Samsung-Sony JV to cut capital

SEOUL, April 25 (AP): S-LCD, a flat screen joint venture between Sony Corp and Samsung Electronics, said Monday it would reduce capital by $555 million, as Sony struggles with perennial losses from its TV business and Samsung seeks to shift to a new type of display. Global liquid crystal display (LCD) market is struggling with faltering demand, with some forecasting that the $100 billion LCD TV industry had already picked last year and would shrink by 3-4 per cent annually, as consumers in advanced countries have already traded their bulky tube TV sets to flat screens. LCD is widely expected to give way to new displays such as energy-efficient active matrix organic light-emitting diode (AMOLED), which is increasingly used in high-end smartphones and tablets and touted as a future large-sized TV display. The 50-50 LCD joint venture announced Monday its first capital reduction of 600 billion won ($555 million) after more than tripling its capital to 3.9 trillion won since Sony and Samsung formed the venture in 2004 with 1.26 trillion won to ensure smooth supply of flat screens for Sony. "The decision reflects shrinking demand from Sony after the devastating earthquake in Japan last month and the sector's overall shift in focus to OLED display," said Kim Sung-in, an analyst at KB Investment & Securities . "Sony has bought around 1.1-1.2 million units of LCD panels every month from the venture but it can't buy that much any more due to weak sales in Japan. With the overall demand for LCD displays set to shrink further, Samsung and Sony are likely to gradually wind up the business and focus instead on OLED," Kim said. Sony will not raise its stake in a separate LCD venture with Sharp Corp for at least a year, a Sony source said last week, a move that reflects the industry's growing caution over growing exposure to the LCD industry, which has been in a glut since last summer. Sony needs to slash costs as it heads for a seventh straight year of losses in its TV business. Highlighting soft demand from TV makers, Philips Electronics said this month it would transfer its TV business into a joint venture with TPV Technology. Panel makers have reduced production after the powerful earthquake on March 11 but demand from TV and computer makers is too weak to absorb even lowered supplies, sending prices of large-sized LCD panels down more than one third over the past year and most panel makers including sector leader Samsung are widely expected to report losses for January-March period. S-LCD, which supplies only to Samsung and Sony, said the move was aimed at improving its capital structure. The South Korean-based firm said on Monday it would cancel 120 million shares to reduce equity capital by 600 billion won to 3.3 trillion won, after having had strong cash flow last year.