THE FRONT LINE: FEBRUARY 1, 2005
TIME TO CRY “UNCLE”?
NEC did it. Sony says they’ll do it. Fujitsu is thinking about it, too. What’s “it?” Why, giving up on the plasma display business – either manufacturing, marketing and selling, or both.
Wait a minute. Aren’t these the same companies who were touting the benefits and features of these thin, ultra-cool big screen displays not long ago? Isn’t the name ‘Fujitsu’ synonymous with plasma, after all? Didn’t Sony once have a stake in the giant Fujitsu Hitachi Plasma (FHP) factory in Kyushu, Japan? Didn’t the head of NEC once boast that they would make a 100-inch plasma monitor by the middle of this decade?
Yes, yes, yes, and yes. But that was then; this is now. In the ‘good old days’ of plasma, retail prices and margins were high, which made up for lower manufacturing yields. A typical 42-inch standard definition plasma monitor (now called ‘enhanced definition’ by CEA) would come onto the market at or around $10K, while 50-inch models made their debut in the $15,000 range. And 60-inch and larger glass was yours for the price of a Honda Accord.
Things were nice and predictable until the Koreans (LG and Samsung) steamrollered their way into the market with aggressive pricing and distribution. Suddenly, 42-inch EDTV plasma prices dropped into the $5K - $6K range, and 50-inch product dropped under $10K. Rumors abounded of special deals that had large quantities of 50-inch and 60-inch screens selling substantially below those prices.
Today, one can honestly say the bottom has fallen out of the plasma market. Go into any Costco or Best Buy and look at the 42-inch Funai and Maxit plasma TVs (analog tuners only) for $1800. Check out the 42-inch ‘HD’ models for $2,495 and 50-inch plasma TVs for $5,000.
Figure 1: This 42-inch Humax HD (1024x768)
plasma TV
is typical of many such products now retailing for under $3,000.
What happened? Two things: (1) The LCD invasion, and (2) The Chinese invasion. Plasma manufacturers (with the exception of Panasonic) have pretty much conceded the space below 42 inches to the LCD market. Seen any 32-inch plasma lately? Dead and buried, thanks to LCD.
Larger LCD screen sizes are dropping in price almost as fast. Sharp’s Aquos 37-inch LCD TV product ($3599) retails for only $400 more than a comparable 37-inch plasma TV from Panasonic ($3199). And the 45-inch Aquos product, which was first unveiled a year ago at CES, now shows up with a street price around $5500.
Even 40-inch LCD TVs are at or under $4,000. The price competition from LCD has forced plasma prices down to maintain some sort of competitive advantage, although not necessarily the right kind of advantage. And a flood of LCD TV products from China-based CMO and AUO (sold here under a confusing array of brands including Moxell, Westinghouse Digital, Norcent, Erae, and so on) will only make things worse for the Japanese plasma manufacturers.
NEC apparently saw this coming a year ago and decided that Pioneer’s offer to buy NEC’s plasma fabs was a deal they just couldn’t refuse. While NEC still wholesales plasma in the USA, they are obviously concentrating on their joint LCD monitor and TV marketing business with Mitsubishi, another company who gave up on plasma in 1997.
Sony has made some noise about exiting plasma altogether in favor of an expanded line of LCD products, manufactured jointly with Samsung as part of their SLCD business. The latest such comments came last December and pointed to Sony’s departing the plasma game in the 2nd quarter of this year.
Even Hitachi has ramped up their LCD production as part of a joint venture with Matsushita and Toshiba to build a 6th-generation LCD fab that will primarily crank out 32-inch and 37-inch LCD products. (Hitachi, you may recall, jointly developed a 32-inch plasma monitor with Fujitsu that is now consigned to history.)
That pretty much leaves Pioneer and Panasonic to soldier on with PDP technology. Indeed, at this year’s CES, Panasonic put on a brave and optimistic face during meetings with the press and analysts, painting a rosy picture for the future of plasma.
They had to. Given their #1 market share and increasing demand for product, particularly in the 42-inch EDTV line, Panasonic is ramping up production to 100,000 units a month and is bringing on a new line in 2005. Pioneer’s production is at least 50,000 units a month and increasing (thanks to NEC’s old PDP fabs).
And Fujitsu? The FHP factory is running at about 100,000 units a month and a third line will kick that up to 150,000 units/month by 2007. Fujitsu has also spent considerable time developing a new plasma tube technology that would reduce manufacturing costs and allow for even larger screens.
But that’s not enough. Fujitsu is hard-pressed to maintain price margins, particularly when many of the same products that come out of the FHP line are being sold for less by partner Hitachi. Competition from Samsung and LG isn’t helping, either – research firm DisplayBank has determined that more than 50% of all plasma shipments came from Korea in the 4th quarter of 2004 vs. just over 40% from Japan, and that gap isn’t likely to close any time soon.
Industry scuttlebutt is that the Japanese government is trying to stall Fujitsu’s departure as long as possible, with a possible transfer of assets and IP to Hitachi the most logical move. But where does that leave Hitachi in the long run? Will they put the lion’s share of future investments into LCD technology? Or, will they ride the plasma bandwagon until it runs out of gas?
Editor’s note: More information and perspective on Sony’s and Fujitsu’s plasma deliberations can be had at EE Times (www.eet.com)
Editor’s note: As this story was being posted, Fujitsu announced it would sell its shares in the joint operated Fujitsu Hitachi Plasma factory and its plasma patents and IP to Hitachi Ltd.