Sony, Toshiba, and Hitachi merging LCD production divisions to remain competitive

Japan’s largest makers of liquid-crystal displays—including both smartphone and tablet computer LCD displays–are in trouble. Facing both dwindling profits and mounting competition abroad, Sony, Toshiba, and Hitachi have decided to team up. Along with a huge boost from the Japanese government, the triad are stripping away their LCD-making departments to spin off and merge them into a new jointly-owned company: Japan Display K.K.

Japan Display K.K. is slated to be created next year with an initial public offering to sell shares in 2016, according to the Tokyo-based companies. Heading them all up will be the government-based Innovation Network Corp. of Japan, which will be investing 200 billion yen (roughly $2.6 billion USD) and in return will receive 70% of the venture, leaving 10% each to the other three.

The main cause of this merger is the fact that these Japanese companies were simply not earning profits from their LCD divisions—Toshiba was reporting net losses. Meanwhile, Korea’s Samsung and Taiwan’s Chimei Innolux Corporation are putting the hurt on the Japanese trio. Combining their efforts will allow them to collaborate together and consolidate resources, saving the costs of having to independently fund R&D divisions and manufacturing costs.

Samsung is a big name to topple.

Between their combined efforts and the new financial backing, Japan Display K.K. will jump up to become the largest maker of small to medium-sized LCD displays. Right now, Sony, Toshiba, and Hitachi combined make up 22% of the market, with Sharp Corp in second place at 15%, and Samsung and Chimei sharing third place at 12% each.

Overall, this is definitely an interesting happening. Samsung has been strutting about with lavish displays for smartphones such as their Super AMOLED Plus display for the Samsung Galaxy S II. If the merger in Japan is allowed to proceed, they will be met with some fiercely redoubled competition in the mobile device market. Because of this, I’m fairly excited to see how we, the end consumers, will benefit from such rivalries.