Japanese companies are joining forces to stay competitive against Korean and Taiwanese rivals in the race to develop panels for next-generation TVs.

Matsushita Electric Industrial, Canon and Hitachi have agreed on a multi-billion-dollar deal to make panels using the organic light emitting diode, or OLED, technology.

The three will each contribute more than 100 billion yen, or about eight-point-nine million dollars, to acquire equal minority stakes in Hitachi Displays. The Hitachi affiliate would develop the OLED panels.

They also agreed to invest 300 billion yen in a new factory to make small and mid-sized liquid crystal display panels.

Japan's Nihon Keizai economic daily reported that the alliance would pit the three against Sony and Sharp in the cutting-edge display panel business in Japan. At the same time, it could keep Korean and Taiwanese rivals in check.