generation LCD plant--one that can more efficiently manufacture large panels--is scheduled to begin operation in Oct. 2004. It will cost about 85 billion yen, or just over $707 million, to set up the plant, the companies said.

In related news, NEC will create a separate new LCD business, called NEC LCD Technologies, to focus on high-end monitors with wide viewing angle technologies and high-resolution displays. For mass-market products, NEC will count on the new joint venture for product development, production and sales.

The cost of the plant is much lower than the billions likely spent by others who built them in other countries, such as LG.Philips LCD and Samsung; this suggests that other companies may establish plants in China, according to Sweta Dash, an analyst with research firm iSuppli/Stanford Resources.

Profits margins are thin and likely to get thinner as LCD TVs become more popular, so companies are desperate to find ways of lowering costs while remaining competitive.

Joint ventures have become more popular in the LCD industry as the economy has dipped because setting up plants is expensive and joint ventures help to spread out the financial burden.

"There is more need for joint ventures or consolidation in the market. It's not easy to make money in LCDs," Dash said.

Shipments are on the rise though, according to a report Wednesday from Austin, Texas, research firm DisplaySearch. The company's fourth-quarter report on desktop monitor shipments indicates that worldwide shipments of LCDs rose 54 percent from the same period a year ago, to a record high of 9.9 million units, while average pricing fell 9 percent. In 2002, LCD monitor shipments rose 105 percent, to 32.2 million units, the report said.