Samsung, Sony Team Up for Technology
Jul 25, 2005
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Samsung is now working with Sony due to Samsung's manufacturing skill and innovative technology on such projects as the Blu-ray Group, which is trying to establilsh the next generation of DVD players.

Rather than shrinking from its role reversal with Samsung, Sony has embraced it by forging a series of deals that have turned the tables on a relationship that Sony used to dominate. The companies jointly invested U.S. $2 billion in a state-of-the-art factory in South Korea to produce liquid-crystal displays; it has been cranking out so-called seventh-generation panels since April, helping Samsung cement its position as one of the world's top LCD producer and giving Sony a lift in a market where it has lagged.

The companies are also partners in the Blu-ray group, one of the consortiums trying to establish the standard for the next generation of digital video discs and players. And in a far-reaching deal, the companies last December agreed to share 24,000 basic patents that cover a range of components and production processes.

Their partnership comes at a crucial time for Sony, which is trying to cut costs in its bloated electronics division. Analysts say Sony, which will announce earnings on Thursday, is expected to report losses of about 15 billion yen (approx. $134.8 million) for the quarter ended in June as sales of its consumer electronics in Japan declined. Samsung, by contrast, said in mid-July that it had net income of 1.69 trillion won (approx. $1.59 billion) in the same quarter. With its brand and products under attack, teaming up with Samsung is a sign that Sony, once fiercely independent, must rely more and more on others to compete effectively.

For Samsung, the deals are an acknowledgment of its emergence as a global player with the manufacturing muscle, financial influence, and popular products to overtake its more prestigious rival in some significant areas. Samsung's market capitalization is now more than twice as large as Sony's, and it earned more than 10 times as much in profits last year. By teaming up with Sony, Samsung hopes to learn from Sony's powerful design and marketing expertise.

While Sony has been pushing into China to drive down production costs, teaming up with Samsung offers another way to cut costs. It also allows Sony to tap into Samsung's deepening expertise in everything from LCD's to memory chips. By pooling some of their patents, the companies can reduce legal costs associated with keeping track of the royalty payments flowing between them. The companies would not say how much they pay each other annually, but both said Sony received more from Samsung. (The New York Times)

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