Sony to Cease Its Flat-Screen Partnership With Samsung

Sony, which makes the Bravia liquid-crystal-display televisions, said in a statement that it would sell its stake of nearly 50 percent in the jointly owned manufacturer, S-LCD, to Samsung, of South Korea, for 1.08 trillion won, or $935 million.

Sony’s exit from the joint venture, which was set up in Tangjeong, South Korea, in April 2004, will let it switch to less-expensive outsourcing options that may help it to resuscitate its struggling television business. The only other LCD panels Sony manufactures are through its joint venture with Sharp, in which Sony owns a 7 percent stake.

Cutthroat competition in a peaking market is squeezing profit margins for TV manufacturers, especially Sony, which analysts have long criticized for its high production costs. A strong yen has also weighed on Sony’s profit by eroding the value of its overseas earnings when they are repatriated into yen.

Last month, Sony warned that it would lose money for its fourth consecutive fiscal year, which ends next March. Sony’s television unit alone accounts for billions of yen in losses.

The company said it would report a further write-down of 66 billion yen, or about $845 million, for the final three months of 2011 because of its exit from the Samsung joint venture. But it expected to cut costs in its LCD business by 50 billion yen a year as a result of the departure, Sony said.

Sony “aims to secure a flexible and steady supply of LCD panels from Samsung, based on market prices and without the responsibility and costs of operating a manufacturing facility,” it said in the statement.

Meanwhile, Samsung Electronics, the world leader in flat-panel televisions, would gain freer rein in producing its next-generation displays by taking control of S-LCD. Samsung said in a regulatory filing that its board had approved the plan Monday.

The roots of the Sony-Samsung alliance date from the late 1990s, when Samsung emerged from the Asian financial crisis as a powerhouse because of relentless cost-cutting and aggressive overseas marketing.

At the same time, Sony was falling behind in several important markets, most notably in computer displays and flat-panel TVs, where it clung to the older technology of cathode ray tubes while consumers flocked to LCDs and plasma screens.

Sony looked to Samsung to reverse its flagging fortunes, forging a series of deals, including the $2 billion state-of-the-art LCD joint venture in South Korea. The companies also together backed the Blu-ray disc format and have entered into patent-sharing relationships.

For Samsung, those deals stood as an acknowledgment of its emergence as a global player. It has now taken over from Sony as the consumer electronics king. In its latest full financial year, Samsung earned $14 billion on sales of more than $134 billion, while Sony lost $3 billion on sales of $92 billion.

In comparison, Apple, the most profitable consumer electronics company in the world, generated $25.9 billion on sales of $108 billion.

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