Japan's three largest electronics firms and the government-backed Innovation Network Corporation of Japan (INCJ) announced a partnership to merge their LCD businesses and invest in next-generation technologies to remain competitive in the global consumer industry.

INCJ, Hitachi, Ltd., Sony Corporation and Toshiba Corporation said in a statement that they have signed a non-binding memorandum of understanding to integrate their small- and medium-sized display businesses, which are operated by their subsidiaries in a new company (NewCo) to be established and operated by INCJ.

The NewCo, armed with a war chest 200 billion yen from INCJ, is expected to invest in the most advanced research and development in order to maintain and enhance the world’s best technologies.

"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," the group said.

INCJ made the investment in exchange for shares to be newly issued by NewCo as a third-party allotment.

Kimikazu Noumi, INCJ president and CEO said “the new company will become a leading small- and medium-sized display manufacturer, and by pooling compelling technological know-how, will be positioned to win in a competitive and lucrative global growth market that has a real impact on the quality of people’s everyday lives.”

INCJ eventually expects to hold 70% of the shares with voting rights of NewCo while Hitachi, Sony and Toshiba each expect to hold 10%.

INCJ was established in July 2009 as a public-private partnership that provides financial, technological and management support for next-generation businesses.

The companies said 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, in which Japanese companies are world leaders.

"NewCo is expected to utilize the world’s best high value-added technologies of the subject subsidiaries and establish new production lines by utilizing capital, which will be provided by INCJ, in order to meet the market demand for high value-added products," it said.

The NewCo also aims to improve its cost competitiveness to solidify its position as a global leading company in the small- and medium-sized display market.

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.

Howard Stringer, Chairman, CEO and President, Representative Corporate Executive Officer of Sony believes that NewCo will perform a vital role in ensuring the stable supply of high quality display devices in the growing field of smartphones and tablet computers.

“By integrating each partner company’s wealth of display expertise and know-how, I am confident the new company will become a driving force for technological innovation and new growth in the rapidly expanding small- and medium-sized display market," Stringer said.