<table width="80" border="0" align="left" cellpadding="8" cellspacing="0"><tr><td><img src="http://www.bytecamera.com/images/stories/Kodaklogo.jpg" width="80" height="72" alt="kodak digital cameras"></td></tr></table>OSAKA - In its latest entry into new business areas, Funai Electric Co has started producing digital cameras for Eastman Kodak Co of the US under an original equipment manufacturer (OEM) agreement, the Japanese firm said on Wednesday.

Funai plans to supply the US company with around 10 billion yen (US$88 million) worth of products in the first year.

In April, Funai started manufacturing digital cameras at a plant in Guangdong province, China. Monthly output there is expected to be raised from 30,000 units to 120,000 units by the end of the year. All of the products will be supplied to Eastman Kodak, which will market them under its EasyShare brand.

Hoping to turn a profit from the business by the second year at the earliest, Funai will pursue tie-ups with other firms and <table width="300" height="600" border="0" align="right" cellpadding="2" cellspacing="0"><tr><td<!-- FASTCLICK.COM 300x600 Half Page CODE for bytephoto.com -->
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consider mergers and acquisitions over the next year to jump-start in-house production of key digital camera components such as lenses and small LCDs (liquid crystal displays).

The company is stepping up efforts to diversify into digital home electronics and other growth areas because the markets for cathode-ray tube televisions and videocassette recorders (VCRs) - its traditional mainline products - are shrinking rapidly.

In March, Funai entered the DVD recorder market through a joint venture with Mitsubishi Electric Corp