Samsung finalizing LCD line talks with Sony: source

A man walks past Samsung Electronics' LCD TV sets displayed at a shopping mall in Seoul August 6, 2007. Samsung is in the final stages of talks with Sony Corp to jointly build a new LCD panel production line and the two may cooperate on another, bigger line, a Samsung source said on Wednesday. (REUTERS/Han Jae-Ho)

SEOUL (Reuters) - Samsung Electronics Co Ltd is in the final stages of talks with Sony Corp to jointly build a new LCD panel production line and the two may cooperate on another, bigger line, a Samsung source said on Wednesday.

Sony, which runs a joint venture to produce liquid crystal display (LCD) panels with Samsung, said on Tuesday it would take a one-third stake in Sharp Corp's $3.5 billion LCD panel plant in Japan to meet rising demand for flat-screen TVs.

Sony's LCD production and procurement strategy had been eagerly awaited as other major TV makers including Sharp Corp T> , Panasonic maker Matsushita Electric Industrial Co Ltd and Samsung have made public their investment plans.

The move announced on Tuesday had raised concerns in the Korean market that Sony might not cooperate with Samsung in future projects, although Sony President Ryoji Chubachi pledged to continue running S-LCD, its joint venture with Samsung.

"We've almost wrapped up discussions with Sony for the 8-2 (eighth generation/line 2) production line and it's been going well," said the Samsung source, who asked not be named.

The new plant would be located at the company's LCD production complex south of Seoul. Sony and Samsung, the world's biggest maker of large-sized LCDs, are already operating the 8-1 line, an eighth-generation line in the S-LCD complex.

The investment size for the new line has not yet been set but will likely be similar to the 8-1 line, the source said.

Asked on the sidelines of a news conference on Tuesday if Sony is talking with Samsung on another eighth-generation line, Chubachi declined to comment, and a Sony spokesman on Wednesday said the company still has no comment on the matter.

Samsung and Sony spent a combined 1.8 trillion won ($1.9 billion) in the initial stage of the existing line. Samsung is currently ramping up the 8-1 line on its own, spending another 2 trillion won.

Samsung believes it is still possible to work with Sony on a bigger 10th generation LCD production line, the source said.

The comment comes after Sony's Chubachi said on Tuesday that if Samsung proposes that they jointly build and operate a 10th generation plant, Sony is willing to consider it.

Sharp's new factory in which Sony is investing will be the world's first using the 10th-generation glass substrates, which yield more panels than earlier lines.

Samsung benefited from Sony's brand power and steady demand for its screens, while the alliance provided Sony with a partner to shoulder heavy investment needs in the flat-panel industry.

But the two are rivals in the LCD TV market, with Samsung ranked the world's biggest LCD TV producer for 2007, followed by Sony and Sharp.

Sony aims to sell 15-20 million LCD TVs in the year starting on April 1, up from 10 million this business year, and urgently needs to secure enough panels.

Shares in Samsung were up 1.2 percent at 578,000 won while Sony rose 2.7 percent to 5,340 yen by mid-afternoon, both outperforming the respective market's benchmark index.

($1=947.0 Won)

(Additional reporting by Kiyoshi Takenaka in Tokyo, Editing by Marie-France Han, Louise Heavens and Michael Watson)