Philips and LG Electronics last week announced a £1 billion joint venture to share manufacturing and technology resources for liquid-crystal displays (LCDs).
A Philips spokesman told PC Week: "As cathode-ray tubes decline, we want to maintain our display leadership."
Joint production in LG's three Korean factories will begin in August, after the deal is completed in late July.
As part of the deal, Philips will take a 50% stake in LG's Active Matrix Liquid Crystal Display business. The deal could also be extended to include sales and marketing, if it proved a success.
"The venture fits in with our strategy of investing in our existing portfolio and filling gaps," the spokesman said. "This is a good opportunity to buy into a successful company and be profitable straightaway."
LG, the world's top manufacturer of active-matrix LCDs, has focused on forming alliances with other technology companies as part of its long-term restructuring.
A leading vendor of CRTs, Philips has long been aware that it must invest in emerging technologies to remain a long-term player in the displays market.
In 1997, Philips closed a similar deal with Hosiden, a Japanese manufacturer of LCD monitors, laptop screens and high-end displays for avionics. But the spokesman said the Hosiden facility was operating at full capacity and cannot meet demand.
The LCD market is predicted grow at 20% a year for several years, as the market continues to expand for monitors, handheld devices, in-car navigation systems and televisions incorporating the technology.
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