Canon, Inc. announced today that it is buying out Toshiba in their surface-conduction electron-emitter (SED) television contract.  Canon will buy all of Toshiba's outstanding shares and once the deal has reached completion, SED, Inc. will become an official subsidiary of Canon, Inc. 

The decision was made in order to suppress the lawsuit by Nano-Proprietary, Inc. for the patent infringement on the technology.  Nano-Proprietary filed a suit against Toshiba-Canon in 2005 claiming that the company had only licensed its technology to Canon and not to Toshiba-Canon.  In November 2006 a judge denied a motion for summary judgment, so in March of 2007 Nano-Proprietary and Toshiba-Canon would start trial proceedings.

Canon issued a press release stating that current SED, Inc. president Kazunori Fukuma, will resign his position under the Toshiba hired post and will resume his career hired under a Canon, Inc. contract.  The SED panel project will fall under Canon contract and Toshiba will loan engineers and resources under the terms of a new agreement. 

The new subsidiary, SED, Inc., will have about 550 employees by January 2007 under Kazunori Fukuma, the continuing president.  Toshiba-Canon was established in October of 2004, and effective January 29, will be wholly owned by Canon, Inc.  The price of the transaction was not disclosed.

This buyout could lead to bigger risks for Canon, however.  The technology will have high production costs to compete with that of of LCD and plasma screen -- it will be difficult for SED to catch up.  Very few analysts believe that SEDs will be cost competitive with existing technologies like LCD and plasma, or even upcoming technologies like OLED. 

Canon already pushed back production of its SED television to the fourth quarter of 2007 to improve cost competitiveness and combat steep price erosion. However, with these recent events, launching mass production has become more complicated.

Canon is currently reviewing a decision to build a 180 billion yen ($1.49 billion USD) plant in Japan for the mass production of the panels.  Analysts are skeptical of Canon's decision to build a new factory due to the lack of cost-effectiveness.  With this in mind, Canon representatives stated late last year that it may stick to small scale production for a launch in Japan.