Sanyo said it started procuring the display panels from Sharp in April, and would use them for the LCD TVs it’s producing for the North American market. And while Sanyo said it will keep buying LCD panels from other suppliers, too, the company also said that it’s in talks with Sharp about a program in which the two would jointly develop a line of kitchen appliances.

With its consumer-electronics business struggling, Sanyo has refocused itself strategically, betting its future on solar cells and rechargeable batteries, Reuters reported.

“We hope to expand our business by having a mutually complementary relationship with Sharp,” Sanyo spokeswoman Yuko Hosaka told Reuters. “Sharp’s strength in LCD [panels] is part of that.”

Sanyo sold about 1 million LCD TVs in North America in the business year that ended March 31.

Sharp’s Growing List of LCD Disciples

Sharp, which markets the Aquos line of LCD TVs, is the world’s third-largest maker of the flat-panel televisions, trailing South Korea’s Samsung Electronics Co. Ltd. (PINK: SSNLF) and Japanese consumer-electronics giant Sony Corp. (ADR: SNE). But Sharp has been trying to boost its market position and establish a consistent market for its LCD panels among rival flat-panel TV producers even as it invests to elevate its own productive capacity, Reuters reported.

As Money Morning reported back in February, Sony agreed to take a one-third stake in a $3.5 billion LCD plant that Sharp is building in Japan to meet the soaring worldwide demand for flat-screen television sets.

It plans to transform the LCD plant – which would be the world’s largest – into a joint venture: The Osaka-based Sharp will take a 66% stake, while Sony will take the remaining 34%.

While the companies would not say how much Sony would invest for its stake, Japan’s Nikkei newspaper said that Sony agreed to pony up $926 million, Bloomberg News reported. The factory will start production by March 2010.

While Samsung, Sony and Sharp rank one, two and three on the list of the world’s largest makers of LCD TVs, Japan’s Matsushita Electric Industrial Co. Ltd. – maker of the Panasonic brand – controls one-third of the plasma TV market.

Sanyo joins Sony, Toshiba Corp. (OTC: TOSBF) and Pioneer Corp (PINK: PNCOF) as companies that have all said that they plan to buy LCD panels from Sharp. But the Sony-Sharp alliance is an especially aggressive example of the linkups taking place among Japan’s flat-panel TV producers.

If it seems odd to have competitors buying and selling such a key component as an LCD screen, consider the challenges Sharp and its rivals face:

• They need to have a big-enough supply of the liquid-crystal display (LCD) panels to meet the accelerating demand.
• But these companies also need to keep their capital investments low at a time when flat panel displays are becoming a commodity, meaning the actual component prices can be expected to undergo the same steep declines as computer memory chips or memory drives.

In the face of burgeoning demand and tight supplies for LCD panels, companies are choosing different routes to fill their needs. Late last year, Toshiba decided to buy LCD panels from Sharp. But earlier this month, Panasonic-maker Matsushita said it would spend $2.8 billion to build an LCD plant of its own.

“Sony needed an extra source of panels because the large-size LCD TV market is growing faster than it had expected. As Sony expands TV production, it is natural to seek to diversify panel sources,” Park Hyun, an analyst at Prudential Investment & Securities, said during a recent interview. “Sony is likely to continue the partnership with Samsung … therefore Sony’s diversification strategy won’t have a negative implication for
the alliance with Samsung.”

For Sharp, the linkup with Sony serves as a hedge at a time when aggressive industry investments in panel-production capacity is boosting worries about a supply glut down the road.

“The problem will be 2010 and 2011,” said Shinko Securities Co. Ltd. (PINK: SKSTF) analyst Hideki Watanabe. “Just when TV demand is likely peaking, Sharp’s 10th-generation plant will come on-stream, and so will Matsushita’s new factory [causing the potential glut. But this] deal gives Sharp good risk hedging.”

The new Sharp-Sony factory would utilize the so-called “10th-generation” glass substrates, which can yield more panels than earlier-generation, smaller glass substrates, improving production efficiency and helping both Sharp and Sony offer flat-panel TVs at competitive market prices.

The new factory will produce LCD screens that have a diagonal reach of as much as 60 inches. Sony will receive a third of the factory’s output, with the rest going to Sharp. Initially, the monthly output will be 36,000 glass substrates, although the ultimate monthly output will reach 72,000 glass substrates.

The substrates are the output from which the flat panels can be cut.

Besides the flat-TV panels, the factory will also make so-called “LCD Modules,” which are flat-panel displays equipped with such components as a backlight unit and LCD driver chips.

