Panasonic Downgrades LCD Production Strategy

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--Panasonic Corporation (NYSE:PC) (Osaka, Japan) is planning to cancel planned expansions to its liquid crystal display (LCD) capacity due to finances and a decline in the industry. Though television sales account for more than 10% of the company's sales, Panasonic is planning to suspend expansion plans at its Himeji site in the Hyogo prefecture and sell its Mobara site in the Chiba prefecture.

The company has logged several years of losses and is now facing an over-appreciated yen and cheaper competition from South Korea, which has already pulled ahead of Japan in the rechargeable batteries industry. Panasonic's finances are now in the red, and Panasonic has decided to dramatically change its LCD production strategy.

In 2004, Hitachi, Panasonic, Toshiba, and Hitachi Displays, a wholly owned subsidiary of Hitachi, formed the joint-venture (JV) company IPS Alpha Technology Limited (IPS Alpha) to produce LCD panels utilizing Hitachi's in-plane-switching (IPS) mode system. IPS Alpha invested more than $2 billion into its first production facility, constructed in Mobara, Chiba, and immediately began an accelerated expansion program to cater to the increasing demand for LCD-TVs domestically and abroad. After the expansions were completed, Mobara had a production capacity of 6 million units per year. Panasonic acquired the facility in 2008 and now intends to sell the Mobara site a company to be established next spring.

Panasonic intended to expand the capacity of the Himeji production site, which became operational in January of 2010, to 28.8 million units a year by 2015 through a series of expansions. All of the expansion phases have a total investment value of more than $2.5 billion, according to Industrial Info data. Phases 1 and 2 of the expansions were completed this past April, raising the plant's capacity by 4.8 million units per year, and the housing of Phase 3 was completed. However, expansion plans will be abandoned now and the housing of Phase 3 will be used for another purpose.

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