Matsushita, Hitachi in talks on major panel deals: source

By Kentaro Hamada and Edwina Gibbs

TOKYO (Reuters) - Matsushita Electric Industrial Co (6752.T: Quote, Profile, Research, Stock Buzz) and Hitachi Ltd (6501.T: Quote, Profile, Research, Stock Buzz) are discussing multi-billion dollar deals on flat panels that could reshape an industry hit by fierce competition, a source familiar with the matter said.

The two possible deals would allow Matsushita, the world's biggest maker of plasma TVs, to do an about-face and move aggressively into liquid crystal displays (LCDs) while enabling Hitachi to scale down a loss-making business.

Panasonic-brand maker Matsushita is looking to take control of a LCD venture it has with Hitachi and Toshiba Corp (6502.T: Quote, Profile, Research, Stock Buzz), the source said. It will also invest $2.7 billion in a new LCD factory as part of that deal, the Nikkei business daily said.

That would help it address a weak spot in the flat TV market.

Matsushita has invested most aggressively on plasma in the belief that it was the most cost competitive technology for big TVs above 40 inches, but plasma's dominance in that segment of the market has started to give way to bigger and cheaper LCD TVs.

"This is a move that Matsushita had to make," said Tetsuro Miyachi, fund manager at Franklin Templeton Investments Japan.

"It needed to decide whether it would become a niche player in 50-inch-plus TVs or pursue the mass market, and if it was going to do that it had to get bigger in LCDs," he said.

The Nikkei said Matsushita and Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) are also considering investing more than 100 billion yen each for minority stakes in Hitachi Displays Ltd, which makes small and mid-sized LCDs and is also developing organic light-emitting diode panels.