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Pioneer Halts PDP Manufacturing

Tokyo – Pioneer confirmed earlier today it will end production of plasma display panels, in favor of procuring the components from other manufacturers, and cut its net outlook for the fiscal year ending this month to a $144.86 million loss after estimating a $57.9 million profit.

“This move will allow us to transform our business model for displays from vertically integrated, capital-intensive operations to a leaner business model geared to making value-added product proposals,” the company said in its financial statement. “Pioneer is currently in discussions on the feasibility of procuring panel modules that may incorporate the company’s proprietary technologies.”

The Nikkei news service reported that Pioneer is in discussions with Matsushita Electric Industrial (Panasonic) for plasma panel supplies.

Pioneer said that halting in-house plasma panel production would result in a one-time cost of $185.5 million, and is expected to help the home electronics business become profitable by 2010.

Pioneer, which will now post a loss for a fourth consecutive year after showing a $65.29 million loss in fiscal 2007, did not specify when the action would take place or how many panels it would be acquiring.

Earlier, Pioneer had cut its estimates for sales of plasma TV sets to 480,000 units from original projections of 720,000 sets for the current fiscal year ending this month.

Going forward, Pioneer will continue to assemble and sell finished plasma sets, and will continue research and development into plasma technology, applying back-end electronics to improve picture performance.

Pioneer currently manufactures plasma panels for 42-, 50- and 60-inch plasma TVs at plants in Kagoshima, Yamanashi and Shizuoka prefectures, but the company said it has not yet decided if it will close down any of the plants. A restructuring plan is expected around May.

Pioneer purchased the Kagoshima operation from NEC, when that company exited the business.

Pioneer also said it expects to expand its TV assortment with LCD TV through a previous capital business partnership with Sharp. But specifics on that expansion have still not been announced.

In the deal, Sharp took a 14.3 percent stake in Pioneer to become the company’s largest shareholder.

Pioneer said it will focus on its core business in car audio equipment, as it strives to return the home electronics business to profitability.

In its financial statement, Pioneer said it “believes that displays are indispensable to its product lineup… and will therefore maintain its fundamental strategy for the display business.

“We aim to compensate for cutbacks in the plasma display business by driving further expansion in our growth businesses,” the statement continued. “This will be done by shifting related personnel and other business resources to the Car Electronics business; the professional sound & visual business, which involves DJ equipment; and the audio/video product business, including Blu-ray Disc-related products. We will give consideration to retaining employees in the course of this process.”

Pioneer joins a line of manufacturers who have abandoned plasma panel production in recent years due to high cost and heavy competition. Fujitsu, NEC and Mitsubishi had all started out manufacturing plasma panels, and Fujitsu and Mitsubishi no longer even sell finished plasma sets today.