Panasonic to Build $2.8 Billion LCD Plant in Japan

Panasonic is planning to invest ¥300 billion (US$2.8 billion) in a new LCD manufacturing plant in western Japan, it said Friday.

The investment was announced simultaneously with a deal that will see Panasonic acquire almost all the shares of IPS Alpha Technology, an LCD (liquid crystal display) panel manufacturing joint venture between Panasonic, Hitachi and Toshiba, and marks the latest chapter in an industry-wide realignment of the LCD business in Japan.

The new plant will be built in Himeji and will be a so-called eighth generation production line. That means it can process sheets of mother glass -- the large glass panels on which several LCD screens are made -- of 2.2 meters by 2.4 meters. Such sheets are best suited to production of 40-inch panels because eight screens can be made with minimal waste.

These aren't the monster panels in which rivals are currently investing billions of dollars, but that's because Panasonic is relying on PDP (plasma display panel) screens for its TV sets that are over 40 inches in size.

While Panasonic will pay for the new factory it will officially be owned by IPS Alpha Technology. Hitachi Display is currently the largest shareholder in the company with a 50 percent stake and Panasonic is second with a 30 percent share.

As part of a deal disclosed Friday, Panasonic plans to buy before the end of March the 15 percent share in IPS Alpha currently held by number-three shareholder Toshiba. That will give Panasonic a 45 percent share of the company.

Then after March and some time in the next two years Panasonic plans to acquire the 50 percent share held by Hitachi Display to give it a 95 percent stake in the company. Hitachi Display's parent company, Hitachi, may acquire up to 10 percent of IPS Alpha, which would slightly dilute Panasonic's shareholding.

Toshiba, which will exit IPS Alpha with the transaction, recently concluded a deal with Sharp under which the two companies will closely cooperate in LCD production from April this year. Toshiba will turn to Sharp for the 32-inch and larger flat-panel displays used in its LCD televisions while Sharp will procure from Toshiba the chips used in its TVs.

In addition both Panasonic and Canon plan to each acquire 24.9 percent stakes in Hitachi Display as a first step towards Canon eventually acquiring a majority stake in the company.

The confusing series of deals has been prompted by the need for all flat-panel makers to invest heavily in new and upgraded production. With competition fierce and each plant costing several billions of dollars the stakes are high and alliances are typically being formed to reduce the up-front cost and ensure a stable customer base for the new factories.

Panasonic is currently putting the finishing touches on a ¥280 billion state-of-the-art PDP production line in Amagasaki, in western Japan, that is due to start production this year. The plant can accept mother glass sheets from which twelve 42-inch panels can be made versus eight on the current line.