In Panasonic's plasma exit, Japan's TV makers come to terms with defeat

Reuters

* Shuttering plant marks end of era for electronics industry

* Japanese TV makers squeezed out by nimble rivals

* Panasonic lost nearly $1 bln in TV business in 2012

By Reiji Murai and Sophie Knight

TOKYO, Oct 9 (Reuters) - Panasonic Corp's move toclose its last plasma television factory completes a painfulreckoning that has all but killed off Japan's TV industry, oncethe pride of the country's post-war rise to technological andeconomic power.

In a golden era that began in the 1970s, the country's TVmakers brought cutting-edge yet affordable technology and brandnames like Sony, the Trinitron and Panasonic into living roomsacross the West, at the expense of U.S. and European rivals.

But after dominating the business for decades, companieslike Sony Corp, Sharp Corp and Panasonic havetaken less than a decade to slide into deep losses, becomingalso-rans to a new breed of nimble, cash-rich rivals likeSamsung Electronics.

Osaka-based Panasonic will pull out of the plasma TVbusiness by the end of the financial year to March 2014, sources familiar with the situation told Reuters on Wednesday.The news was first reported by the Nikkei business daily.

The end has come sooner than expected, underlining companypresident Kazuhiro Tsuga's determination to weed out weakoperations as he focuses on higher-margin products to end yearsof losses at the consumer electronics conglomerate.

All that will remain of Japan's TV manufacturing are three cutting-edge liquid crystal display (LCD) plants, with Sharp'spartially owned by foreign players, and a few assembly plants.Storied Japanese brands such as Toshiba Corp andHitachi Ltd are outsourcing the bulk of their sets toother manufacturers.

Like the U.S. and European companies they defeated in theindustry decades ago, the Japanese can chalk up their fate asmuch to hungry competitors as to their own mistakes.

"It wasn't just a failure of Japanese companies. It was alsothat rivals caught up quite fast," said Kun Soo Lee, analyst atindustry research firm IHS iSuppli.

"The Japanese companies were probably a bit sentimental,underestimated their rivals and didn't form a competitivestrategy."

The decline of Japan's TV business comes as the globalindustry faces a pivotal moment - how to cope with consumersaround the world beginning to use their computer screens,laptops and tablets to watch more on-demand broadcasts and mediacontent.

Global TV shipments dropped 6.3 percent in 2012, the firstdecline in over a decade according to research firm IHS iSuppli,with the flat-panel market reaching saturation after consumersin developed markets completed the switch from cathode raytubes.

The shrivelling of the industry also comes as new leadersinstalled at Sony, Panasonic, Sharp and Toshiba over the pastyear-and-a-half make a significant break with the past - adifficult task in many Japanese corporations where the peoplewho ran companies remain within the organisations' structureseven after passing on the reins of leadership.

Japanese TV makers, while overlooking the ability of theirrivals to build up a global brand quickly, did too little toprotect their technology from rivals, were too easily convincedto spend big on projects and too slow to make strategicdecisions to adjust to changing trends in demand.

Panasonic's plasma TV base at Amagasaki, a sprawling baysidecomplex midway between the western Japan cities of Osaka andKobe, typified the last two problems. The newest of itsfactories had been in operation less than two years when Tsuga,then a senior managing director running the TV business, shut italong with another factory, leaving just one in operation.

BILLION-DOLLAR LOSSES

Panasonic's TV division has been a major contributor to theelectronics company's combined $15 billion net loss in its twolatest financial years. Its TV business posted an operating lossof 88.5 billion yen ($913 million) in the last financial year.

But Tsuga has waited until after Fumio Ohtsubo - the man whopushed Panasonic head-first into plasma with the 485 billion yen($5 billion) Amagasaki project - resigned as chairman in June tomake the decision to pull the plug on plasma completely.

Sources familiar with the situation said on Wednesday thatthe No. 2 Amagasaki plant, the last in operation, would beshuttered within months and that the company would take a 40billion yen impairment charge to cover the cost, likely out ofthe 120 billion yen earmarked for restructuring at the beginningof the year.

The 400 to 500 workers will be reassigned to otherfacilities in the company, the sources said.

"Even if they talk about reassignment, it won't be thateasy," a worker in the plant in his 40s said as he left thefacility on Wednesday, declining to give his name. "Things aretough at all of Panasonic's plants in Japan."

The closure will take Japan completely out of the plasma TVbusiness, which has been eclipsed by sales of LCD televisions inrecent years as they moved into larger-screen sizes, while SouthKorean rivals came to dominate plasma as well as LCDs.

Sony, which invented the Trinitron colour TV set thatoffered much brighter images, dominated the industry along withits Japanese peers from the 1970s until the end of the century,driving U.S. competitors such as General Electric, RCA, Sylvaniaand Magnavox out of the business.

But those decades of dominance ended abruptly as theJapanese giants stumbled in the shift to flat-screen TVs, takingbillions of dollars in write-offs for failed efforts to keeppace with nimbler rivals elsewhere in Asia.

"Even with Panasonic withdrawing from plasma TVs, you can'tsay that Japan's TV industry is finished restructuring," saidone analyst at a foreign securities house who asked not to benamed. He said the companies still have bloated sales andadministrative staff padding their fixed costs.

Panasonic still has a factory in western Japan making LCDs,but has said it will shift production from 80 percent for TVs to80 percent for mobile gadgets. It has also launched pilotproduction of organic light-emitting diode screens, a possiblefuture flat-screen technology, although Tsuga has said thecompany will be cautious about investment.

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