MADRID, 31 Aug. (Reuters/Portaltic) -
Japanese companies Sony Corp., Toshiba Corp. and Hitachi Ltd. will join their operations for the manufacture of LCD screens and will have the backing of the government to fend off growing competition from rivals in South Korea and Taiwan. The government's injection has been 1.8 billion euros ($2.6 billion).
The merger will create the world's largest manufacturer of LCD screens for smartphones and tablets, surpassing world leaders Sharp Corp. of Japan and Samsung Electronics of South Korea. The move would help companies focus on their core operations.
The Japan Innovation Network (INCJ) will invest about 1.8 billion euros ($2.6 billion) with a 70 percent stake. Sony, Toshiba and Hitachi will hold the remaining 30 percent stakes, the three companies said Wednesday.
The INCJ is overseen by Japan's ministry of commerce, and was criticized in the 1990s for not supporting Japanese technology and display manufacturing companies. Critics say this failure allowed U.S. and South Korean companies to take the lead in the LCD screen business.
The goal of Sony, Sharp and Hitachi is to complete this union in the spring of 2012. The three companies together controlled 21.5 percent of the small and medium-sized display manufacturing market last year, higher than Sharp (14.8 percent) or Samsung Mobile, with 11.9 percent.
The three had hesitated to invest in a new line to compete against Sharp, which is awaiting a 692 million euro ($1 billion) investment from Apple, and against South Korean rivals LG Display and Samsung Mobile, which have supply deals with key customers.
With manufacturers shifting their strategy towards making small screens to meet the demand for smartphones and tablets, industry analysts say that with the union of these three companies there would be an oversupply for next year. "It's not a business that is likely to provide stable profits in the medium and long term," said Shigeo Sugawara, senior investment manager at Sompo Japan NipponKoa.
At the moment it is not clear how these three companies, which use two different types of technology, will come together. The announcement did not include details on how this business was to develop.
This new company will focus on developing the next generation of LCD screens, including thinner organic screens with a higher resolution, the three companies said.
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