Recently, in an attempt to restructure its LCD business, cutting costs and reducing losses, Sony offered to sell its share of the joint S-LCD business back to Samsung for £600 million; Samsung has since accepted the offer, "Under the agreement, Samsung will acquire all of Sony's shares of S-LCD Corporation, the two companies' LCD panel manufacturing joint venture, making S-LCD a wholly owned subsidiary of Samsung."
S-LCD was a joint venture set-up by the two firms in 2004 when an economical boom led to a huge demand in consumer electronics and the rise of LCD technology found the component present in an increasing number of products. Conversely, the economical bust of 2008 and the reduced profit margins of the now not-so-new LCD have made it difficult to carry out profitable business, especially for one such as Sony that tends to focus towards high-end products, which suffer the most during tough economic times, "This deal will allow Sony to acquire LCD panels from Samsung Electronics in a stable way based on market prices, without the responsibility or costs that come with operating a factory," said the Japanese firm. From Samsung's point of view, full ownership of the venture would provide it with "heightened flexibility, speed and efficiency in both panel production and business operations."
This move seems an appropriate one, Sony has switched from in-house production to becoming a panel consumer, this makes sense as Sony has never really been a provider of panels and relies heavily on the success of its own consumer electronics division; Samsung on the other-hand, will see ups and down with various clients, whilst one sees reduced sales, another may increase its demand, leading to a market with greater stability. Samsung will be able to further streamline its operations now that it holds full control of S-LCD.
Some analysts suggest that Sony may look towards cheaper Taiwanese panel manufacturers in the future, diverting sales away from Samsung, however, only time will tell as Sony rethinks its future product lines under the new business model.
