Samsung described the deal on Tuesday as a marriage of convenience, saying it would help the world's largest microchip maker clinch the top spot in the market for flat-panel televisions.
Sony, currently the world's leading TV manufacturer, will in turn secure a supply of flat panels (screens) for televisions and computers, as it seeks to revamp its product offerings.
The 50-50 joint venture will be established in South Korea in the first quarter of 2004 and requires a capital investment of about two billion dollars.
It will produce large, seventh-generation liquid crystal display (LCD) panels, with Samsung aiming to secure a 40% share of the LCD market for televisions.
"The partnership will enable Samsung to become the top seller of flat panels for televisions"
"The partnership will enable Samsung to become the top seller of flat panels for televisions," Samsung president Lee Yoon-Woo said.
"This investment... will enable both companies to ensure stable production with efficient cost performance allowing them to supply their products to the LCD market," the two companies said in a joint statement.
They said demand for LCD TV sets should reach 14 million in 2005, or 10% of total TV sales worldwide and allow Sony and Samsung to lead the way towards standardising the global TV-monitor format.
"Sony will be able to secure a stable... panel supply for its own TV sets in order to promote product development and meet expanding world demand," the statement read.
Sony executive deputy president, Ken Kutaragi, said his firm would try to develop some of its technology to create clearer, more realistic images and more functions on flat-panel screens.
"You would be surprised at the kind of features that will be on TVs going forward," Kutaragi said.
Sony also noted it would continue to purchase flat panels from other makers.
Up to now, Sony has procured all its LCD panels from Japanese firms and market leader LG.Philips LCD, a joint venture between South Korea's LG Electronics and Dutch group Philips Electronics.
"Sony will be able to secure a stable... panel supply for its own TV sets in order to promote product development and meet expanding world demand"
Major LCD makers have been increasing capacity to meet booming demand for flat-screen televisions and computer monitors as the traditional cathode ray tube screens are dropped.
LG.Philips plans to build a new flat-panel television plant in South Korea next year while Japan's Sharp Corp. announced on Monday that it plans to double capacity for LCD televisions to 40,000 units a month at its factory in Spain.
Samsung said the partnership with Sony will help it cut costs and reduce risk, with both companies planning to sell products from the joint venture to other companies.