Pioneer Rethinks PDP Plant Growth

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Pioneer's weaker than expected plasma display sales during the recent holiday period and a resulting drop in home electronics revenue reported in its fiscal third-quarter financial statement (see p. 49) caused the manufacturer to announce the postponement of investment plans for a new plasma factory.

"In light of the results of the 2006 year-end sales season, we have decided to postpone investment in a new manufacturing site for plasma displays," the company said in its financial statement. "Decisions on the scale of the new plant and the timing of investment will be based on the outlook for market trends, as well as a wide range of considerations such as the creation of a more efficient manufacturing framework or joint investments with other companies."

The company disclosed plans for the plant at International CES, where it also said it was re-engineering the entire plasma line to deliver industry high performance levels for any display technology. At CES the company said the new line was expected to be delivered this summer.

According to a spokesperson in Pioneer's U.S. sales and marketing office, the plant postponement will not delay plans for that newly engineered line. "It just means that we won't have any additional capacity beyond what we're currently able to produce, so as we release even better televisions, the supply will remain somewhat limited. No change in timing for the launch of the new products."

Pioneer said it had developed "a new panel, filter and application-specific integrated circuit" to deliver industry-leading picture performance levels.

Pioneer planned to build the new plant at a location west of Tokyo, but the postponement was decided after Pioneer reported a 10 percent drop in plasma display panel sales, due largely to a substantial loss of OEM sales to other manufacturers.

The company said sales of home electronics dropped 2 percent to $928 million for the last three months of the year. Pioneer also revealed that sales of Pioneer-branded plasma sets dropped in Japan, but increased in Europe in the period.

Rapidly declining prices for large-screen LCD TVs began to take share away from plasma in 2006, analysts said, causing several flat-panel TV companies to drop plasma to focus on LCD models in 2007.

During the first quarter of 2007, Pioneer said it expects to make fewer plasma displays, but will increase spending on promoting them.

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