Rivals LG, Samsung Cut Cross-Purchase Deal

Samsung and LG is long-time rivals in electronics industry. However, they recently have agreed on a cross-purchasing deal to aim in surviving the fierce competition in the global market for flat TV screens and panels. Lee Sang-wan, chief of Samsung Electronics mentioned that they will supply their 52-inch liquid crystal display (LCD) panel to LG Electronics from July. He said “As the supply and demand imbalance will be eased, thanks to the operation of the second phase of the eighth-generation line."

60,000 sheets of production capacity from the line is expected per month. Previously, Samsung Electronics has been refusing calls by LG Electronics to provide larger-sized panels making a tight supply in the industry. But as market situation is getting rough, Samsung will decide by July in purchasing 37-inch panels from LG Display. Although panel pricing and the technology gap is still remained as some technical matters experts are looking forward of the decision. If it goes well, as experts hoped, the Korean TV manufacturers will be in a advantageous position to compete their Taiwanese rivals.

Deciding Cross-purchasing has long been disputes but the bilateral tie-up will help Korean firms to widen the market gap with their rivals in Taiwan and Japan. According to industry estimates, Samsung buys a ambined 60% of its 32-,37-,40-,46 and 52 inch LCD panels from Taiwan-based suppliers while LG Electronics buys a combined 34% 32-,37-,42-,27 and 52-inch panels. Because the global flat TV demand is estimated 100 million this year, the Korean and their Japanese rivals (Sony, Sharp) have been competing mainly in U.S and European markets even thought there are concerns over profitability by aggressive price- cuts. The Taiwanese panel suppliers have been enjoying the increasing orders from LG and Samsung because they both wanted more market share in the global market. Samsung have also engaged in specific discussion with LG Electronics and LG Display to cross-buying unfinished LCD panels or cells and a decision will be made in the coming months.

In my opinion, I think cross-purchasing deal for Samsung and LG would benefit our domestic firm’s profitability and will be a good step to weaken their rivals from other nations. Before Samsung & LG had bought panels from Taiwanese to compete each other it only benefited Taiwanese firms to grow and rise to a position where they are able to compete with conglomerates of Korea. Because competing fiercely with their own nation’s firm will only give advantage to firms in other nations. I’m positive of the way Samsung & LG are cooperating to become the world’s greatest provider of LCD market.

http://koreatimes.co.kr/www/news/biz/biz_main.asp?CategoryCode=123

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