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UPDATE 1-Continental, Osram to launch joint venture in 2018 -sources

(Adds details, background)

MUNICH, Nov 6 (Reuters) - German auto parts supplier Continental and lighting company Osram plan to set up a joint venture next year to develop lighting products for the automotive industry, people familiar with the matter said.

The venture is expected to generate annual sales of between 400 million euros and 600 million euros ($464 million-$695 million) initially, the two people said on Monday, without being more specific.

Osram and Continental both declined to comment.

Continental, the world's second-biggest supplier to carmakers by sales, is bolstering its expertise in electronics as customers such as Volkswagen and Daimler increase spending on electric and self-driving technologies. It has been in talks with Osram for months about setting up a joint venture, company sources have said.

German daily newspaper Handelsblatt, citing industry sources, reported earlier on Monday that the joint venture will employ 1,500 staff initially. ($1 = 0.8632 euros) (Reporting by Irene Preisinger; Additional reporting by Andreas Cremer; Editing by Susan Fenton)