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Sony, Hitachi, Toshiba team up for LCD

Posted: 02 Sep 2011 ?? ?Print Version ?Bookmark and Share

Keywords:merger? display business? display market?

In a move to fend off the growing competition from its South Korean and Taiwan rivals, Sony Corp., Hitachi Ltd and Toshiba Corp, together with Innovation Network Corp. of Japan (INCJ), have signed a non-binding memorandum of understanding to integrate their small- and medium-sized display businesses. The companies are aiming to sign definitive and legally-binding agreements by autumn of 2011 and to complete the business integration in the spring of 2012, subject to any necessary government approvals.

The merged company, dubbed as Japan Display, will be operated by INCJ, which is supervised by Japan's trade ministry. The ministry has been criticized for not supporting Japan's chip and display industries and this, according to some critics, has allowed South Korean and U.S. companies to overtake Japanese firms.

Japanese LCD companies merger

(L to R) Kimikazu Nomi, president, Innovation Network Corporation of Japan; Norio Sasaki, president of Toshiba Corp; Hiroaki Nakanishi, president of Hitachi Ltd; and Hiroshi Yoshioka Sony Corp. executive deputy president hold hands as the companies join together to integrate their businesses on small and medium-sized liquid crystal display panels for smartphones and tablet computers. (Kyodo)

All of the issued shares of the subsidiaries of Hitachi, Sony and Toshiba engaged in small- and medium-sized display business and their other assets will be transferred to the new company. INCJ, as a public-private partner that will provide financial, technological and management support for next-generation businesses, plans to invest a total of $2.52 billion (200 billion yen) in the new company in exchange of shares to be issued to INCJ as a third party allotment. Eventually, INCJ expects to get 70 percent of the shares with voting rights of the new company, while Hitachi, Sony and Toshiba will each get 10 percent of the shares.

"This is a landmark project for INCJ in our mission to make impactful, long-term and hands-on investments to grow next-generation businesses worldwide in the spirit of open innovation," said Kimikazu Noumi, CEO of INCJ. "The new company will become a leading small- and medium-sized display manufacturer, and by pooling compelling technological know-how, will be positioned to win in a competitive and lucrative global growth market that has a real impact on the quality of people's everyday lives," he added.

The global market for small- and medium-sized display is expected to grow rapidly due to anticipated strong demand for high-resolution, high value-added products (smartphones and tablet computers) and superior high-resolution display technologies.

However, Sony, Hitachi and Toshiba were all making losses on their small panel businesses last year and the merger is said to allow them to focus on their main operations. The new company is expected to utilize the world's best high value-added technologies of the three companies and establish new production lines with the help of the capital that INCJ is providing. With the efficient use of the existing production capabilities of Sony, Hitachi and Toshiba, the merged company aims to improve its cost competitiveness to solidify its position as a leading company in the small- and medium-sized display market. The company will be the largest small panel maker for smartphones and tablet PCs, overtaking Japan's Sharp Corp. and South Korea's Samsung Electronics. The merger also hopes to keep Taiwan firms, such as AU optics, at bay.

INCJ will lead in recruiting the new executives of the merged entity, while the external directors will be appointed by Sony, Hitachi and Toshiba.

"By integrating each partner company's wealth of display expertise and know-how, I am confident the new company will become a driving force for technological innovation and new growth in the rapidly expanding small- and medium- sized display market. I believe it will perform a vital role in ensuring the stable supply of high quality display devices that further enhance the user experience in the growing field of smartphones and tablet computers," said Howard Stringer, chairman, CEO and president, representative corporate executive officer of Sony Corp.

"I have every confidence that this integration of three highly capable manufacturers of small- and medium-sized displays and their leading-edge technologies, along with the infusion of capital from INCJ, will create a highly competitive company. Toshiba will provide full support for the new company as it seeks to win leadership in the global market," said Norio Sasaki, director, representative executive officer, president and chief executive officer of Toshiba Corp.

"The new company, which integrates the three companies' technology, experience and resource, possess the necessary capabilities to offer a high value added products to meet customer needs, through the development of cutting-edge display technologies. I believe the new company will fully satisfy customers to succeed and to become a leading company in the global market," concluded Hiroaki Nakanishi, president of Hitachi Ltd.

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