Japan Pools LCD Resources

Japan announced it will invest $2.6 billion to help merge small-panel LCD operations among three of the country's biggest electronics makers, a move that may help them fend off competition.

Toshiba, Hitachi and Sony are set to pool their small-panel liquid-crystal-display businesses into a new company, called Japan Display K.K., which is expected to control at least 20 percent of the fast-growing global market for the panels used in smartphones and other digital devices.

The three companies and the government-backed investment fund, INCJ, yesterday said the merger is set to begin in the spring of 2012.

Kimikazu Noumi, president and chief executive of the INCJ, Wednesday said the new joint venture is being set up "to ensure that Japanese companies can maintain their competitive edge in the LCD panel space."

To maintain and enhance its technological advantage, the new Japan Display K.K. company is expected to invest in the development of next-generation technologies such as thinner and higher-resolution organic light-emitting-diode displays.

The consolidation may strengthen the Japanese LCD industry as it emerges from this spring's earthquake and tsunami disaster, besides faces vigorous competition from South Korean rivals like Samsung and China's growing LCD production.

Though Hitachi, Sony and Toshiba once commandeered the LCD market for TVs and other large displays, the television business is shrinking and they are now banking on smaller LCD screens for tablets and smartphones to bring them much-needed revenue.

Illustrating the extent of companies' plight, Sharp, the world's largest small-scale LCD maker, switched production to small displays at one of its large-screen TV plants.

The solution to pool resources among Japan's top three tech companies may help reduce their hefty capital expenditures for research and development and new facilities. It also may ensure the partners are less vulnerable to price fluctuations in the market.

Still, Sony, Hitachi and Toshiba will have to work together for this joint venture while managing their core businesses.

This may present special challenges to Sony, which has been languishing since its PlayStation network 

All three companies are still reckoning with the aftereffects from Japan's March earthquake and tsunami, which 

If they can successfully come together, Sony, Hitachi and Toshiba may be able to reverse their recently declining fortunes to more competitively compete against rival LCD makers.

The newly-formed company is predicted to have a combined market share of 21.5 percent, overtaking current industry leader Sharp. Last year, Toshiba had a 9.2 percent share of the small-panel LCD market by shipment value, Hitachi had 6.3 percent and Sony 6 percent, according to research firm DisplaySearch.

As far as the competition is concerned, the research firm indicates last year Sharp's 15 percent market share was followed by South Korea's Samsung with under 12 percent and Taiwan's Chimei Innolux with 11.7 percent.