By Jonathan Soble in Tokyo
Japan?s plans to create a national-champion manufacturer of smartphone and tablet computer displays have grown more ambitious, with Hitachi joining talks between Sony and Toshiba about merging their non-television display businesses, according to people familiar with the matter. The new company, which would be majority owned by a government-backed investment fund, would be the world?s largest producer of touchscreen liquid crystal displays.
Demand for small LCDs is growing quickly thanks to the popularity of mobile devices such as Apple?s iPhone and iPad. Currently, an array of Japanese producers control about a third of the global market, but they are coming under increasing pressure from South Korean and Taiwanese rivals.
Sony and Toshiba were already in talks to shift production of small LCDs to a joint venture with the Innovation Network Corporation of Japan, a fund that has received more than 90 per cent of its capital from the state.
Hitachi, meanwhile, has been negotiating to sell a majority stake in its small-LCD business to Hon Hai Precision Industry, the Taiwan-based contract manufacturer. If it decides to join a domestic partnership instead, it would bolster Japan?s efforts to defend its lead in the technology.
Japanese groups fear being overtaken in the manufacture of small displays in the same way they were in LCD televisions – a product category they dominated until the middle of the last decade but have since largely ceded to cheaper competitors elsewhere in Asia.
One reason Japan failed to hold on to the LCD TV market, analysts and industry executives say, is that production was scattered among the country?s many consumer electronics companies, none of which was able to build sufficient scale in what quickly became a high-volume, low-margin business.
Last year, Toshiba controlled just over 9 per cent of the market for small LCD panels, according to DisplaySearch, a market research group, while Sony and Hitachi each had a share of just over 6 per cent. A combined Toshiba-Sony-Hitachi venture would account for a fifth of global supply.
A deal would leave Japan with two major small-LCD producers. Sharp, currently the global market leader, has indicated that it plans to keep working independently. It recently announced that it would convert a large LCD TV panel factory in western Japan to production of smartphone and tablet displays.
If Hitachi agrees to participate, the INCJ may double its planned investment in the joint venture to Y200bn ($2.5bn), Japanese media reported. The money would be used to expand output of next-generation organic light-emitting diode (OLED) panels, which are just beginning to be adopted in devices such as Sony?s upcoming PlayStation Vita handheld video game console.
Hitachi, Sony and Toshiba declined to comment. The INCJ said it does not comment on specific investment targets.
? The Financial Times Limited 2011