Issei Kato/Reuters

TOKYO — Sony, Toshiba and Hitachi announced on Wednesday that they would work with a government-backed fund to spin off and merge their liquid-crystal display businesses, joining forces in the face of rising global competition.

The deal could create the world’s biggest maker of LCDs for mobile phones and cameras, with 22 percent of the market for small and midsize screens, according to DisplaySearch, an industry research firm.

The fund, the Innovation Network Corporation, will invest 200 billion yen ($2.6 billion) in the new company for a 70 percent stake, while the three manufacturers will equally split the other 30 percent, they said in a statement.

Related Links The press release

The Japanese government has long encouraged the nation’s manufacturers to consolidate as a way to increase their presence in global markets and better fight mounting competition from rivals like Samsung Electronics of South Korea, which is now far bigger and profitable than any single Japanese electronics maker.

But the use of public money to invest in private companies, especially in volatile industries, could draw fire at a time when the government is struggling to pare down its expanding public debt. Sony, Hitachi and Toshiba have lost money in their LCD businesses, though Toshiba’s returned to profitability last year.

The overall market for small and midsize LCD screens is booming. Sales are likely to jump 22 percent this year, to $24 billion, according to DisplaySearch.

“By integrating each partner company’s wealth of display expertise and know-how, I am confident the new company will become a driving force for technological innovation and new growth in the rapidly expanding” market, Howard Stringer, Sony’s chief executive, said in a statement.

The newly formed business, named Japan Display, will hire managers from outside the three companies and invest in new production lines, the statement said. The companies, which expect to complete the merger by the spring, plan to increase sales by then to 750 billion yen ($9.8 billion), from the expected 570 billion yen ($7.4 billion) for the three units collectively.

The venture must gain approval from antitrust regulators in Japan, but authorities here have been supportive of the government push to consolidate Japanese industry.

Since 2009, the Innovation Network Corporation, 90 percent of which is owned by the government, has helped Japanese companies make acquisitions abroad and invested in promising new businesses in the manufacturing and new energy industries.

This year, the fund took a 33.3 percent stake in Japan’s first low-cost international airline, a joint venture between All Nippon Airways and a fund based in Hong Kong.

For Sony, Japan’s largest exporter of consumer electronics, spinning off its LCD business will help the struggling company focus on areas where it is more competitive, like advanced sensors for digital cameras and mobile phones. In July, Sony reduced its annual profit forecast by 25 percent, to 60 billion yen ($771.24 million), as a result of lackluster sales.