Analysts said the strategic alliance would help strengthen Philips' position as a leading global supplier in the display components market, while providing LG with much-needed funds and a global business network.

Under a letter of intent signed last week and approved yesterday by the two firms' boards of directors, Philips Electronics and LG Lcd will hold equal rights to manage the joint venture.

"This is an excellent transaction for both companies and their shareholders, and exactly meets Philips' criteria for investment," said Cor Boonstra, president and chief executive of Royal Philips Electronics.

"We are partnering with an already profitable operation and a strong management team we can work with, investing in our divisional portfolio and furthering the digital strategy of Philips ingeneral," he said.

LG chairman Koo Bon-Moo said, "we have been pursuing a growth strategy through forming strategic alliances with leading global companies," adding "through foreign capital investments, LG not only seeks to improve its financial structure but also its global competitiveness by forming strategic partnership".