Samsung scrambles to find new sources for LCD panels after Sharp halts supply

Samsung Electronics has sought LG Display’s help in solving a potentially serious problem of not having enough panels to manufacture LCD TVs, since Sharp has decided to stop selling it large panels.

The Japanese electronics maker has told Samsung that its LCD panel joint venture with Taiwanese parent Hon Hai Precision Industry will cease supplying LCD panels for TVs to the South Korean electronics maker next year.

This has moved Samsung to approach archrival LG group, a fellow South Korean conglomerate which fiercely competes against Samsung in flat-panel TVs, panels and other fields. LG Display has indicated that it will consider Samsung’s highly unusual request with a positive attitude — but “it is difficult to predict if their negotiations will lead to an agreement,” said a South Korean stock analyst.

Samsung makes liquid crystal display panels by itself and also procures the key TV component from Chinese manufacturers, such as BOE Technology Group, as well as AU Optronics and other Taiwanese companies. Aside from hoping to start buying panels from LG Display, Samsung likely is looking to procure more from BOE and other existing suppliers.

Due to their strong rivalry, Samsung and LG have only had limited dealings in the electrical machinery business. But Samsung approached the LG group recently for potential procurement of cellphone batteries when it was hit by a scandal involving combusting smartphones, a problem that was deemed to be caused by defective batteries.

Even if Samsung is able to procure LCD panels from LG Display, however, using different suppliers will require adjustments in the manufacturing process. This likely will result in increases in TV production costs, and thus lower profit margins.

Source: http://asia.nikkei.com/