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CES: Panasonic Announces TV Spending Cuts

Posted by: Kenji Hall on January 9, 2009

Japan’s tech makers are pouring on the glitz at the Consumer Electronics Show in Las Vegas but not all is well for many of them in TV-land. On Jan. 9, Panasonic announced in Tokyo that it will cut back on investments into its fifth domestic plant for plasma display panels, located in the western Japanese city of Amagasaki. The planned spending cuts won’t be huge, and they appear mainly aimed at delaying a production ramp-up until the economy starts to rebound, which some tech analysts say could come in 2010.

For the next fiscal year through March 2010, Panasonic said company would reduce its investment in the Amagasaki plant by 25% to 210 billion yen ($2.3 billion) from 280 billion yen ($3.1 billion). It will also slash spending on a plant for liquid-crystal displays that it runs jointly in the western Japanese city of Himeji with Hitachi and Toshiba, lopping off by 22% to 235 billion yen ($2.6 billion) from 300
billion yen ($3.3 billion).

The cuts are not unlike what other Japanese TV makers have announced in recent months. One reason for the cutbacks is that while sales are still growing the downturn means that the numbers won’t be as strong as expected. (A few weeks ago, market researcher iSuppli said that unit sales of LCD TVs was up just 10% in 2008, following a 30% gain the year before, and said it expects to revise downward this year’s predictions.) And competition is driving retail prices down faster than TV makers can trim their own costs. In late October, Sharp said its capital spending would be down 4.9% this fisal year, compared to last year. Sony will be reducing investments in plants and new equipment for its electronics division by roughly 30% next fiscal year.

Panasonic tried to portray the cuts as only a slight setback. The company hopes to sell 15.5 million flat-panel TVs in the fiscal year through March 2010, 50% more than the one ending this March. That’s a far cry from the 40 million units—roughly 20% market share—Panasonic wants to build up to. “We don’t think this is backward-looking,” the company’s president, Fumio Ohtsubo told reporters in Tokyo.

Other news from the Panasonic news conference:

--Panasonic plans to begin selling appliances such as washing machines and refrigerators in Europe in 2009.

--Ohtsubo said Panasonic won’t reach some of the three-year growth targets it had hoped to by this fiscal year. “It is very difficult to achieve our targeted values such as 10 billion yen of sales and a 300,000 ton reduction of CO2. But we believe that our direction is correct: Expanding overseas sales, moving aggressively in the BRICs (Brazil, Russia, India, China) and Vietnam, proactive investment in the flat-panel TV business, and synergies with Sanyo and so on,” Ohtsubo said.

--Panasonic hasn’t decided how it will spend more than $1 billion it plans to pour into Sanyo Electric, the tech company it agreed to buy from a group of investors led by Goldman Sachs last month. “I can’t give you many details but the target for our investments will be energy-related businesses such as solar batteries,” Ohtsubo said. “The air-conditioning and health-care businesses also hold promise.”
--with Hiroko Tashiro, in Tokyo

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