Hon Hai display merger with Hitachi on the cards

Hon Hai, better known as Foxconn, is to invest a possible 100 billion yen ($1.2 billion) of capital in Japanese firm Hitachi, according to a Japanese newspaper.

The move, reported in Nikkei, will see the Taiwanese company, which makes parts for a number of major companies including Apple, HP and Dell, pay out the money to Hitachi to acquire its Display Products Group, which will integrate with its own display subsidiary.

Hon Hai’s display group, Chimei Innolux, is the largest manufacturer of TFT-LCD displays in Taiwan, while Hitachi is a dominant force in Japan. The combination of the two could make Hon Hai the largest global panel manufacturer, a title currently held by Sharp.

The reports were apparently denied by Hajime Kito, a Hitachi spokesperson, but Chimei Innolux and its parent company have been keeping quiet about the rumoured deal. Other sources who are close to the deal suggest that the two companies are deep in talks.

Hon Hai and Hitachi already share a close relationship in the display sector, with both companies’ display groups signing an IPS cooperation agreement in July 2010, which makes it likely that further partnership could be on the radar.

Interestingly, Hon Hai assembles the iPhone 4 for Apple, while Hitachi supplies the displays for the exact same device. The integration of the two could give Hon Hai an even bigger hold on production of the popular smartphones.