Will Hitachi & Fujitsu Survive In The Plasma Market?

X

The future for Hitachi and Fujitsu in the flat panel plasma TV market looks grim following the announcement that Sharp has purchased a stake in Pioneer Electronics. The move will most likely kick-start further realignment in Japan’s overcrowded electronics sector, which needs to pool resources to survive.

While Japanese company Fujitsu invented plasma, it is credited with doing a poor job of marketing the flat panel technology which during the past 12 months has lost share to LCD TV technology in the fast growing flat screen TV market, despite the fact that it is a superior technology to liquid crystal display (LCD) technology.

This resulted in Fujitsu selling the rights to the plasma technology to Hitachi which last week reported losses for the last six months of over $400 million dollars from its plasma TV operations. Today Fujitsu relies on Hitachi to produce its panels.

What Fujitsu and Hitachi lack in Australia is marketing skills or the budget to invest in brand advertising that generates plasma sales, and for specialist resellers this is important as both Pioneer and Panasonic are currently investing millions in marketing that drives consumers into stores. And when in the store consumers are more apt to be disposed to a brand they know.

 

For consumers investing in a a large flat screen TV that currently costs upwards of $8,000 they want the comfort of knowing that the plasma brand they have chosen is not going to disapear from the market as did the Vizio brand last year.

A classic example of how marketing can work in the flat panel market is the recent “Plasma is better than LCD” campaign from Panasonic. This not only built awareness of plasma very quickly but led to consumers flocking into stores for plasma TVs. Even competing brands such as Pioneer benefited from the Panasonic campaign when it reported it had sold out of its 50-inch plasma model as a direct result of the Panasonic plasma campaign.

For Hitachi or Fujitsu to remotely survive they have to invest billions into new large screen plasma plants that are capable of handling the new larger size plasma panels. Or alternatively, develop a joint venture with the likes of Toshiba.

To do this they need to be sure that they are able to achieve the sales or alternatively line up several manufacturers to share the production costs.

 

Today Japan’s flat panel business is not in good shape. Several business conglomerates such as Hitachi and Fujitsu have sprawling business portfolios, spreading their resources across everything from microchips to flat-panel TVs, mobile phones, rice cookers, nuclear power plants and prefabricated homes.

The business model worked well during Japan’s rapid economic expansion of the 1960s and 1970s, but now looks outdated as global leaders like Nokia and Intel gain their edge by focusing on a few products and leveraging scale.

Even Sharp, which has risen to become one of the world’s top makers of flat TVs and is considered relatively well positioned in the sector, is about half as efficient as Nokia, with an operating profit margin of just 6 percent.

 

“More than 10 firms are still making TVs in Japan. Little progress has been made in the field of selecting and focusing on core businesses,” said Hiroshi Motoki, chief investment officer at AIG Global Investment.

“It is a serious problem that the competitiveness of this sector is slipping due to lack of focus. Consolidation is just about the only way for Japanese electronics makers to survive.”

Analysts say that the Japanese chip and mobile-phone sectors are among the most ripe for a shake-out.  Consolidation has already whittled Japan’s memory-chip sector down to one maker of DRAM in Elpida Memory and one supplier of NAND flash memory in Toshiba.

But now analysts say makers of system chips, which include Fujitsu, Matsushita Electric Industrial, Sony and NEC desperately need to merge or forge ties. Last week Sony bailed out of the cell processor market with the company admitting that their future is based around OEM manufacturing of Sony designed products.

Makers of mobile phones are also prime candidates for consolidation as they lack the scale to compete with Nokia and Motorola Inc (MOT.N: Quote, Profile, Research) overseas, and face a maturing home market about to become even less attractive due to a structural change.

 

As early as next year mobile-phone operators are expected to start cutting the subsidies paid to retailers to keep handset prices affordable, and to lower communication charges instead.

This move will likely discourage subscribers from replacing their handsets so frequently, hitting demand for phones made by the likes of Matsushita, NEC Corp (6701.T: Quote, Profile, Research), Toshiba, Casio Computer Co Ltd (6952.T: Quote, Profile, Research) and Mitsubishi Electric Corp (6503.T: Quote, Profile, Research).

Already there has been some movement. Sanyo Electric Co Ltd (6764.T: Quote, Profile, Research) is in talks to sell its loss-making mobile-phone operations to Kyocera Corp (6971.T: Quote, Profile, Research), sources close to the matter have said.

“Realignment is inevitable in the mobile-phone sector. The market is very crowded,” Mizuho Securities analyst Koichi Hariya said.

SAVING THE WEAK

Sharp said on Thursday it would take a 14 percent stake in Pioneer, which will in turn buy 0.9 percent of Sharp. That capital tie cements a business alliance that will include joint development of DVD players, car electronics and displays.

The alliance will also give Sharp a steady customer for liquid crystal displays (LCD) from a new factory due to come on line in 2010, while propping up loss-making Pioneer with a development partner and an injection of cash.

“Over the past three to four years, strong companies have been getting stronger and weak players have been getting weaker. Companies in the losing camp are being forced to take some action,” Daiwa Institute of Research analyst Kazuharu Miura said.

 

Among other recent deals, car electronics and audio equipment maker Kenwood and asset manager Sparx Group agreed earlier this year to buy a 30 percent of loss-making consumer electronics maker JVC.

That deal was in large part orchestrated by Matsushita, which was keen to run down its JVC stake to below 50 percent in order to get the firm’s losses off its consolidated accounts.

Other big conglomerates are sharpening their focus. Hitachi has parted with its stake in robot parts maker Japan Servo and has pledged to cut its group firms to about 700 from 945 to improve profitability.

Toshiba said this week it would sell a landmark building in Ginza to raise cash for its core businesses, and sources close to the matter have said it is in talks to buy Sony’s production facilities for advanced microchips used in the PlayStation 3.

“The consolidation trend is here to stay. Any company that tries to cling to the status quo will end up destroying its corporate value,” Hariya said.

HAR0532 SHCHnews BT 728x90 Will Hitachi & Fujitsu Survive In The Plasma Market?
Olimpia Splendid Unico Cooling 728x90 Will Hitachi & Fujitsu Survive In The Plasma Market?
Sony 290ES 728x90 1 Will Hitachi & Fujitsu Survive In The Plasma Market?
SmartHouse DAP X1860 728x90 V2 Will Hitachi & Fujitsu Survive In The Plasma Market?
Moxyo Zigi Band 728x90 1 Will Hitachi & Fujitsu Survive In The Plasma Market?
728x90 MOTOROLA EDGE 20 PRO Will Hitachi & Fujitsu Survive In The Plasma Market?
Leaderboard 728x90 Will Hitachi & Fujitsu Survive In The Plasma Market?
728x90 5 Will Hitachi & Fujitsu Survive In The Plasma Market?
ALOGIC 728x90 1 Will Hitachi & Fujitsu Survive In The Plasma Market?
LG HE FN Series Banners 4SQM LB 728x90 Will Hitachi & Fujitsu Survive In The Plasma Market?


YOU MAY ALSO LIKE