Having no choice, the small players are dropping out of the plasma display panel (PDP) manufacturing business. Fujitsu, which was a key developer of the modern color TV plasma panel, is long gone, as are NEC and Plasmaco. Pioneer is phasing out its PDP production, and will buy all of its panels from Matsushita beginning in the second half of next year. And now, to no one’s surprise, it’s Hitachi’s turn.

Ken Werner
Senior Analyst and Editor

Hitachi announced last week it would attempt to reduce the losses at its plasma-TV operation by discontinuing panel manufacturing and buying all of its PDPs from — who else? — Matsushita. Starting at the beginning of FY 2009, all Hitachi plasma-TVs will come with Matsushita-made PDPs, reported Daisuke Akiba of The Nikkei Business Daily last Friday, instead of the panels from Hitachi Plasma Display, which they have been using until now. Hitachi will still apply the drive circuitry to the panel and, because it will continue to perform this final processing step, the company is saying, "this is not a withdrawal." I’m inclined to say something about putting lipstick on a pig, but people have gotten in trouble for saying that during the last couple of weeks.

According to one of Akiba’s company sources, Matsushita entered the negotiations with Hitachi prepared to provide fully processed panels, but Hitachi refused. By continuing to produce and mount its own drive circuits, Hitachi hopes to "render images in its own original way" for TV, a spokesperson said.

Hitachi’s costs would almost certainly be less if it acquired complete panels — that is, with the drive circuitry included. An executive at a leading appliance maker speculated to Akiba that perhaps Hitachi wanted to ensure "job security for people working in Miyazaki." Roughly 1,000 people work at Hitachi Plasma Display’s Miyazaki plant on two lines, each of which can produce 100,000 panels monthly. When Pioneer closes its Kagoshima plant late this year, 600 employees could face unemployment.

All of this is good for Matsushita, which plans to ramp up its fifth PDP plant in May 2009. When the new plant is in full operation, the company will be able to produce up to 23.5M 42-inch panels annually. It plans to sell 6M panels in fiscal 2008, so Matsushita needs to find more customers.

"The success of our comprehensive panel production depends on a higher operating rate," said a Matsushita executive in an admirably direct statement. There’s no lipstick on that pig.