said Monday that it has begun streamlining its television manufacturing operations and has sold its nearly 50 percent stake in a joint-venture LCD panel factory to co-owner
The move affirmed reports out of Japan several months ago that Sony was looking to scale back its television making operations due to increasingly difficult market conditions, including the strong value of the yen against the dollar and South Korean won, and the sustained economic meltdown which has hindered consumer demand for more profitable products.
Revealingly, Sony waited for one of the slowest news days of the year in the Western world - the day after Christmas - to make its less-than-positive pronouncement.
Sony, which ranks in the top three selling TV brands in the U.S. with its Bravia sub-branded LCD TVs, said in a statement that it would sell its stake in the jointly owned manufacturer, S-LCD company, to Samsung of South Korea for $939 million.
The joint venture was established in Tanjeong, South Korea, in April 2004.
However, Sony said it would maintain its LCD TV marketing business in part by outsourcing. It also retains a 7 percent stake in an LCD joint venture panel factory with Sharp.
Last month, Sony warned that it would lose money for the fourth year in a row in its current financial year, which ends next March.
Sony said it expects to show a loss of 66 billion yen, or $856 million, for the last three months of 2011 because of its exit from the Samsung joint venture.
The move, however, should reduce costs in its LCD business by 50 billion yen a year, the company said.
Sony said it would continue to purchase LCD panels from Samsung based on market prices.
Samsung officials said in a regulatory filing Monday that it had approved the plan.
The NPD Group's television display market analyst firm DisplaySearch said in a blog on the move that "Sony's panel sources will change, but probably in 2013 rather than 2012. Sony needs a stable and consistent supply of quality LCD TV panels, and we believe Samsung will supply more than half of Sony's LCD TV panels."
Sony's other suppliers include: AUO, Chimei Innolux, and LG Display.
DisplaySearch, however, pointed out that Sony does not seem to be increasing purchases from others in 2012.
"In the longer term, Sony will have the freedom to source TV panels from all suppliers. With more panel sourcing flexibility, Sony can reduce the use of Samsung panels, and focus on differentiating its LCD TV products," DisplaySearch said.
The firm noted that Sony "will buy more open cells and fewer finished LCD modules."
The company is changing its business model, shifting more to backlight module system (BMS), DisplaySearch said.
Sony plans to purchase open cells from panel vendors and do the final TV set assembly at both OEM partners and in-house TV assembly lines.
The firm said Sony might adjust its 2012 LCD TV shipment plans downward 20 million from its previous estimates of 22 million, with production focused more on higher-end models.
Sony is also shifting its promotional activities to China and other Asian markets, and to Latin America, DisplaySearch pointed out.
Samsung LCD, meanwhile, will gain better flexibility in its fab product mix.
"This may help Samsung optimize its fabs for profitability," the firm speculated.