Innovation Network Corp. of Japan (INCJ), Hitachi, Sony Corp. and Toshiba Corp. on Wednesday announced that they have signed a non-binding memorandum of understanding to integrate their small- and medium-sized display businesses and establish a new company (NewCo) that will be operated by INCJ. The companies plan to complete the business integration in the spring of 2012, subject to the receipt of any necessary government approvals.
All of the issued shares of subsidiaries of Hitachi, Sony and Toshiba engaged in the small- and medium-sized display business (Hitachi Displays, Sony Mobile Display Corp. and Toshiba Mobile Display) and other assets are planned to be transferred to NewCo. INCJ, as a public-private partnership that provides financial, technological and management support for next-generation businesses, plans to invest a total of ¥200 billion ($2.61 billion) in NewCo in exchange for shares to be newly issued to INCJ by NewCo as a third-party allotment. Eventually, INCJ expects to hold 70% of the shares with voting rights of NewCo, while Hitachi, Sony and Toshiba each expect to hold 10% of such shares.
The global market of small- and medium-sized displays is expected to grow rapidly due to anticipated strong demand for high resolution, high value-added products, particularly for smartphones and tablet computers, and superior high resolution display technology is key to competitiveness. Other small- and medium-sized display manufacturers have announced significant investment plans to try to capture this market, and appropriate measures are required in order to enhance competitiveness.
NewCo is expected to utilize the world’s best high value-added technologies of the subsidiaries and establish new production lines by utilizing capital, which will be provided by INCJ. In addition, by use of existing production capabilities of the subsidiaries, NewCo aims to improve its cost competitiveness to solidify its position as a global leading company in the small- and medium-sized display market. In order to maintain and enhance technologies, NewCo is also expected to invest in the world’s most advanced research and development. This investment will focus on the development of high-potential next-generation technologies, including higher resolution and thinner organic light-emitting diode (OLED) displays, in an effort to drive forward the market as a whole.
NewCo’s management will be newly hired, and INCJ is leading the selection process. Each of INCJ, Hitachi, Sony and Toshiba plans to appoint the outside directors of NewCo. Also, INCJ, Hitachi, Sony and Toshiba intend to provide NewCo with technical support, and NewCo will establish a strong governance framework and business infrastructure.