According to sources, Toshiba Corps and Fujitsu Ltd are in negotiations with a view to merging their mobile phone businesses which would create Japans number two mobile phone maker after Sharp.

A report over on Reuters says that the Toshiba, Fujitsu deal would enable the two companies to share the heavy cost of developing mobile handsets while analysts expect more consolidation.

If the merger goes ahead, Japan’s mobile phone industry will have 6 groups which is down from the 10 groups of 3 years ago. Last year Hitachi Ltd, Casio Computer and NEC Corp combined their mobile operations whit the new venture starting this month.

The chief fund manager at Ichiyoshi Investment Management, Mitsushige Akino has said, “The Japanese market is not all that big, but there are still far too many manufacturers. Consolidation will continue, even if at a slow pace.”