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Panasonic Outlines Plasma TV, Profit Goals

A 40 percent unit share of worldwide plasma- V sales and a doubling of operating profit to 10 percent are key priorities for Panasonic parent Matsushita Electric Industrial (MEI), Matsushita executives said during the recent CEATEC trade show.

In 2010, MEI wants to achieve an operating profit of 10 percent compared to “about 5 percent now,” said chairman and president Fumio Ohtsubo. He emphasized that the goal is “not a commitment” but a “clear target.”

Plasma will play a major role in achieving that goal, as will an “integrated platform strategy” in which products in once-separate categories are developed with shared platforms that reduce development costs and enable Panasonic to add value, said Satoru Fujikawa, platform development director at MEI’s R&D division.

Plasma and product-development efficiencies have already played a major role in turning around the company’s fortunes, the company previously said. For the fiscal year ending March 31, Matsushita’s sales rose 2 percent to $77.6 billion, and Matsushita’s net more than doubled to $1.3 billion, while AVC Networks’ sales rose 6 percent to $13.5 billion. In the fiscal first quarter ending June 30, Matsushita’s sales were up 4 percent to $18.58 billion, net income rose 7 percent to $312 million, and operating profit surged 41 percent to $566 million. AVC Networks ‘sales rose 4 percent to $7.63 billion, but sales of A/V products within the division jumped 14 percent.

In plasma, the company shipped 2 million models in fiscal 2005 and targets 4 million in fiscal 2006, ending March 31, 2007., representing 40 percent of forecast worldwide sales of 10 million, said Masaaki Fujita, MEI executive officer and senior VP of Panasonic AVC Networks Company. Panasonic AVC makes and markets consumer electronics, information, and communications products. In 2010, Panasonic forecasts global sales of 30 million plasmas, with Panasonic again accounting for 40 percent, or 12 million sets.

To fill expected demand, Panasonic is building more plasma factories and boosting yields in each successively new factory, said Hiroyuki Nagano, director of the Panasonic plasma device business unit. The company’s third plasma plant, which started operation in Sept. 2005 in Amagasaki, is in “full operation” and churning out 285,000 models per month, bringing capacity to 5 million units annually. A fourth plant, whose construction began in May, will start production in July and be in full operation in 2008, bringing the capacity of all Panasonic plants to more than 11.5 million units per year, Nagano said.

Built into that projection are rising production efficiencies. From its third plant, situated in Amagasaki, the company gets six 42-inch panels from one sheet of 1.8mm-thick glass with yields up to 90 percent, he said. The fourth plant will yield eight panels from one glass sheet. In contrast, the company’s first plant, still in operation, yields one 42-inch panel per sheet, with the second plant delivering three 42-inch panels per sheet.

The four factories, all in Japan, make only the display panels used in plasma TVs. The panels are shipped to plants in the U.S., Europe, China and Brazil for final TV assembly and prompt availability in overseas markets. Assembly in Singapore is planned in 2007.

In plasma, the company will continue to offer models only in screen sizes of 37 inches or more, while offering LCD TVs in 26- and 32-inch sizes, because of plasma’s wider viewing angle, higher contrast ratio of 5000:1 in Panasonic models, smoother reproduction of fast-moving images and superior color reproduction, especially of blues, he said. Plasma technology’s performance-to-cost ratio is best for larger screen sizes, he added.

Demand for the flagship 103-inch plasma TV, the world’s largest, has been greater than expected despite a price tag of $69,999 in the U.S., he added.

In LCD TVs, the company is targeting a 20 percent share of the global market in the 26- to 32-inch screen sizes but didn’t specify a timeframe.

Panasonic joined with Hitachi and Toshiba to build an LCD factory that went into production in May 2006 and will achieve an annual capacity of 5 million units by the end of 2007, the company said.

The company forecasted industry flatpanel TVs accounting for 65 percent of all 200 million TVs sold worldwide in 2010. By that time, TVs with screen sizes of 30 inches or more will account for 48 percent of TVs sold compared to 16 percent in 2005. Smaller screens will be used mainly for information services such as news, the company said.

TVs are among the products benefiting from Panasonic’s integrated platform strategy, the company said.

Panasonic is shifting from “discrete development” to integrated platforms that share development costs among different product categories, improve the efficiency of product development, and link different products to provide additional value, said R&D executive Fujikawa. In the past, it was “very difficult to share efforts across product categories,” he noted.

In “most mainstream CE products,” Panasonic has made the shift to integrated platforms and will expand the strategy to new types of products in 2007, he said without specifying the categories.

The platform strategy is Panasonic’s response to skyrocketing digital-era development costs, which are a “major managerial issue,” he said. With digital, “production costs go down, but software-development costs and intellectual property costs go up.”

The advantages of the strategy include the ability to “unify” a large company’s “development direction,” stage global simultaneous launches ahead of competitors, and offer products that unleash “new types of value” because they are networked. TVs that connect to the Internet and feature memory card slots to display photos and videos are one example.

The strategy also gives the company a leg up in an industry in which previously separate product categories now share many features, thanks to “increased commonalities of technologies among different product areas.” Such products include cellular phones with camcorder, camera, TV, and music-playing capabilities, he said.

On other subjects, Matsushita executives explained past efforts and future goals.

Toshihiro Sakamoto, Panasonic AVC Networks president and MEI board member, said the A/V and IT worlds must be connected to each other in the home, but the company is focusing first on the TV link in the network because the “TV is always in a first-class position in the living room.” In Japan, Panasonic pursues that strategy by offering TVs with Internet access via Ethernet ports, and the company hopes to bring the concept to the U.S.

In Japan, five CE makers including Panasonic have launched a TV portal site that offers mostly text information and some video to supplement TV broadcasts and to provide local information such as traffic and school lunch menus. He expects the portal to offer video on demand in 2008.

For his part, Kazuhiro Tsuga, executive officer, digital network and software technologies, said he doesn’t foresee suppliers offering Blu-ray recorders in the U.S. “In Japan, there is more demand for recorders,” he said. “In the U.S., the recorder is a function of the set top box [such as a satellite-TV set top],” and as a result, companies “need to work with partners.” In the future, however, he sees every HDTV incorporating a Blu-ray player.