“For Sharp, this is a positive step since it means a major buyer that would keep the 10th-generation factory busy,” Kazuharu Miura, a Daiwa Institute of Research analyst, told Reuters.

The venture reduces Sony’s reliance on Samsung – currently its main supplier – at a time when LCD TV sales are projected to rise 29% this year, easily outpacing demand growth for rivaling plasma-based TV sets. Both UBS AG (UBS) and Lehman Brothers Holdings Inc. (LEH) predict that the LCD shortage will persist throughout the year.

Worldwide sales of LCD TV are expected to reach 155 million units by 2012, double the 74.8 million sold in 2007, predicts the Japan Electronics and Information Technology Association. Demand for plasma TVs will likely reach 25 million units in 2012, 119% more than the 11.4 million sold last year, the JEITA said.

Sony is expecting to sell 10 million of its Bravia LCD TVs in the current fiscal year, which ends March 31. The suggested list price of the TVs range from about $500 to $1,600, according to the Sony Web site.

The company also has a second LCD joint venture – this one with Samsung – known as S-LCD.

• American Express Co. (AXP) said Thursday that it agreed to buy General Electric Co.’s (GE) Corporate Payment Services, a commercial credit card and corporate purchasing business, for $1.1 billion. The all-cash deal will give American Express more than 300 large corporate clients, notably its largest client, GE. American Express said it expects that deal will have a “minor dilutive impact” on earnings per share and return on equity “in the early years following the transaction.”

• Osaka-based Sharp Corp. (OTC:SHCAY) said it would spend $729 million to build a new solar cell plant next in western Japan, Reuters reported. The new plant will be built next to a Sharp plant that builds liquid crystal display panels. Sharp’s new plant is further evidence that there is a growing demand for solar, and that of course gives investors a few opportunities to capitalize early.

• The Federal Reserve said yesterday (Thursday) it would hold public meetings on Bank of America Corp.’s (BAC) planned acquisition of Countrywide Financial Corp. (CFC). The central bank is required by law to consider whether the merger offers benefits such as greater convenience and increased competition, or produces conflicts of interest or excessive concentration of resources, Bloomberg reported.

• Lennar Corp. (LEN), one of the nation’s largest homebuilders, reported a first quarter loss yesterday (Thursday), after taking charges to adjust land values, and new home sales and collapsed. Lennar reported a loss of $88.2 million, or 56 cents per share, in the three months ended Feb. 29 compared with profit of $68.6 million, or 43 cents per share, in the year ago quarter. “There is a growing consensus that the deterioration of the housing market has likely led us into recession,” chief executive Stuart Miller said in a statement, “and the stabilization and recovery of the housing market will likely lead us out.”

• Williams-Sonoma Inc. (WSM) posted a 2.9% rise in fiscal fourth-quarter net income and will cut its 2008 forecast in response to “one of the most challenging macro-economic environments we have seen in many years.” The company boosted its quarterly dividend by 4.3% to 12 cents a share after reporting net income of $124.6 million, or $1.15 a share, for the quarter ended Feb. 3. Net income was $121.1 million, or $1.06 a share, a year earlier.

• MF Global Ltd. (MF) stock rose $0.31, a 3% increase, to close at $10.04 yesterday on news that it will no longer provide Man Investments, a subsidiary of parent company Man Group PLC, with clearing services for certain over-the-counter forward foreign exchange trades. The change is expected to free up $800 million in capital that had been reserved to secure unrealized gains from the trades. MF Global has been suspected of having liquidity problems since late last week when Money Morning Investment Director Keith Fitz-Gerald warned of a possible “British Contagion.”

• Oracle Corp. (ORCL), the third largest U.S. software company, announced earnings after the market closed Wednesday. Sales were $5.35 billion for the fiscal quarter ended Feb. 29, a 21% increase over the prior year, but below analyst estimates of $5.42 billion in sales. Profit was $1.34 billion, or 26 cents per share, an increase from $1.03 billion, or 20 cents per share, for the same period a year ago. Shares dropped $1.51, a 7% decline, to close at $19.43 yesterday (Thursday), the day after the announcement.

• Shares of Google Inc. (GOOG) slumped $14.11, a 3% decline, to close at $444.08 yesterday (Thursday), the day after data released from comScore Inc. showed that Google’s paid clicks increased only 3% in February, compared to the same period in the prior year. Paid clicks tally the number of times Web users click on ad-supported links, generating revenue from the company’s advertising customers, DowJones reported.