Fujitsu group companies will transfer their LCD research and development, manufacturing and sales operations to Sharp.

Fujitsu decided to pull out after seeing declining profitability at its LCD subsidiary and "determined that the best way to realize the full potential of this business is by transferring it to the leading company in LCDs, Sharp," a joint statement said.

"Sharp and Fujitsu are now discussing details of a definitive agreement, which they expect to complete in March," the two firms said in a joint statement. Terms of the deal were not given.

"The planned transfer will further expand Sharp's development and production capabilities in the small- and mid-size LCD segment," the statement said.

LCDs, used primarily for smaller high-resolution televisions, is also in competition for buyers with plasma displays, a technology used for wider-screen sets.

Fujitsu pioneered flat screens more than 30 years ago but the leaders in plasma diplay are now South Korean companies Samsung and LG Electronics.

Japanese companies Matsushita and Hitachi -- number one and two in the plasma display business in Japan but ranked third and fourth worldwide -- said Monday they would join forces in the sector to cut costs and face up to the Korean challenge.

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