Toshiba to buy Panasonic stake in LCD maker

A rapid realignment of the liquid crystal display market is under way, with Toshiba set to buy Panasonic’s stake in their lossmaking LCD joint venture.

Toshiba is in talks to buy Panasonic’s 40 per cent stake in Toshiba Matsushita Display Technology, the world’s second-largest maker of small LCD panels used in devices such as mobile phones, according to a person close to the discussions. The price is expected to be several billion yen.

Panasonic is the latest Japanese manufacturer to try to leave the fragmented sector because of heavy losses caused by the economic downturn. Seiko Epson is in talks with Sony about the transfer of its small LCD assets, while NEC is closing a Japanese plant that makes the panels.

Toshiba Matsushita Display has suffered from falling prices, and the company’s internal forecast is for an operating loss of Y30bn on sales of Y270bn ($2.8bn) in the year to March 2009. In 2008, the company had 10.3 per cent of the market for small and medium-sized LCD panels by value, according to the research company DisplaySearch, second only to Sharp.

Although Panasonic is driving the deal, it would also be Toshiba’s latest investment in a struggling electronic components business at a time when its own balance sheet is under severe pressure. Toshiba’s expected net loss of Y280bn in the financial year that ends on Wednesday is likely to leave shareholder equity at less than 10 per cent of total capital.

Toshiba is buying Fujitsu’s hard disk drive business for a price expected to be around Y30bn and investing in a new lithium-ion battery business.

Panasonic declined to comment on a possible deal with Toshiba but said that, in general, the company’s strategy is to focus on large display panels used to make TVs. Panasonic is a leading maker of plasma television panels and is also investing heavily in a plant to make large liquid crystal panels.

Toshiba also declined to comment. As well as LCDs, however, Toshiba Matsushita Display is seen as attractive because of its strong position in research on organic light-emitting diodes, or OLED, a technology that may displace LCD in the future.

Toshiba Matsushita Display recently delayed investment in a new factory to mass produce small OLED panels due to the economic conditions, but owning the company outright could help Toshiba to commercialise larger OLED panels for televisions.

Panasonic has its own OLED development programme, but selling its share in TMD would be seen as a sign that it does not think the new technology will take off quickly.

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