Mon, Dec 26, 2005 page11

• Matsushita Electric Industrial bullish about local TV market

  Matsushita Electric Industrial Co, which is well-known for the consumer electronics products it sells under the Panasonic brand, said local sales will grow by 10-percent annually, fueled primarily by demand for its flat-screen televisions. Chen Shih-chang, head of the Osaka, Japan-based firm's local unit talked with `Taipei Times' reporter Lisa Wang in a recent interview:

  • By Lisa Wang / STAFF REPORTER
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  Taipei Times: Can you talk about Panasonic's sales target for the next fiscal year? Will Panasonic aim for 10-percent growth again like this year? What will the major drivers be?

  Chen Shih-chang (陳世昌): Yes, we hope the total sales of Matsushita Electric Industrial's four local units will increase by 10-percent [from an estimate of NT$35 billion (US$1 billion) for this year].

  Digital products such as slim-screen TVs will have strong growth momentum as the penetration rate for these products in Taiwan is still low. In addition, products with added-value such as washing machines with built-in driers will also help to boost sales. These products usually enjoy higher selling prices.

  

  Matsushita Taiwan head Chen Shih-chang is confident about the coming year.

  PHOTO: CHEN TSE-MING, TAIPEI TIMES

  We expect sales for home appliances in Taiwan to rise by a double-digit percentage as they have over the past few years. Panasonic posted sales of NT$12 billion for last year, excluding overseas exports.

  TT: What about the mobile phone business next year? You said recently that Panasonic will pull out of the low-end of the market. Will this make it difficult for Panasonic to maintain its current 2 percent market share?

  Chen: It is hard to say. In the absence of new models to introduce to the market next year, sales may slide. We are gradually shifting our phones from 2.5 generation to third-generation (3G) models. We feel it is difficult for us to compete with other brands in the low-end market, so we made the decision to move upwards.

  Within the next 12 months, we will only sell the current 10 models with minor design changes before completing the design of our next 3G phones. We haven't come up with a timetable to launch our first batch of 3G handsets here yet.

  I think 3G is becoming a mainstream product. Not only Panasonic, but other brands too will cut their spending on 2.5G models and focus on 3G products.

  TT: Will Matsushita Electric Industrial's recent announcement that it plans to close two overseas mobile facilities in the Philippines and the Czech Republic affect the local unit in any way?

  Chen: Taiwan is not included in the company's restructuring plan. No layoffs are planned for the Taiwanese unit.

  The shutdown of overseas plants aims to trim costs and boost production efficiency. In addition, the company decided to integrate research and development resources by developing models appropriate to all markets in the future. Research teams now develop a wide range of different models for both the home and overseas markets.

  The consolidation of R&D teams will benefit us. In the future, we will be able to launch the same models as for the Japanese market at the same time. That will please local followers of Japanese fashion.

  TT: Some local TV brands such as Kolin Co (歌林) recently announced that they would pull out of the plasma-display-panel (PDP) TV market. Will that help Panasonic to grab the top position in Taiwan's PDP-TV market from Korea LG Electronics Co next year?

  Chen: A short supply of PDP panels is the main reason for Kolin and other local TV manufacturers withdrawing from the market. Few Taiwanese companies are capable of making PDP screens due to technological barriers. [Editor's note: In Taiwan, only Chunghwa Picture Tubes Ltd (中華映管) and Formosa Plasma Display Corp (台塑光電) make PDP panels. They are still struggling to break even, according to recent reports.]

  We have no such problems. We source our PDP panels from Matsushita Electric Industrial, which is the world's largest PDP panel maker. One out of three of the world's PDP-TVs uses Matsushita panels.

  Recently, we started assembling PDP-TVs in Taiwanese plants with key components including panels imported from Japan. [Editor's note: The company says that the move has helped to reduce costs significantly and made it possible for the company to offer PDP-TVs at a 50-percent discount to local consumers, compared to those imported from Japan.]

  Furthermore, we produce high-quality products. We are confident of achieving our goal and becoming No.1.

  TT: What is Panasonic's strategy to achieve a bigger share of the flat-panel TV market?

  Chen: We only make LCD-TVs under 32 inches (81cm) in size. The 32-inch model accounted for about 80-percent of LCD-TV sales in Taiwan this year and we expect it will continue to be the mainstream size next year.

  In the bigger screen market, we believe PDP-TVs will become more competitive. We started selling our first 42-inch screen PDP-TV this year. The TVs are assembled in our Taiwanese plant. We plan to roll out a second model in the middle of next year.

  To comply with the government's ruling that TV sets of 29-inches or bigger are required to receive digital signals from next year, all of our flat-screen TVs are already equipped with built-in digital TV tuners.

  TT: Some say LCD-TVs will overtake traditional sets next year. What are your predictions for the Taiwanese market?

  Chen: The combined sales of cathode-ray-tube (CRT) TVs and flat-panel TVs will hold steady at around one million units for next year, but there'll be a major change in the segments.

  Sales of slim-screen TVs -- ?including liquid-crystal-display (LCD) and PDP sets -- ?will account for half of all TV sales, up from around 30 percent this year.

  Flat-panel TVs will account for 80 percent of all sales revenues because of higher prices.

  TT: An increasing number of companies which did not make home appliances before are vying for a share of the LCD-TV market. Computer motherboard maker Asustek Computer Inc (華碩電腦) is a recent example. What is your opinion about the highly competitive TV market?

  Chen: Home appliance makers made the first transition to making flat-screen TVs. Then PC makers and flat panel makers followed. Foreign brands also want to secure a piece of the pie.

  Currently, there are some 33 brands competing for Taiwan's annual LCD-TV sales of between 300,000 units and 400,000 units. In other words, every vendor will sell some 10,000 sets a year, which will not be able to cover the costs any TV companies spent in developing and marketing their products. It is a loss-making business.

  Therefore, I see this as a short-term phenomenon. I expect industry consolidation in the long run. Some companies have already announced that they will quit the market.

  TT: What advantages do the home appliance companies hold in over PC-related electronics makers?

  Chen: I think home appliance vendors like Panasonic know more about what consumers need in terms of video and visual quality. So we are able to develop products that are more suitable for consumers.

  Furthermore, we have an intensive retail network that enables us to provide fast after-sale service. These are our advantages over PC makers.

  But PC makers have more capacity for reducing costs by boosting production. We do business in different ways.
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