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Sharp to buy Fujitsu LCD business

The tie-up is the latest consolidation in Asia, which has been hit hard by price declines and slower-than-expected demand.

Japan's Sharp said Monday that it will buy Fujitsu's LCD business, the latest consolidation in the fast-growing but highly competitive market for thin displays.

Sharp's announcement followed news earlier in the day that Matsushita Electric Industrial and Hitachi will tie up in plasma panels, another type of display used in flat TVs, whose makers have been battered by price falls.

Panel makers stepped up production last year on hopes that people would trade in bulkier cathode ray tube sets for slick flat-panel televisions at a brisk pace, but slower-than-expected demand and fierce competition have been slicing into profit margins.

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Price competition also has been intense in small and midsize liquid-crystal displays (LCDs) used as computer screens and displays for mobile phones.

Fujitsu will sell its loss-making LCD business, including research and development, manufacturing and sales operations, to Sharp for an undisclosed amount. Fujitsu has primarily focused on producing LCD panels for use in PC monitors.

"The line being sold by Fujitsu is quite old so it would be hard to see Sharp gaining anything from the production side of things in this deal. The merit for Sharp would have to be in Fujitsu's patents and its engineers," said Hiroshi Hayase, director at research firm DisplaySearch.

Sharp is the world's largest maker of TV-use LCD panels but is also a leading producer of small and midsize LCDs. It said the move would strengthen its development and production of displays for cell phones, game consoles and other mobile devices.

For Fujitsu, which last week said it would sell an additional stake in a plasma panel joint venture to its partner Hitachi, the deal with Sharp will mark its effective exit from the volatile display market.

Fujitsu said earlier on Monday it had agreed to sell its operation to manufacture equipment for flat-panel displays (FPD) to Ulvac, a Japanese maker of vacuum equipment including FPD-making equipment, for an undisclosed sum.

Panasonic products maker Matsushita and Hitachi, Japan's largest electronics conglomerate, said their cooperation would include development, output, marketing and intellectual property rights related to plasma displays.

Matsushita is the world's third-largest plasma panel maker after Samsung SDI and LG Electronics, according to DisplaySearch.

Hitachi's stake in Fujitsu Hitachi Plasma Display, the fourth-largest plasma panel manufacturer, will rise to 80.1 percent in April with the purchase of an extra stake from Fujitsu, which holds several key patents in the plasma field.

The alliance is expected to give Matsushita, which is investing heavily in plasma production, cheap and easy access to Fujitsu's patents while offering Hitachi access to Matsushita's strong technology for creating high-resolution pictures.

Hitachi and Matsushita will also consider standardizing some components and manufacturing processes to lower costs. Manufacturers are scrambling to boost efficiency with the price of panels falling 20 percent to 30 percent each year.

"What the market is demanding is beautiful, large and yet low-priced displays. Figuring out how Japan's two largest plasma display makers can jointly achieve rationalization is the key point of this alliance," Hitachi President Etsuhiko Shoyama told reporters.

Shoyama said details of the cooperation have yet to be decided.

The two deals are the latest in a series of realignments among Asian flat-panel makers.

Electronics and entertainment conglomerate Sony said last month it would buy the Japanese LCD operations of Taiwan's Chi Mei Optoelectronics to boost its ability to make parts needed for high-end digital products.

Last August, Hitachi, Matsushita and Toshiba said they would spend a combined $1.06 billion (110 billion yen) to jointly produce large LCD panels for flat-screen televisions.

Annual demand for LCD televisions is expected to reach 59 million units in 2009, up from 7.98 million in 2004, the Japan Electronics and Information Technology Industries Association said Monday.

The industry group said demand for plasma display would likely to grow fivefold to 11.6 million units by 2009.

Story Copyright © 2005 Reuters Limited. All rights reserved.