Sony, Toshiba and Hitachi in screens merger

A trio of Japanese giants – Sony, Toshiba and Hitachi – plan on merging their LCD operations.

The merger, to be completed by spring next year, will create the world’s largest maker of the small panels used in smartphones and tablet PCs, leapfrogging global leaders Sharp and Samsung.

The 90% Government-owned Innovation Network will eventually invest 200 billion yen ($2.6 billion) in the merged unit, taking a 70% stake, while the three manufacturers will each take a 10% holding.

An industry shake-up has been on the cards in the face of panel price falls, along with ever advancing technological demands and volatile output demand.

The parent companies have found a most convenient buyer for their factories and staff

All three firms have delays investing in new production facilities to compete against Sharp, which is due to receive a $1 billion investment from Apple.

Sony has been weighed down by chronic losses on its TVs, Toshiba is speeding up plans to shrink its chip business, while Hitachi has been looking to distance itself from the panel business to focus on infrastructure operations.

The three firms together controlled 21.5% of the market for small and medium-sized displays last year, more than Sharp with 14.8% or Samsung Mobile with 11.9%, according to research firm DisplaySearch.

Tough choices ahead

But how the three, which use two different types of display technology, will merge operations is unclear and the companies may need to trim duplicate waste.

“The parent companies have found a most convenient buyer for their factories and staff,” said Yoshihisa Toyosaki, head of Japanese research firm and consultancy Architect Grand Design.

“The assets of the merged entity will be huge. Without restructuring, there is no way that this company will win against Sharp, or rivals from South Korea, Taiwan, and eventually China.”

The three firms will focus on developing next-generation displays, including thinner OLED displays with higher resolution.