South Korean electronics goods major Samsung has signed a $2 billion pact with Japan’s Sony Corp to produce new generation liquid crystal displays.

The production will take place at S-LCD in South Korea, a plant jointly owned by them.

Samsung and Sony sealed the pact by signing a letter of intent to manufacture 8th generation" amorphous TFT LCD panels.

The S-LCD was commissioned in July, 2005 at Tangjeong near Seoul.
S-LCD currently produced 7th generation LCDs which are of 40 inches, Sony and Samsung said in a media release.

Analysts are closely watching the deal as the race to produce the flat panels hots up among liquid crystal display makers worldover.

Samsung is the market leader in LCDs along with LG Philips, which is a Dutch-South Korean venture.

The production of 8th generation LCDs will begin in 2007, Samsung and Sony, who will invest $1 billion each said.

The monthly production capacity would be 50,000 units.

While Sony aims to focus on cost-competitive and high-quality large screen products , Samsung is aiming at business expansion the booming LCD market.

By ramping up production, Samsung hopes to lower the prices and boost the demand of LCDs.

It may be recalled that Sanyo Electric of Japan and and Quanta Computer of Taiwan formed a joint venture in March this year to produce flat screen TVS.

Meanwhile , Samsung’s rival AU Optronics is also keen to cash in on the LCD boom. It is reportedly toying with the idea of acquiring Quanta Display.

If the deal sais through, competition in the LCD market will only increase.