Even before the paint dries on Panasonic’s new PDP fab in Japan’s Amagasaki prefecture, the company will begin construction on its fourth plasma factory, the third to be co-located at the same site. Amagasaki-3 will boost total output from a forecasted 11.5M units / year in 2008 to a whopping 22M units by 2009. This represents about 70% of the global PDP market share slated for 30M units by 2010.

Steve Sechrist
Senior Analyst and Editor
Projection Monthly

The move is primarily in response to the constantly eroding ASP’s (average selling price) of flat panel technology - hovering at about 30% per year. Matsushita plans to manufacture its way out of the declining profit cycle by boosting capacity, growing market share and reaping the benefits of higher efficiencies.

But it will do this at a considerable cost. With the investment of fab three at Amagasaki slated to cost over $2.4B, Matsushita has committed a total of $5.72B in new plasma facilities since the first PDP factory opened there in 2002. This is the largest single product line investment ever made by the almost 90-year old company.

Make no mistake; Matsushita is looking to a strategy of accelerated capital investment to introduce cutting-edge manufacturing equipment and position itself as the leading low cost flat-panel manufacturer. For example, Toshihiro Sakamoto, a senior managing director at Matsushita remarked that the next generation fab facilities reduce fixed cost to less than 20% of the original PDP fab built in Osaka with a 430% greater "investment productivity," that is, the number of PDP panels a plant can produce for the same amount of investment.

But the company has another trick up its sleeve. Matsushita and its popular Panasonic brand have done well in selling peripheral display products that the company hopes to leverage into higher market share of PDP displays. It’s recent net operating profit (net op profits to sales ratio) in the digital appliance business hit 6.2% for the most recent October - December quarter (up a point from last year’s number). This is the group that sells DVD players, video cameras and other AV appliances that can be used with plasma displays and help create pull in the demand for Panasonic panels.

Matsushita is clearly not backing down from its bullish position on PDP technology, and should be lauded for its willingness to go head-to-head against LCD giants like Sharp and S-LCD (Sony/Samsung). PDP manufacturers have long maintained they possess the superior display technology not just in image quality, but also claim PDPs are less expensive to manufacture.

Matsushita, LG and Samsung SDI dominate PDP production and Matsushita is clearly trying to out spend and out produce its rivals so as not to become a victim of consolidation. But $2.4B is a lot of money - a figure more typical of an LCD fab, so the stakes to stay in the game keep getting bigger.

Nevertheless, Matsushita believes it can deliver the low-cost flat panel technology solution - even in the face of 30% ASP declines. In the meantime, get ready as ever-decreasing prices follow the introduction of some fantastic looking large flat panel displays. Either way, chalk up another victory for the consumer as the DTV era dawns in full-HD on a plasma or LCD-TV near you.