TOKYO (Reuters) - Taiwan’s Hon Hai Precision Industry Co will buy a majority stake in a Hitachi Ltd display unit for about $1.2 billion, making it the world’s top ranked maker of small and medium sized LCDs, the Nikkei newspaper said on Monday.
The venture, Hitachi Displays Ltd, will use the funds to build a factory in Japan that will supply Hon Hai, one of the biggest manufacturers of Apple Inc’s iPhone and iPad, the newspaper said.
Combined with its recent acquisition of Taiwanese LCD panel maker Chimei Innolux Corp, Hon Hai, which is owned by electronics giant Foxconn, would become the world’s top maker of smaller liquid crystal display panels with market share of 17.3 percent, outstripping Sharp Corp according to 2009 data.
But Sharp is also considering expanding its small LCD production capacity, sources told Reuters this month. And Japanese local officials said last week Toshiba Corp was set to build a new LCD factory for 100 billion yen, which media reports say will supply Apple.
Goldman Sachs analyst Ikuo Matsuhashi welcomed the Nikkei report as a sign Hitachi was continuing efforts to streamline its sprawling business, after Canon, which owns 25 percent in Hitachi Displays, said in September it had dropped a plan to take control.
“We see the announcement as testimony to continuing commitment to business restructuring and exits from non-core businesses,” he wrote in a note to clients.
The Nikkei said Hitachi’s stake in the venture will drop to about 30 percent from the current 75.1 percent, adding that the new plant would begin operating in 2012 and that it would more than double the annual capacity of Hitachi Displays.
Shares in Hitachi were up 0.3 percent at 409 yen in Monday morning trading, weaker than a 0.6 percent rise for the broader Nikkei stock average. Shares in Hon Hai were down 0.4 percent at T$116.50.
Hitachi said no decisions had been made.
“Hitachi is constantly considering measures to strengthen its operations but will not comment on individual plans under consideration,” said company spokesman Atsushi Konno.
Hon Hai will make the investment through two 50 billion yen payments, one in the year to March 2012 and one in the following year, the Nikkei said.
A Hon Hai spokesman said he had not heard about the reported deal.