LG Electronics has joined forces with Hitachi, Ltd. of Japan to strengthen its position as the world leader of optical storage and to advance into the next generation digital storage market.
On October 5, Vice President Nam-kyun Woo of the LGE Digital Media BU and CEO Fujimori Yoshinori of the Digital Media Group at Hitachi, Ltd. signed a Letter Of Intent (LOI) to establish a joint venture for optical storage in Tokyo, Japan.
In accordance with the agreement, the two companies will invest jointly (LG 49%, Hitachi 51%) to establish a company with paid-in capital of 1.5 billion Yen (approx. 15 billion won) and approximately 350 employees. The joint venture (Hitachi-LG Data Storage, Inc.) will focus on R&D and marketing on optical storage for computers such as CD-ROM and DVD.
Hitachi-LG Data Storage will be officially born on November 1 and will supply new products developed with their own technology to the PC-based world optical storage industry, which has an annual sales volume of 200 million units. LG Electronics and Hitachi, Ltd. will be responsible for production of newly developed products.
With the establishment of the new joint venture, LGE and Hitachi will be able to proactively respond to the latest trends of the world optical storage industry and move toward high-density products that require high technology and recording products such as CD-RW and DVD-RAM. Through these efforts, the two companies will be able to improve their standing as the global top players.
In particular, by adding Hitachi`s market presence to LGE`s world highest market share, LGE will strengthen its top market position. The combination of LGE`s production technology, price competitiveness, and global marketing power with Hitachi`s world class product development technology and next generation technology standards will offer the new joint venture a stable foundation to lead the current as well as future digital storage market.
The joint venture is also expected to bring large benefits in terms of business operation to the two partners. LG Electronics will ship all goods from its existing product lines to the joint venture and thus secure a stable sales channel. For Hitachi, Ltd., it will be able to use its technological strength for early development of new products and thus strengthen its position as market leader.
In addition to shipping all its product volume to the joint venture, Hitachi will be able to leverage LGE`s production technology and marketing power for earlier commercialisation of its world-class technology to aggressively target global markets.
Moreover, both companies will directly sell the latest products developed by the joint venture under their own brand names, thereby securing opportunities for additional sales.
At the press conference held after the signing of the LOI at Palace Hotel, Tokyo, Vice President Woo said, "The joint venture is very meaningful as the first case to realise a strategic alliance in the IT industry of Korea and Japan. By combining the strengths of the two companies and providing cutting-edge products, we will lead the world market."
President Shoyoma of Hitach, Ltd. said, "We have enjoyed a very productive and beneficial partnership with LG in a variety of businesses. I am therefore confident that the new joint venture will also realise stellar performance."
For the President and CFO for Hitachi-LG Data Storage, Inc., Vice President Mun-hwa Park of the LGE Digital Storage BU and Financial Director Tatsumi Tomoichi of Hitachi, Ltd., respectively, have been appointed. The company will start its official operation from January 1 next year to reach sales of 2.3 trillion won in 2001 and sales of 3 trillion won in 2003. The establishment of the joint venture is a meaningful strategic alliance formed after the recent Korea-Japan summit and is expected to open the door to deepening the relationship for economic co-operation. Through synergy created by combining mutual strength through global partnership, the two companies will be able to secure global leadership in the competitive digital market by becoming first to realise a new business paradigm.
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