Sharp shares rise on LCD industry realignment hopes

TOKYO (Reuters) - Shares of electronics maker Sharp Corp (6753.T) jumped 5.2 percent on Monday after a source said that Sony Corp (6758.T) was planning to start buying TV-use liquid crystal display (LCD) panels from Sharp.

Meanwhile, shares of Pioneer Corp (6773.T) jumped 4.3 percent to 1,168 yen on an Asahi newspaper report that the electronics manufacturer plans to stop making 42-inch plasma display panels.

Such a move by Sharp, the world's No.3 LCD TV maker, and Sony, the second largest, would underscore the importance of securing enough display panels to meet fast-growing LCD TV demand.

"The (LCD panel) industry is finally splitting up neatly into two groups," said Nikko Citigroup analyst Kota Ezawa.

The deal would create a larger alliance between Sharp, Sony and Samsung Electronics Co Ltd (005930.KS), which currently runs an LCD panel joint venture with Sony, along with Toshiba Corp (6502.T), which said in December it would buy large LCD panels from Sharp.

Meanwhile, Matsushita Electric Industrial Co Ltd (6752.T) and Hitachi Ltd (6501.T) hold a large stake in joint venture IPS Alpha Technology, which makes large LCD panels. Matsushita also announced earlier this month it would spend 300 billion yen to build an LCD panel plant by 2010.

Still, Ezawa noted that the potential deal wasn't without risk for Sharp.

"By providing panels to its television competitors, Sharp faces the risk of its own televisions not selling well," he said.

For Sony, the procurement from Sharp is expected to help it secure enough panels without making heavy capital investment.

Sony's shares rose 2.4 percent to 5,140 yen, compared with the benchmark Nikkei's .225 3.1 percent gain.

Shares of Sharp ended at 2,100 yen.

On the plasma television side, whose market share has gradually been eaten away by LCD TVs, Pioneer will procure 42-inch and smaller panels from Matsushita or Hitachi, the Asahi newspaper said on Saturday.

The company has been struggling to compete with larger rivals with better production efficiency such as Matsushita and LG Electronics Inc (066570.KS).

Goldman Sachs said in a report to clients that such a move would be positive for Pioneer, helping it cut losses in its plasma display panel segment.

Pioneer will end output of such panels at a plant in southern Japan by March 2009 and focus on making panels 50 inches or larger at other plants, the Asahi said.

(Reporting by Yoko Kubota; Editing by Chris Gallagher)