Sony Corp will invest $1.2 billion in the next financial year to double its output of image sensors, taking advantage of brisk demand for digital cameras and smartphones.

The sum includes a deal announced last week to buy back a semiconductor production line from Toshiba Corp, which has been estimated by an industry source at 50 billion yen ($600 million).

Sony will take advantage of a Japanese government subsidy for environmentally friendly businesses to help with the investment, it said in a statement but declined to say how much that would be.

It will convert part of the plant in Nagasaki, southern Japan, for the production of CMOS (complementary metal-oxide semiconductor) sensors and invest in wafer processing equipment for CMOS image sensors.

Sony is the world's second largest digital camera maker behind Canon Inc and runs a mobile phone joint venture with Sweden's Ericsson.

The investment will bring its total production of image sensors, including CCD and CMOS types, to 50,000 units a month by March 2012.

(Reporting by Isabel Reynolds; Editing by Edwina Gibbs)

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