Hitachi and Matsushita could partner to change the flat panel TV industry

Hitachi and Matsushita are in discussion for a multi-billion dollar deal that could change the shape of the flat panel TV industry.

The deal will allow Matsushita to aggressively move into the LCD TV market while allowing troubled Hitachi to exit or scale down its involvement. Matsushita, by the way, is the largest plasma TV manufacturer in the world.

The new venture, called IPS Alpha Technology Ltd., could see Matsushita pump in $2.7 billion. Matsushita and Canon are also seeking to buy stakes in Hitachi Displays and develop OLED panels.

LCD TVs have completely driven out plasmas and Sharp is spending more than $3 billion to build the largest LCD plant in the world. Sony and Samsung are also ramping up their production in their South Korean plant.

Hitachi has been hit by losses in the flat panel market and is looking at Matsushita for bailout. However, some analysts doubt the deal.