Blurry Times in the Plasma TV Biz

Revenues are set to peak in 2008 for plasma TV panel makers, but Japan's Matsushita Electric is still betting big on the technology

by Kenji Hall

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It's a classic dilemma for any flat-panel TV maker: to expand or not to expand. But for plasma TV manufacturers, the question goes beyond the usual hand-wringing about whether to spend on more super-efficient factories now to reap cost advantages later. That's because by 2009, companies like Matsushita Electric Industrial (MC), LG Electronics and Samsung could get hammered by falling revenues, as competition from the dominant flat-panel technology, liquid-crystal displays, drives down prices and undercuts their profits.

According to market research firm iSuppli, revenues, estimated at $7.7 billion last year, could peak at $10.2 billion in 2008 before falling back to $8.7 billion in 2011. The decline is expected to come despite rising sales of the specialized glass panels for plasma TVs, which could more than double from 10 million last year to 23.6 million in 2011.

The not-so-upbeat outlook explains why most plasma-panel makers aren't eager to ramp up production. This year only one company hasn't curtailed production: Matsushita. Says iSuppli's Riddhi Patel: "Most panel makers have cut their production utilization rates to around 70%—except for Matsushita, which remains at 100%."

Matsushita Has More at Stake

So why does Matsushita CEO Fumio Ohtsubo have his plants firing on all cylinders when everyone else is taking a wait-and-see approach? Ohtsubo has yet to offer a clear answer.

The best guess is that he's dead-set on reaching his target of selling 5 million sets this fiscal year through March, 2008—a 43% rise from 3.5 million last year—and reaching even higher levels in the next few years, and anyway it's premature to get all worked up about a contraction. It's no secret that Ohtsubo wants Matsushita to rule the market for big screens by the end of the decade.

It could also be that Matsushita simply has more riding on the success of plasma TVs than anyone else. The world's biggest plasma producer, with more than a third of the market, the company is outspending all others on state-of-the-art panel-making factories. Its $2.4 billion facility—the company's fifth and biggest to date—is scheduled to be up and running in May, 2009. That mega-plant could double the company's current annual production capacity to 11.5 million sets by early 2010.

Ohtsubo's goal is for one in four of all flat TVs with screens measuring 37 in. and larger that are sold worldwide to bear the Panasonic brand. One way he might accomplish that: expand Matsushita's small-scale LCD TV business. On Aug. 9 the company did just that, announcing plans to sell 37-in. LCD TVs in Japan for the first time and moving up in size from the 32-in. sets it had previously made.