* Sony to take 10% of Sharp’s G10 LCD unit

- Positive impacts on industry

Sony has agreed to buy a 10% stake in Sharp’s G10 LCD unit, Japanese news has reported. Details of the deal will be released today. The overall effects on the industry should be positive, in our view. It is well known that Sharp will ramp up its G10 fab by the end of 3Q or early 4Q regardless of a JV agreement or not. But we believe that if Sharp started mass production without Sony’s participation as a captive buyer, it would be negative for panel prices due to possible inventory stockpiling by Sharp. Even though the G10 ramp-up is a given, a larger inventory at a specific firm could cause prices to plummet. As such, we expect the JV deal will stabilize panel supply/demand conditions and prices.

- Unlikely G11 JV between Samsung and Sony

We believe it is unlikely that Sony will form a G11 JV with Samsung since entering the deal with Sharp. Considering the bleak outlook for the global economic recovery and Sony’s weakening presence in the LCD TV market, it is less attractive for Sony to have two partners for the G10 and G11 fabs, in our view. Besides, we believe Sony chose Sharp instead of maintaining S-LCD, a JV with Samsung, because Sony concluded that Samsung was benefiting more from the venture. Having said that, we expect the collaboration between Samsung and Sony may end with the G8 fab.