Taiwan's largest maker of optical disc drives (ODDs) Lite-On IT is carefully monitoring the formation of a new joint venture between Sony and NEC to design, produce and market ODDs.

Lite-On IT is seriously concerned about the new joint venture because Lite-On IT is currently the main ODM/OEM maker of ODDs for Sony, with Sony's orders worth more than US$298 million a year, accounting for 20-25% of the company's total revenues, as DigiTimes.com reports.

Sony and NEC have concluded a memorandum of understanding to establish a joint venture in which Sony and NEC will hold a respective 55% and 45% stake, with operations to begin April 1, 2006.

The joint venture will integrate Sony's and NEC's current ODD business operations, including patents. The joint press release, however, did not indicate whether the joint venture itself will make ODDs or rely on ODM/OEM production.

For Lite-On IT, the impact may be positive if Sony, as the majority shareholder, will continue to outsource its ODM/OEM orders and thus bring in additional orders from NEC, which currently mostly relies on self-production. In different situation, it may be negative, if Sony if shifts ODM/OEM orders from Lite-On IT to the joint venture.

LiteOn has not yet officially commented on the news-story, but will probably have an official statement next week.