Sony and Samsung are reaffirming their alliance in LCD (liquid crystal display) panel manufacturing with plans to jointly construct a third flat-screen factory in South Korea.

The 1.8 trillion won (US$1.8 billion) production line will be built by S-LCD, a joint venture between Sony and Samsung that already operates two factories in Tangjeong in South Korea. The new factory will be built at the same site and is scheduled to start turning out LCD panels in the second quarter of 2009, the two companies said Friday.

It will be based on so-called eighth-generation technology and has been given the name 8-2. That means it will be able to accept sheets of mother glass -- from which several panels can be made -- of 220 centimeters by 250 centimeters.

S-LCD already operates one eighth-generation line in Tangjeong, called line 8-1, in addition to its original seventh-generation line. With each successive jump in production technology the size of the mother glass sheets is increased and economies are introduced into the production process. The higher technology lines can make larger panels at a lower per-inch cost.

The new factory is scheduled to process 60,000 mother glass sheets per month, which makes it larger and the 8-1 facility that handles up to 50,000 sheets per month.

Output from the plant will be split between Samsung and Sony with 51 percent of panels going to the former and 49 percent to the latter. This is in line with their share holdings in S-LCD.

In February Sony it had started talks with Sharp towards investing in a new production line that Sharp has under construction in Japan. The Sharp plant will be based on a more advanced 10th generation technology and will be best suited to making LCD panels in the 60- and 50-inch class.

The announcement sparked speculation that Sony was giving up on S-LCD and had found a new partner with which to share the considerable cost of a cutting-edge display factory. Friday's announcement reaffirms the joint venture with Samsung but repositions from the leading edge to become a supplier of panels for what are likely to be the mass market portions of the LCD TV market.

Earlier in the day Samsung reports 37 percent higher net profits for the January to March quarter on the back of strong demand for LCD panels and TVs. The company said its LCD panel business recorded a year-on-year sales growth of 53 thanks to increased production and strong sales of TV screens in the 46-inch size and above.