15/11/2011 07:21 GMT | Updated 15/01/2012 05:12 GMT

Sony, Toshiba and Hitachi Merge LCD Production To Form World's Largest Display Manufacturer

Three Japanese manufacturers have agreed to merge their production of small and medium displays to create the largest LCD producer in the world.

Sony, Toshiba and Hitachi have signed agreements to set up a new company, Japan Display.

The three firms together controlled 21.5 percent of the market for small and medium displays in 2010, more than Sharp with 14.8 percent and Samsung Mobile with 11.9 percent, according to DisplaySearch.

Each of the companies will gain a 10% stake in the new firm, while the public-private partnership Innovation Network Corporation of Japan will gain a 70% share with an investment worth around $2.6bn (¥200 billion).

The merger is intended to allow the three companies to better compete with South Korean and Chinese rivals and exploit economies of scale.

Technology analysts have also speculated that it may be a way to reduce costs associated with research and development, exploit patents and reduce costs.

Shuichi Otsuka, the COO of Elpida, will run the new firm.

"Japan Display is expected to utilize the world's best high value-added technologies," Toshiba said in a statement. "And establish new production lines by utilising funds provided by INCJ, in order to meet the market demand for high value-added products.

"In addition, through efficient use of the existing production capabilities of the Subject Subsidiaries, Japan Display aims to improve its cost competitiveness to solidify its position as a global leading company in the small- and medium-sized display market.

"The business is scheduled to begin operations in Spring of 2012, subject to the receipt of any necessary government approvals."

Japan Display also announced it would purchase a screen manufacturing plant from Panasonic for an undisclosed sum.