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Team LCD: Sony, Toshiba & Hitachi Shock Merger As Tab Displays Boom

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“Innovation Network Corporation of Japan, Hitachi, Sony and Toshiba announced today that they have signed a non-binding Memorandum of Understanding to integrate their small- and medium-sized display businesses.”

 The shock move is what the new trio called “appropriate measures.. to enhance competitiveness” comes as just yesterday, Samsung were rumored to be planing to cut LCD TV production by 80% and concentrate on making notebook and tab screens, with LG also set to cut production as its TV panel business flounders. 
The JV will also mean New Co may potentially turn into the world’s single biggest manufacturer of small LCD displays, according to Bloomberg, shoving  Korean owned Samsung and fellow Japanese maker Sharp, who is also kicking off accelerated small screen production from October, off the top spots. 
The new display giant aims to “establish a leading global company by integrating three companies businesses.”

All three have recorded dramatic falls in their display business operations, with Sony noting dropping global demand for Bravia LCD TVs, blaming the global economic recession. 
The Jap bulwark will also establish new production lines to meet demand for “high value-added products” and use production resources of Hitachi Displays, Sony Mobile Display Corp and Toshiba Mobile Display. 
All three will also provide technical support, assets and other infrastructure to the new joint venture.  It is also planning major R&D investment in high-potential next-generation technologies, including higher resolution and thinner Organic light-emitting diode (“OLED”) displays. 
 “The global market of small- and medium-sized displays is expected to grow rapidly due to anticipated strong demand for high resolution, high value-added products, particularly for smartphones and tablet computers, and superior high resolution display technology, in which Japanese companies are world leaders,” they said. 
In total 200 billion yen will be invested in the JV in exchange for shares and ran as a public-private partnership, backed by government sponsored Innovation Network Corporation of Japan. 
 Other small- and medium-sized display manufacturers have also announced “significant investment” to try to capture this market, the statement issued from Tokyo said. 
 NewCo aims to improve its cost competitiveness to solidify its position as a global leading company in the small- and medium-sized display market and the synergy and joint intelligence gains are to be enormous. 
“For each of the three companies, capital spending would continue to be a burden and it’s hard for them to stay competitive on their own,” said Tokyo-based analyst, Yuichi Ishida, Mizuho Investors Securities Co. 

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“It’s probably a plan led by the government trying to boost presence of Japanese manufacturers in the global market.” 

Hitachi, Sony and Toshiba plans to appoint the outside directors of NewCo, a new governance framework and business infrastructure. 
INCJ, headed by Kimikazu Noumi, expects to hold 70% of the shares with voting rights, while Hitachi, Sony and Toshiba each expect to hold 10% of such shares. 
 The new operation will be fully controlled by the trio, set to be finalised in Autumn and complete by Spring of 2012, subject to the government approvals. 

“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. 

“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,  said Howard Stringer, CEO and President, Sony. 
 Norio Sasaki, President and CEO of Toshiba, added: “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.” 
INCJ was established in July 2009 as a public-private partnership to provides financial and management support for next-generation business.