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Toshiba Corp. and Fujitsu Ltd. are in talks toward integrating their mobile phone businesses to boost competitiveness amid sluggish handset sales, sources said Friday.

The integration, if realized, would create the second-largest mobile phone maker in Japan, with a combined market share of nearly 20 percent, behind industry leader Sharp Corp.

The two electronics makers are expected to create a joint venture possibly by the end of the year, with Fujitsu likely to have the greater stake, the sources said.

By integrating their mobile phone businesses, Toshiba and Fujitsu aim to strengthen the development of mobile phones and enhance their overseas operations, the sources said.

According to Tokyo-based MM Research Institute, domestic shipments of Fujitsu handsets in fiscal 2009 stood at roughly 5.18 million units, and ranked third with a share of 15.0 percent, while Toshiba ranked eighth with a share of 3.7 percent, or about 1.26 million units.

Combining Toshiba and Fujitsu would place the two firms behind Sharp, with a share of 26.2 percent, thus overtaking current No. 2 Panasonic Mobile Communications Co., a mobile phone unit of Panasonic Corp., at 15.1 percent.

Fujitsu is in the black in terms of its mobile phone operations mainly due to its popular Raku Raku phone, which is extremely simple to use and targets elderly customers and others who want a phone with simplified functions.

Toshiba, meanwhile, is struggling in the mobile phone market. Last year, the electronics maker ended production of mobile phones in Japan and shifted outsourcing overseas to cut costs.

Amid shrinking demand for handsets, realignment among manufacturers has been noticeable, the latest being the integration of mobile phone operations of NEC Corp., Hitachi Ltd. and Casio Computer Co.

With the Long-Term Evolution, a next-generation mobile phone communications format, set to be introduced in Japan this year and become recognized as an international standard, Toshiba and Fujitsu are aiming to boost overseas sales by focusing on next-generation mobile phones, the sources said.

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