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31 Aug 04. Three of Japan’s leading electronics groups have agreed to jointly manufacture liquid crystal display panels for flat-panel TVs in a move that highlights the trend towards consolidation in the industry amid rising investment costs and falling prices.

Hitachi, Toshiba and Matsushita said on Tuesday they would invest Y110bn ($1bn) in a new production line at a Hitachi plant west of Tokyo, starting manufacture of LCD panels in January. The joint venture aims to ramp up production in the second quarter of 2006 and reach the equivalent of 2.5m 32-inch TV LCD panels a year two years later.

The move could create a Japanese force in the fast-growing LCD market, dominated by Korean and Taiwanese groups.Japan’s largest LCD manufacturer, Sharp, is the world’s leading LCD TV maker, but Japanese groups have trailed competitors such as Samsung, LG Philips and AU Optronics in panel production.Kunio Nakamura, Matsushita president, emphasised the group’s commitment to procuring key devices from within Japan. This policy contrasts sharply with that of Sony, which has an LCD joint venturewith Korea’s Samsung. Hitachi will take a 50 per cent stake in the joint venture while Toshiba and Matsushita will each take 21-25 per cent, depending on whether or not other investors join the venture.The agreement highlights the huge cost and technological burden of remaining competitive in the LCD market. At the same time, TV manufacturers face a growing need to secure a stable source of panels.

Demand for LCD TVs is forecast to grow fivefold from 3m units in 2003 to 15m in 2006. Fierce competition makes it crucial for TV manufacturers to provide high-quality panels, particularly for high-end users targeted by Japanese manufacturers. But many Japanese TV makers, including Matsushita and Toshiba, do not produce LCD panels for TVs. Hitachi has been keen to find a partner to shoulder the cost of moving on to state-of-the-art manufacturing technology in order to reduce costs.

By linking, the three groups hope to differentiate their product and raise competitiveness in terms of performance and price. The new venture aims to become profitable in fiscal 2007 and to take a 20 per cent share of the market for 26-inch to 32-inch panels in 2008.

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