Hitachi-Matsushita Tie-Up to Expand PDP Market

[Gregg Lengling]

In a period of only a few days in February 2005 there was a flurry of repositioning among firms involved in the development and manufacture of plasma display panels (PDP) and liquid crystal display (LCD) panels. On February 2 Fujitsu Ltd of Japan sold a portion of its shares in subsidiary Fujitsu Hitachi Plasma Display Ltd (FHP) of Japan to Hitachi Ltd of Japan, which promptly announced that FHP had been made a consolidated subsidiary. Five days later, on February 7, Hitachi held a joint press conference with Matsushita Electric Industrial Co, Ltd of Japan, disclosing a comprehensive tie-up covering development, manufacture, marketing and intellectual property (IP) issues related to PDPs. On the same day, Sharp Corp of Japan announced that it was acquired by Fujitsu's LCD panel business.

Select Group

This activity, which only became visible to the public in February 2005, is actually the finishing touches of a total restructuring by Japanese appliance manufacturers as they firm up their flat-panel display (FPD) businesses to boost competitiveness in large-screen TVs (see Fig). In 2004, for example, Hitachi, Toshiba Corp of Japan and Matsushita Electric announced the formation of joint venture IPS Alpha Technology, Ltd of Japan in LCD panel manufacturing, while Pioneer Electronic Corp of Japan acquired the PDP business of NEC Corp of Japan.

Now that the industry reshuffle is pretty much over, the panel development and manufacturing stance in Japan is simpler. Two key structural changes have taken place - (1) the integration of panel development and manufacturing points under the major TV manufacturers, and (2) the concentration of all Japanese panel-related IP, technology and expertise - in less than a year.

With the achievement of (1), a vertically-oriented development stance in Japan, it has become much easier for Japanese TV manufacturers to develop and push unique TV set features. Panel characteristics directly affect TV image quality and power consumption. No matter how much the image processing technology is tweaked, competing panel manufacturers will not be able to match a panel with superior performance. Hitachi seems well aware of the significance of adopting FHP as a subsidiary, as Kazuhiro Tachibana, FHP vice president and executive officer and president & CEO of Ubiquitous Platform Systems, Hitachi, pointed out: "We will solidify our position as the leader in the PDP TV market by integrating the management strategies of our TV and panel businesses."

In panel manufacturing, this approach makes it possible to ensure a stable supply, which in turn allows major investment. Capital investment has a large effect on panel cost, which means investment itself can translate into improved cost competitiveness.

Another result is that non-Japanese panel manufacturers trying to enter the market will have an even tougher time. A number of LCD panel manufacturers in Taiwan and elsewhere, for example, are being forced to review their equipment investment plans for 2004, as reflected in the for-TV LCD panel supply capacity projections offered by survey firms. There has been a major reduction in the forecast in only half a year.

For change (2), not only are related patents being brought to one place, but also all of the engineers with key panel development and manufacturing expertise. The fact they have gathered under the umbrella of the TV manufacturers is a key point. Engineers at Fujitsu, for example, which has invested massive amounts of capital into PDP and LCD development in the past, are now in one place, working for a TV company. For Japanese TV manufacturers hoping to maintain competitiveness, this is a crucial move.

Ramping Up for 2007-2008

It is no accident that the sudden restructuring in panel development and manufacturing for TVs has happened just now. The switch to digital broadcasting and high-definition TV (HDTV) content is accelerating worldwide, leading to predictions that the large-size TV market will change dramatically in 2007-2008. For the TV manufacturers, this represents a major opportunity to grab the lead. Contenders are deadly serious as they try to map out winning strategies, and part of the plan has been to implement tie-ups and acquisitions two years in advance to solidify their positions.

No matter how the structure of the industry is changed, however, there's little point in pursuing it unless there's a profit to be made. Speaking about the joint PDP business between Hitachi and Matsushita Electric, Etsuhiko Shoyama, president and CEO at Hitachi, said: "We investigated ways of further slashing costs, and this tie-up is one result." While no concrete details of the tie-up have been released, it does appear that the larger scale will make reduced cost possible. As Hitachi's Shoyama added, "Even materials procurement, for example, should be reduced in cost through the joint effort."

by Takuya Otani  

(May 2005 Issue, Nikkei Electronics Asia)