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May 21, 1999
LG and Philips may make LCD monitors in IndiaByas Anand in New Delhi
LG Electronics of Korea is deciding on an opportunity to produce LCD monitors in India in a joint initiative with Royal Philips Electronics of the Netherlands.
Also, LG is seriously considering India as a market for joint launches with Philips, says Michael Ahn, senior-vice president of LG Electronics' overseas division for home appliances.
''We are also yet to decide whether a separate company would be set up for the purpose or whether the LCD monitors would be produced through our existing subsidiary - LG Electronics India Limited,'' Ahn said.
The negotiations are a fallout of the recent agreement reached between the two global consumer electronics majors under which Philips would pick up a 50 per cent stake for $1.6 billion in LG LCD Inc, the 'active matrix liquid crystal display', or AMLCD, business of LG.
Under the letter of intent signed and approved by the board of directors of both sides, Philips Electronics and LG LCD will hold equal rights to manage the joint venture.
''This partnership will lead LG LCD to solidify its position as one of the world's largest LCD manufacturer. Initially, we were targeting the domestic market in Korea. Later we are to extended to other markets like India,'' Ahn added.
Globally, LCD monitors account of 30 per cent of LG Electronics' sales.
Through this alliance, LG Electronics seeks to not only improve its financial structure but also its global competitiveness.
The AMLCD flat panel display market is the most rapidly growing area of display technologies, with revenues of approximately $8 billion in 1998 and is expected to continue to grow annually by more than 20 per cent.
That growth will be driven by the development of a greater variety of screen sizes, and new applications such as automotive, smart handheld devices and television.
LG LCD had sales of approximately $500 million in 1998 and expects that to rise to approximately $1.8 billion in 1999.
The transaction is a key element of Philips' strategy to continue leadership in displays as it moves into the digital future. LG LCD is recognised as a manufacturing and technological leader in AMLCDS.
The joint venture is said to strengthen global competitiveness of both companies in this market and provide Philips with its own source of flat panel displays with the capacity required for meeting increasing demand.
The new company will begin as a manufacturing and technology joint venture with the potential to develop into a full joint venture over time, incorporating all the AMLCD activities of both companies.
LG has been making efforts to restructure its businesses as part of its select and focus strategy. By either selling or closing a number of existing businesses, while forming strategic partnerships in key areas, LG aims to focus mainly in major business areas where it can compete globally, namely, electronics and telecommunications, including the Internet, chemicals and energy, and financial services.
By following this corporate restructuring strategy, LG has attracted approximately $4 billion since last year from various global companies, with the most successful restructuring programme of all the major Korean corporations.
Closing of the transaction is expected at the end of July, and the joint venture will officially start in August.
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