Panasonic stuck with an earlier decision to go whole hog into plasma display panel manufacturing with a gigantic investment (440 billion yen – about $5.5 billion) for its Amagasaki fab starting in 2005. The bet is now costing Panasonic dearly.
The company said this week it will lose almost $10 billion in the current fiscal year as it writes down goodwill and assets while preparing for further restructuring. Panasonic also skipped its dividend for the first time in more than six decades and cut its full-year TV sales forecast by more than a quarter to 9 million sets. Company shares slumped by nearly one-fifth on Thursday, wiping out $3 billion of its market value.
There is some hope, though.
Kazuhiro Tsuga became Panasonic's president earlier this year and issued a decisive order to stop PDP production immediately. That shocked many in Japan.
Panasonic previously had been spreading its own engineering gospel that PDP technology offered noticably better picture quality than LCD, especially in a dark room. Tsuga conducted his own month-long, side-by-side comparison and found little difference in picture quality. Besides, he noted, "most people watch TV with the lights on.”
In the final analysis, it took Panasonic almost a decade – and billions of wasted yen -- to wake up to the fact that PDP was never going to beat LCD.
Sharp management also bought the myth that the success of its advanced LCD panels manufactured in Kameyama fab was assured. It blindly followed an ambitious expansion plan for ultra large-screen LCD panel production. The result? Sharp announced massive second-quarter losses this week and acknowledged “material doubt” about the company’s survival.
Sharp now finds itself on a pace to double it annual net loss to 450 billion yen ($5.63 billion) after taking a $1.1 billion restructuring charge in the last quarter. Its forecasting operational losses totaling 155 billion yen ($1.94 billion).
A rescue deal with Terry Gou, chairman of Foxconn owner Hon Hai stalled over the summer after a tentative deal was reached earlier in the year. Gou had agreed to pay 67 billion yen for a 9.9 per cent stake in Sharp and partial ownership of an underused display factory near Osaka. Now Gou is pressing Sharp to lower its price to reflect a precipitous decline in its share value.
As a result, Sharp is reportedly exploring “other alliances."
Either way, Sharp is running out of time and options. So, too, is Japan, Inc.
So, CRT displays are to Sony what plasma displays are to Panasonic? The eventual success of LCDs was almost inevitable, as far as I could tell. Too many advantages to pass up (power consumption, weight, bulk, pixel count, relative immunity from burn-in problem that plagued CRTs and PDPs).
But why tie the past and the future of Japan Inc. only to disply technologies? Apart from companies like Sony and Panasonic sticking doggedly to their original "favorite" display types, wasn't their slow adoption of digital personal electronics also a big factor? Like, the Walkman that never morphed into an iPod-like device?
Billion-dollar commitments to a single technology never succeed. If it takes so much investment, it's clearly not the simplest or most practical path at the moment. Especially with the irony of calling it the most "cost effective" choice. Unknown costs always linger somewhere along the way, and always exceeding initial revenues. But these technologies have so much irrationality behind their catchy 3-letter acronyms like PDP, EUV, PCM, it approaches addictive behavior.
To @Bert22306, plasma display is technical superior in many ways, I remember the days that everyone wanted one so you can't blame them for pushing it...I was surprised myself when LCD beat it and too over the market, so much worse picture quality...but then OLED is going to kill LCD shortly so the story continues, you have to be nibble in this business and Japanesse corporation seem to be too slow in reacting to changing market conditions and users preferences...I suspect this is rooted in their culture...they do much better in automotive biz because cars have essentially not changed much in 50 years (they only piled lots of electronics into it)
Iniewski, I gotta tell you. I never wanted a plasma. Yes, in the early days, they had greater contrast than LCDs and they were bigger. But they were always power hogs (you could easily feel the heat emanating from them), they were for the longest time only ED quality, meaning 480 lines vertical, they suffered from burn-in, so that owners even obsessed over the station ID bugs, they weighed a lot, and they were thicker by far than LCDs.
So I happily waited for LCDs to grow and grow, and for their contrast ratio to increase, until I finally bought one of the earlier 26" ones, happily retiring my previous 25" CRT TV. And then moved up from there.
