SEOUL (Reuters) – LG.Philips LCD Co. Ltd., the world”s number-two flat screen maker, said on Tuesday it signed a 5.05 trillion won ($5.03 billion) three-year deal to supply Hewlett-Packard Co. with flat panels.
Under the contract, LG.Philips will supply flat panels for notebook computers and monitors to HP, the world”s second-biggest computer maker, through May 2008.
Analysts say the deal, with annual value equivalent to about 20 percent of LG.Philips” revenues, would help the screen maker compete against bigger rival Samsung Electronics Co. Ltd. in the market for notebook PCs.
"The deal could be seen as a sign that the LCD industry outlook is improving," said Jeff Kim, analyst at Hyundai Securities. "It”s an opportunity for LG.Philips to expand in the notebook PC market. For HP, they should get better terms with LG.Philips than with Samsung."
Shares in Samsung slid 1.5 percent on Tuesday. LG.Philips, with the third-largest market capitalization on the benchmark Korea Composite Stock Price Index (KOSPI), closed 2.71 percent higher at 53,000 won, outperforming the wider market”s 0.53 percent fall.
Officials at both LG.Philips and HP”s South Korean operations could not provide details of their current supply arrangements.
LG.Philips said in a statement the deal represented a substantial increase over the existing supply agreement with HP, without elaborating.
"This large long-term agreement further strengthens LG.Philips LCD”s presence in the notebook PC and monitor LCD market," the company said. "It will assist us in claiming a top position in the notebook PC market."
LG.Philips LCD is a joint venture between South Korea”s LG Electronics Inc. and Dutch Philips Electronics NV
"This strategic agreement with LG.Philips LCD is a key to our continuing growth in the notebook and display market by enabling a stable supply of high quality and advanced technology products," HP Vice President Kirk Moul said in the statement released by LG.Philips.
Hyundai”s Kim added HP might want the deal with LG.Philips to expand in the Asian PC market.
Prices for liquid crystal displays (LCD), the most common type of flat screens used in televisions and computers, slipped 10 percent in the first quarter, following a fall of more than 40 percent in the 2004 second half.
Analysts and companies expect demand for flat panels to improve later this year helped by low retail prices of monitors and televisions.
Research firm iSuppli Corp. said last month the global supply for large-sized LCD is expected to tighten in the second quarter.