TOKYO May 26 (Reuters) - Japan Display Inc, the world's biggest maker of liquid crystal displays for smartphones and tablets, is considering setting up a joint venture with Sony Corp and Panasonic Corp to develop organic light-emitting diode (OLED) displays, sources familiar with the matter said.
They added that the new company would be mostly owned by the Innovation Network Corp of Japan, a government-backed fund that formed Japan Display from loss-making panel businesses at Sony, Hitachi Ltd and Toshiba Corp.
OLED screens offer higher resolution and use less power than more commonly used LCD panels. South Korea's Samsung Electronics Co Ltd equips it smartphones with OLEDs, but the technology is considered prohibitively expensive for larger screens used in televisions.
Panasonic and Sony at the end of December disbanded a joint project to develop OLED displays for TVs although they continued separate development efforts on the technology.
Japan Display is currently setting up a test line to manufacture OLED panels at a factory in northwestern Japan.
Sony, Panasonic and Japan Display would each own a portion of the OLED venture and would send engineers to work on the technology, the sources said.
The parties are aiming to reach an agreement as early as June, but several issues remain to be resolved, they added.
Officials with Japan Display, Sony and Panasonic all declined to comment.
(Writing by Sophie Knight; Editing by Edmund Klamann and Matt Driskill)