TOKYO (Reuters) – Japan's Sony Corp, Toshiba Corp and Hitachi Ltd said on Wednesday they will merge their liquid-crystal display operations using government-backed funding, to better compete with low-cost panels from South Korea and Taiwan.
The merger, to be completed by spring 2012, will create the world's largest maker of small panels used in smartphones and tablet PCs, leapfrogging global leaders Sharp Corp and Samsung Electronics.
The 90 percent government-owned Innovation Network Corp of Japan will eventually invest about 200 billion yen ($2.6 billion) in the merged unit, taking a 70 percent stake, while each of the three companies will take a 10 percent stake.
An industry shakeup has been overdue in the face of panel price falls along with ever advancing technological demands and volatile output demands.
All three firms have hesitated about investing in a new line to compete against Sharp, which is due to receive a $1 billion investment from Apple Inc.
Sony has been weighed down by chronic losses in its TVs, Toshiba is speeding up plans to shrink its chip business, while Hitachi has been looking to distance itself from the panel business to focus on infrastructure operations.
"We will probably see oversupply (in small LCD panels) in the near future," said Shigeo Sugawara, a senior investment manager at Sompo Japan NipponKoa Asset Management. "It's not a business that will likely provide stable profits in the mid- to long term."
The three firms together controlled 21.5 percent of the market for small and medium-sized displays last year, larger than Sharp with 14.8 percent or Samsung Mobile with 11.9 percent, according to research firm DisplaySearch.
But how the three, which use two different types of display technology, will merge operations is unclear. Nor did the companies' initial announcement include plans for streamlining business overlap.
"The parent companies have found a most convenient buyer for their factories and staff," said Yoshihisa Toyosaki, head of Japanese research firm and consultancy Architect Grand Design.
"The assets of the merged entity will be huge. Without restructuring, there is no way that this company will win against Sharp, or rivals from South Korea, Taiwan, and eventually China."
The three firms will focus on developing next-generation displays, including thinner organic light-emitting diode displays with higher resolution, the three firms said in a joint release.
Hitachi has been in separate talks with Taiwan's Hon Hai Precision Industry, better known as Foxconn Electronics Inc, about a joint venture in LCD panels, sources have said.
Talks with the parent of Chimei Innolux Corp broke down when Hitachi failed to grab a key contract with Apple, one industry source said.
Ahead of the announcement, well-flagged by media, shares in Sony closed down 1.8 percent, Toshiba fell 2.4 percent and Hitachi rose 0.5 percent. The market benchmark Nikkei average ended flat.
($1 = 76.735 Japanese Yen)
(Additional reporting by Isabel Reynolds, graphic by Christine Chan; Editing by Michael Watson)
HONG KONG (Reuters) – European stocks were set to edge higher on Wednesday, poised to end a volatile month on a mildly stronger note, while the dollar struggled on heightened expectations that the U.S. Federal Reserve would do more to stimulate the economy.
Minutes of the Fed's early August meeting released on Tuesday showed policymakers discussed a range of unusual tools they could use to help the economy, with some actually pressuring for bold new steps to shore up a flagging recovery.
This added to expectations the Fed may spring into action at the next meeting in September.
"The FOMC meeting minutes showed that Fed governors are becoming anxious, indicating a few members felt that recent developments justified a more substantial move," said Jessica Hoversen, fixed income and foreign exchange analyst at MF Global in note.
"A rise in unemployment on Friday may push this faction of Fed officials over the edge," she said.
Hopes of a Fed stimulus offered some respite to beaten down European shares which could yet post their biggest monthly drop since October 2008.
European stocks bore the brunt of the severe setback earlier this month as markets were roiled by a sovereign downgrade in the U.S., persistent debt problems in the euro zone and sharp cuts to global growth expectations.
The FTSEurofirst 300 (.FTEU3) index of top European shares is down 13 percent this month while Germany's DAX (.GDAXI) has slumped 21 percent and is down nearly 25 percent since hitting a 3- year high in May this year.
The indexes are expected to open 0.3-0.5 percent higher, according to financial spreadbetters. (.EU)
In Asia, the MSCI index of Asian stocks outside Japan (.MIAPJ0000PUS) is down 9.5 percent. On the day it rose 0.9 percent helped by a 1.7 percent jump in Korea's KOSPI (.KS11).
U.S. stocks futures pointed to an extension of the modest overnight gains as signs of the Fed willing to take aggressive steps helped offset the gloom from the slump in consumer confidence in the U.S., which hit a two-year low.
In Japan, the Nikkei (.N225) closed flat at 8,955.2 on profit-taking after four straight gaining sessions.
"The index may stay in a narrow range below 9,000 until we have more catalysts for a U.S. economic recovery," said Fumiyuki Takahashi, managing director at Barclays Capital.
He added that domestic institutional investors such as pension funds are buying below 9,000, while foreign investors are hesitant to take positions ahead of U.S. non-manufacturing data from the Institute for Supply Management and U.S. jobs data later this week.
JOBS DATA AWAITED
A Reuters poll showed economist forecast U.S. non-farm payrolls rising 80,000 in August with unemployment staying at 9.1 percent.
In currency markets, the euro fell across the board, particularly against commodity currencies, after lukewarm demand at an Italian bond auction threatened to push the euro zone's third biggest economy back to the center of the region's debt crisis.
The dollar faced problems of its own as the prospect of further monetary easing in the U.S. would further cement its status as a funding currency in carry trades.
The dollar index (.DXY) which measures the dollar's strength against a trade-weighted basket of currencies is down 6.3 percent this year and is poised to finish flat on the month.
Brent crude hovered at $114 a barrel on Wednesday after posting six days of gains on expectations the United States will act again to try to stimulate its economy and boost fuel demand.
Spot gold edged lower on the day, pulling back from a 2.6 percent rally in the previous session but in contrast to stocks, is set for its biggest monthly gain since November 2009. It is up 12.6 percent this month.
(Additional reporting by Ayai Tomisawa in TOKYO; Editing by Ramya Venugopal)
PHOENIX – A former City Council member and a political consultant are leading five rivals in the race to become Phoenix's next mayor, apparently setting up a run-off election in a contest that has seen candidates pledge to prioritize job creation as the city struggles to recover from the housing market collapse.
Initial results Tuesday show councilman Greg Stanton, a Democrat, has nearly 38 percent of the vote with roughly 91,000 ballots counted. Wes Gullet, a Republican who was a senior aide to former Gov. Fife Symington, has nearly 21 percent.
A runoff election will be held Nov. 8 if no candidate receives a majority of the votes. The winner takes office Jan. 3.
City Clerk Cris Meyer says tens of thousands of ballots remained to be counted over the next several days, but initial results point toward a run-off.