12, 21. 2005
Matsushita Electric Industrial Co., Ltd., the company behind the global Panasonic and National brands, is on a roll, fuelled by the product it has become best-known for, plasma display panel (PDP) televisions.
The major market for PDP televisions is the United States, where competition is so severe that the price for a 42-inch-screen high-definition model has nosedived from more than 500 dollars six months ago to less than 300 dollars now. Matsushita enjoys a market share of 50% in the United States for these products, and close to 70% in Japan. For the six months through September of this year, Matsushita reported an operating profit as high as 28 billion yen in its television business. Sony Corp., by striking contrast, reported a 77 billion yen plunge into red ink in the corresponding period. Matsushita and Sony used to be regarded as the twin giants of the audiovisual AV industry. Why have they fared so differently?
One answer is semiconductors. Matsushita has a semiconductor unit operating as a separate 'internal' company, around which its AV business has been built up. For the past 10 years, personnel and capital investment has been concentrated on this unit, which has become the foundation of Matsushita's production of system LSIs (large-scale integration) circuits, the most important element in audio and visual processing. Because it can produce system LSIs independently, Matsushita can avoid the costs of ordering from outside suppliers, and also cope with demand fluctuations-all of which has enabled it to slash prices. And its system LSI chips have boosted the performance not only of its PDP TV business, but also of its DVD recorder and digital camera operations.
Sony has gone in the opposite direction. Under chairman and CEO Nobuyuki Idei, the bluechip electronics company diverted resources from its nuts and bolts businesses and into software production (movie and music content), broadcasting and telecommunications, and finance. It relied on outsourcing for audiovisual operations, placing orders with various outside firms. As a result, operations are high-cost. Sony has already downsized its PDP TV division and partly replaced it with liquid crystal display (LCD) TV production, but it is relying on a joint venture with Samsung Electronics Co., Ltd. of South Korea for key LCD panel supplies.
PDP televisions now stand for Matushita Electric's favorable conditions at exhibition sites.
However, it is worth noting that Matsushita's sales of PDP TVs amounted only around 400 billion yen or so for fiscal 2005, although shipments exceeded 2 million units. The company has huge sales promotion expenses, and the PDP TV business has yet to grow into a major pillar capable of supporting groupwide consolidated sales of 8.7 trillion yen. Matsushita President Kunio Nakamura has trumpeted his goal of maintaining the company's 40% share of the thin-panel TV market in Japan, but it still has work to do the PDP TV business.
Already, Matsushita has nearly pushed Hitachi Ltd. and Pioneer Corp. out of the PDP TV business, and now dominates the industry. Matsushita will now have to go head to head in LCD TVs with the likes of Sharp Corp., Sony, Toshiba and Samsung. At this critical juncture, though, Nakamura is rumoured to be stepping down as president next June. Kazuo Toda, vice-president and his right-hand man, is also expected to leave.
Likely candidates for next president are Susumu Furuike, executive director and head of the semiconductor unit, and Fumio Otsubo, managing director in charge of the audiovisual business. Whoever it is, the way ahead will necessarily not be smooth. The company is enjoying mistake-free management at the moment, and its white goods operations-refrigerators and washing machines-are also doing well; the situation is very different from some years ago when some people were writing off Matsushita, which had been forced into restructuring and inventory cuts. But, an executive pointed out, 'because the company has done well for the past three or four years, employees have lost much of their sense of crisis readiness. If we stumble, the next boss will have to find to a way to dispel lax attitudes.'
