Sony and Sharp amend JV agreement on LCD panels
5/3/2011 8:20 AM EDT
MANHASSET, NY -- Sony and Sharp will withhold further investment in their joint venture Sharp Display Products Corp (SDP).
Under the original JV agreement, Sony was to make additional capital injections in SDP, resulting in a maximum 34 percent ownership by Sony of SDP by the end of April 2011, subject to certain conditions set forth in the JV Agreement.
Sharp and Sony have now agreed to amend the JV Agreement to suspend those contributions and plan to continue to discuss any future contributions by Sony to SDP until the end of March 2012.
According to the original agreement the two companies signed in 2009 to produce and sell large-sized LCD panels and modules.
SDP was launched in April 2009 as a wholly-owned subsidiary of Sharp. Since then, Sony invested 10 billion yen (about 123.43 million dollars) in December 2009, and SDP became a joint venture of Sony and Sharp. At that time, Sony had a share of 7.04 percent, but until April 27 2011, no additional investment was made.
On July 1, 2009, Sharp transferred its LCD panel plant in Sakai City, Osaka Prefecture, to SDP. On December 29, 2009, Sony invested 10 billion yen into SDP in exchange for new shares issued by SDP to Sony (at which time Sony owned 7.04% of the shares in SDP) and, as a result, SDP became a joint venture company of Sharp and Sony on that date. Sony has made no further investment to date.
Sony stated that there is no material impact on Sony's consolidated financial forecasts for the fiscal year ended March 31, 2011 as a result of this amendment.
According to a Reuters report, Sony had initially planned to invest up to 68 billion yen ($822 million) in Sharp's western Japan plant by the end of April this year, raising its stake in the venture to 34 percent from the current 7 percent.
Sharp has been forced to suspend operations at the 10th generation LCD plant, the most advanced in the world, and another TV panel factory for at least a month due to plunging domestic demand and a shortage of a gas used in the production process following the March 11 earthquake.
Sony competes with Samsung and LG Electronics in televisions, and needs to slash costs as it heads for a seventh straight year of losses in its TV business.
Reuters reports Sony spokeswoman Yuki Shima said that abandoning plans for raising its stake to 34 percent from 7 percent was one option being considered by the consumer electronics giant, but that talks would continue until the end of the month before a decision was made.