Matsushita and Hitachi are to pump 80bn yen ($713m; £378m) into doubling flat screen TV production at a liquid crystal display joint venture.
The Japanese electronic giants now expect IPS Alpha Technology to produce five million screens a year by 2008.
A new production line will be added to the IPS site near Tokyo to raise output from a previous target of 2.5 million.
"This move is in response to growing demand for flat-panel TVs worldwide," IPS said in a statement.
"Presently, in addition to the roll out of digital broadcasting, upcoming events of global interest such as the 2006 FIFA World Cup in June this year and the 2008 Beijing Summer Olympic Games are spurring a rapid increase in demand for flat-panel digital TVs," it added.
Expansion
The group said it had also earmarked 12bn yen for building an LCD factory in the Czech Republic.
The move should help Hitachi, Mitsubishi and Toshiba - which also owns a stake in IPS - to grab a share in the fastest growing segment of the flat-screen market.
According to research by Displaysearch, LCD TV shipments surged 137% in the fourth quarter, compared with a 109% rise for plasma TVs.
The report also forecast that demand for LCD panels for TVs will jump threefold over the coming three years.
In order to pay for the expansion plans, IPS will raise 30bn yen by issuing new shares to Matsushita and Hitachi, both taking half.
The move will leave Hitachi with a 50% stake in the venture, while Matsushita will hold 30% and Toshiba 15%. The remainder will go to other investors.
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