Toshiba, Hitachi and Sony have announced a plan to merge their operations in small and medium-sized displays.
A fourth partner, government-backed investment fund Innovation Network Corp of Japan (INCJ), will invest 200 billion yen (£1.6bn) in the new company, to be named Japan Display, and hold 70 per cent of the voting shares. Toshiba, Sony and Hitachi will each have a 10 per cent stake.
INCJ, which is 90 per cent owned by the Japanese government, was set up in June 2009 to promote innovation and develop a competitive edge in Japanese industry.
The three electronics giants will transfer the assets of their respective subsidiaries Hitachi Displays Ltd, Toshiba Mobile Display Co and Sony Mobile Display Corp into the new company, with completion expected by March 2012.
There are plans to list Japan Display by the 2015 fiscal year ending March 2016. By then HDL, TMDC and SMDC hope to increase combined sales revenue from a projected 570 billion yen in 2011 to 750 billion yen in 2015.
Japan Display will be the world’s largest producer of small panels used in smartphones and tablet personal computers.
According to research company DisplaySearch, Toshiba, Hitachi and Sony had a combined 21.5 per cent market share of the small and medium-sized panels in 2010 while Sharp had 14.8 per cent and Samsung Electronics 11.9 per cent.
The global market for such panels is projected to grow at the rate of 21 per cent from 2010 to 2015 with revenue jumping from US$18.8bn to $49.4bn due to increasing demand from smartphones and tablet computers.
A Hitachi official, Sho Sato, told E&T that the merger is needed for the Japanese companies to survive and compete in the increasingly tough global market.
Sho noted that the merger had been in the pipeline for some time as Toshiba, Sony and Hitachi were making losses on small panels until 2010.
The three companies were initially reluctant to fork out investments for new lines, while Hitachi had planned to move out completely from the volatile panel business to concentrate on infrastructure operations.
To stay ahead of the competition, Japan Display aims to invest in R&D to develop new products to meet market demand.