TOKYO (Reuters) - Sony Corp (6758.T) and other Japanese companies said they will team up to jointly develop key technologies to make large-sized organic light-emitting diode (OLED) panels for use in TVs.

OLED panels, seen as promising next-generation flat displays, use organic, or carbon-containing, compounds that emit light when electricity is applied.

Unlike liquid crystal displays, OLED panels do not need backlighting, making them slimmer and more energy efficient. But makers need to clear hurdles such as cutting production costs and maximizing screen size in order to begin mass-producing OLEDs.

Sony and other firms, including a joint venture between Toshiba Corp (6502.T) and Matsushita Electric Industrial Co (6752.T), will participate in a joint development project initiated by the Japanese government.

Details of the project, which aims to establish basic technologies for making energy-saving, high-definition OLED displays with screen sizes of 40-inch and larger, will be announced soon, participating companies said.

Sony in November started selling the world's first OLED TVs with an 11-inch screen, while South Korea's Samsung SDI Co Ltd (006400.KS) said last month that it would boost production of active-matrix OLED displays to six times the current level by mid-2009. The Nikkei business daily said the Ministry of Economy, Trade and Industry will pitch in 3.5 billion yen ($33 million) to help with the project, which would run from this year through 2012.

Other participants in the project include Idemitsu Kosan Co Ltd (5019.T) and Sumitomo Chemical Co Ltd (4005.T).

Shares in Sony were up 1.8 percent at 4,430 yen in early afternoon trade, outperforming the Tokyo stock market's electrical machinery index (.IELEC.T), which fell 0.3 percent.

(Reporting by Sachi Izumi and Kiyoshi Takenaka; Editing by Brent Kininmont)

($1=106.76 yen)