So, do I think that Panasonic couldn't have helped but believe in Plasmas exclusively? Uuuh, no. That's the thing. It shouldn't matter what people gush over today. What should matter is to see the trends of the technology.
I think most consumers are sensitive to price. The cost of building plasma has never been able to compete with that of building LCD for various reasons. When price and quality are being evaluated together, consumers are willing to sacrifice a bit of quality to a way better price. Lately, I have visited Sony shop and saw a TV with noticeable better picture quality with price of close to $3,000 of a 55" screen.
Product management and development is a bet. You bet that consumers are willing to spend the dollars to own these features and the quality of the product given an economic situation.
I really don't understand why they put every thing behind displays ?
Aren't there other products like mobiles, players, tablets,....etc to invest in ?
And besides, was it really hard for them to understand that plasma displays are slightly better than LCD displays? Why they needed all this time to realize that? The Panasonic new president simply tried it himself to judge !
Certainly, they didn't have to put everything behind displays.
But the truth is, for many Japanese CE manufacturers, this was about "TV business" (not about "display" business).
You need to understand that TV division at many of these companies has been the main pillar of their business for decades. That means, their division had more sways in getting support and budget in investing further in its business.
Japanese CE vendors could have chosen to buy displays from someone else (which Sony eventually did, but that did not help them either), so that they didn't have to make HUGE investment in manufacturing displays on their own.
But again, remember, many engineers at Japanese CE vendors devoted their lives in developing and perfecting flat panel display technologies of their own. For them, this was personal. It was, in many ways, unthinkable for them to drop their R&D project and walk away from it.
Hence, the engineering ego becomes the issue, while much to be blamed, in my opinion, is the lack of management directions to navigate the changing market and business.
Japanese believed that controlling their own flat panel display technology development and production was to control their own fate in the TV business, which Samsung managed to do successfully.
maybe this is just a normal round of business cycle for japan inc. same as kodak, xerox,
generally older folks ll get slower in respond time, can't blame em anyway.
just wait for younger gen to pop out.
There is really no right or wrong things to do. If you made it, everything you did must be right. If you lost it, people can find millions of things that you did wrong. Just considering Apple. Apple did it all the wrong ways. Others focus on either software or hardware; Apple wants both. Others go to open systems; Apple insisted its own closed system. On and on. Right or wrong? I donít know. But it takes a genius to reverse the tide.
As I had a pleasure to work together with guys and gals from other Japanese giant - Toshiba Electronics I noticed one thing: problem with marketing communication. Who the heck did know that Toshiba had the best quality NAND Flash components? Only geeks, so 90% of people decided to buy TLC components from Samsung, cause they offered higher capacity at better price. The same story with plasma TV - the quality was and still is faaaaaaar much better than LCD or LED. But people didn't know it and decided to buy LCD, even though their quality wasn't as good as plasmas. And last but not least - have you ever tried to watched Sharp's LCDs? Who knew that they invented 4th colour for displaying? You can feel the difference after few minutes or hours of watching it. It's so obvious, that both Panasonic and Sharp offer still excellent products, but they didn't know how to communicate it. Maybe it's because I'm the PR guy and electronics geek, but it really hurts when you look at these excellent companies with excellent products in the situation and comments where they are right now.
It appears to me that countries, companies and managers are sometimes, mostly by chance, at the right place and time with a technology. In such cases they may be very successful. Such success indicates their operational skills not their long term technology forecasting "skills." Long term technology forecasting does not appear to be correlated to the countries, companies or managers (Steve Jobs is an exception). Considering long term technology forecasting a "skill" (i.e. learnable) seems unrealistic.
Japan Inc. doesn't get software. User interface defines success in the market today with great technology BEHIND it. Motorola's fate was partially to blame because of this. As I say about the Japanese companies which whom I am engaged with at this moment, "Process over Profit."
The Japanese way of working is: copy a product or invention from the West. Then make it smaller, cheaper and more profitable.
That worked OK in the 20th century. These days, the world is too competitive.
It's not that these Japanese companies are too slow to change, it's that they cannot change. They never had the creation aspect.
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