Lite-On IT carefully eyeing new Sony-NEC joint venture

Lite-On IT, said that they will be carefully monitoring the formation of a new joint venture between Sony and NEC to design, produce and market ODDs, according to general manager Michael Gong for the company’s Optical Disc Drive Business. Lite-On IT is currently the main ODM/OEM maker of ODDs for Sony.

Sony and NEC have concluded a memorandum of understanding to establish a joint venture in which Sony and NEC will hold a respective 55% and 45% stake, with operations to begin April 1, 2006, according to a joint press release by the two companies on November 17.

Lite-On IT is expected to be seriously concerned about the new joint venture because Lite-On IT is currently the main ODM/OEM maker of ODDs for Sony, with Sony’s orders worth more than NT$10 billion (US$298 million) a year, accounting for 20-25% of the company’s total revenues, according to local ODD industry sources.

The joint venture will integrate Sony’s and NEC’s current ODD business operations, including patents. The joint press release, however, did not indicate whether the joint venture itself will make ODDs or rely on ODM/OEM production.

For Lite-On IT, the impact may be positive if Sony, as the majority shareholder, will continue to outsource its ODM/OEM orders and thus bring in additional orders from NEC, which currently mostly relies on self-production, commented the sources. Or it may be negative, if Sony if shifts ODM/OEM orders from Lite-On IT to the joint venture, the sources added.

Source: DigiTimes