Of all the segments of the tech industry one of the most volatile is the display segment. The screens made by display manufacturers are crucial parts of devices like notebooks and smartphones, but the panels are also directly tied to the fate of the gadget makers. When sales drop for the gadget companies, demand decreases and could leave the display makers with a huge stockpile of screens they can't sell.
Some of the largest firms in the display making market have been looking for ways to shore up their operations and make operations more stable and some even want to distance themselves from the display market.
In Japan Sony, Toshiba, and Hitachi have all announced that they will be merging their LCD businesses. The deal will be funded in part with $2.6 billion in government-backed finds. The move is an attempt to make the Japanese businesses stronger with increased competition from rivals in Taiwan and South Korea.
The money from the Japanese government is coming from the 90% government-owned fund that was set up to drive Japanese innovation years ago. The investment of the $2.6 billion or 200 billion yen will give the Innovation Network Corp of Japan (INCJ) a 70% stake of the display company and leave each of the three other firms with 10% of the company.
The parties involved in the deal hope to complete the merger by the spring of 2012 and plan to call the merged operation Japan Display. The merged entity should listed by March 2016 and in that time the companies plan to increase revenue to 750 billion yen from 570 billion by the year ending March 2012.
Together the merged company has 21.5% of the display market for small and medium panels. All three of the companies were expected to move from the red into the black this year. One South Korean government official stated, "The decision reflects a growing sense of crisis in Japan in light of its falling market share in the global chip and display markets." Some things remain unclear right now, one of which is how the companies will merge when they use different display technology.