BOSTON The flat-panel-display globe took a decidedly international spin this week as three different players took stakes in various display operations. Dutch giant Philips finalized its agreement to acquire half interest in South Korea's LG LCD, Apple Computer Inc. took a $100 million stake in the LCD operation of South Korea's Samsung and Hong Kong's Varitronix forged a manufacturing and technology agreement with U.S. microdisplay startup SpatiaLight Inc.
Both the Philips and Apple forays are geared toward locking down a supply of active-matrix, thin-film-transistor (TFT) LCDs at a time of short supply. The Varitronix-SpatiaLight deal involves liquid-crystal-on-silicon (LCOS) displays.
Apple's move is particularly focused on portables, where its competitors for example, Toshiba and IBM through their Display Technologies Inc. joint venture have a captive supply. "We are pleased to partner with Samsung to ensure that Apple is on the cutting edge of flat-panel display technology," said Apple's interim chief executive officer, Steve Jobs, in a prepared statement. Between the new iBook and Mac Powerbook, "Apple will need more flat displays than ever going forward," Jobs said.
Samsung supplies LCDs for the PowerBook and is sole supplier for the 12.1-inch screen on the new iBook, due out in September, an Apple spokesman said. "Samsung will use this investment to further accelerate the expansion of our TFT-LCD production to support Apple's growing needs," said Y.W. Lee, president and chief executive of Samsung's semiconductor business.
The LCD ramp-up over the past few years has been "steep," said Avo Kanadjian, senior vice president of Samsung Semiconductor Inc. (San Jose, Calif.), as Japanese competitors held back new investment in the face of plummeting prices and Korean competitors coped with national business realignment.
Samsung became the world's LCD leader in 1998, passing Sharp Electronics, Kanadjian said. Last year it scored in excess of $800 million in sales on more than 2.25 million LCD panels. "And we've already done over $800 million in just the first half of 1999," he said.
For its part, Philips Flat Panel Display Systems (San Jose) has bought LCD capacity before. In the spring of 1997, it took a 50 percent stake in Japanese active-matrix LCD vendor Hoshiden Corp., forming a new subsidiary, Hoshiden and Philips Display Corp., and then boosting its stake to 80 percent one year later.
LG Electronics spun off LG LCD last year as a separate business unit starting off with $1 billion in its coffers. It tallied about $500 million in LCD sales in 1998 and expects $1.8 billion this year. A new LCD facility at Kumi, South Korea, is expected to go online in early 2001.
The agreement, whereby Philips acquires a 50 percent stake of LG LCD from LG Electronics, puts in place a technology and manufacturing joint venture "with the potential to develop into a full joint venture over time," the companies said. They called the $1.6 billion price tag "the largest foreign investment in South Korean history and Philips' biggest single investment ever." The deal creates "the world's largest supplier of active-matrix LCDs," according to Philips.
"Some of our competitors have chosen to merge to increase their capacity," said Samsung's Kanadjian, "but our preferred method of accelerating capacity expansion is to make customers shareholders." Intel invested in Samsung earlier this year to expand its production of Rambus memories. "We hope to have additional opportunities with other OEMs as well," he said.
The fact that Apple has bought $100 million in Samsung bonds does not give it preferred-customer status, Kanadjian said. "We agree to accelerate capacity expansion and, in doing so, [Apple] will get their fair share." LCD demand "has outstripped supply," he said, and no let-up is expected "for the foreseeable future."
Varitronix, a broad-base LCD supplier with plants in Hong Kong, Malaysia and mainland China, will use the SpatiaLight deal to increase the supply of LCOS displays. "Varitronix will provide foundry service for microdisplays based on [its own] technologies, as well as technologies that may be specified by or transferred from companies such as SpatiaLight," said company president C.C. Chang.