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THE FRONT LINE: REDUX – FEBRUARY 9, 2005 |
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| STRANGE BEDFELLOWS? I don’t often re-write a story, but several announcements in the past week are turning the flat-panel business in Japan on its ear. In last week’s Front Line (2/1/05, now archived), I discussed how several prominent Japanese companies have (a) announced plans to exit the plasma display business or (b) are looking for a way out. I specifically identified NEC and Sony as two such companies who have washed their hands of all PDP manufacturing (whether directly or as an investor), and Fujitsu as a third company who is looking for an escape hatch. Since that story was posted, here’s what has developed: • Fujitsu announced it would sell most of its share in the jointly operated Fujitsu Hitachi Plasma (FHP) venture to Hitachi, giving the latter an 80% stake in the company and all of Fujitsu’s IP and plasma patents • Fujitsu then turned around and announced it was selling its LCD business (everything from R&D to marketing and sales) to Sharp Electronics • Hitachi and Panasonic announced a partnership to develop and sell next-generation plasma displays and TVs Fujitsu’s two announcements represent an almost complete departure from the flat panel business. The US trading company made its reputation by selling plasma monitors only to the high end of the market, with no Internet sales allowed. But savvy consumers soon figured out that many of these plasma monitors could be purchased under Hitachi and other brand names for much less. An avalanche of cheap panels and TVs from Korea and China also threatened Fujitsu’s high-end strategy. At CES 2005, the price points for 42-inch HD plasma and 50-inch plasma appear to be set around $2500 and $5000, respectively. That’s far below what Fujitsu and other Japanese companies were charging for their products. The question now is, will Fujitsu stay in the U.S plasma marketing and sale business at all as yet another ‘private label’ wholesaler? Or, will they concede the battle to Samsung, LG, Panasonic, and the scads of private labelers who are pushing products through Best Buy, Costco, Sam’s Club, and other big box stores?
Figure 1. Fujitsu’s first
50-inch integrated plasma TV may be too late
The Hitachi – Panasonic joint venture was not unexpected, and actually makes sense. These two companies already have a relationship; a joint venture (with Toshiba) in a Generation 6 LCD fab, which is supposed to come online in 2007. Given the high costs of expanding PDP fab capacity, a joint venture is a less risky way to increase supply while dealing with rapidly collapsing market prices, particularly in the ultra-competitive 42-inch screen size. (Some analysts have said the days of a $999 42-inch monitor aren’t far off.) That’s the way Pioneer did it when they purchased NEC’s plasma business in January of 2004. Many of us questioned the move at that time; Pioneer now looks like a genius as they lower manufacturing costs by spinning off NEC’s 42-inch SD and HD products to OEM partners while keeping the 43-inch HD and 50-inch products to themselves. Panasonic arguably has the best-looking plasma monitors on the market, thanks to their ability to achieve CRT-like grayscales and color saturation with essentially no false contours and other picture artifacts. (Fujitsu’s 50-inch plasma monitors were OEM’ed from Panasonic.) Now, Hitachi can brand the same panels and go after the lower-priced business if it wants. It’s reasonable to assume Hitachi will also have access to the new 65-inch PDP array that was developed by Matsushita and is now just coming into the US market.
Figure 2. Will the Panasonic –
Hitachi joint PDP venture mean
Still, the lion’s share of flat-panel monitor and TV sales worldwide will continue to be in the 26-inch to 42-inch screen size category, which is rapidly being overrun by LCD technology. The Sony-Samsung SLCD Gen 7 LCD fab will target the 32, 37, and 40/42-inch sizes. The Matsushita/Hitachi/Toshiba LCD joint venture will also go after that space, and of course Samsung, Sharp, LG, and Chi Mei are all cranking out LCD TVs to satisfy growing demand in that “sweet spot”. Why Sharp wanted Fujitsu’s LCD production capacity is not clear, but the intellectual property may be of value, particularly with smaller screens for handheld devices. Sharp’s bigger challenge will be maintaining decent price margins as their new Japan-based LCD fabs compete with Chinese and Korean fabs that have lower labor and manufacturing costs. |
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