Japan Electronic Makers Forge Alliances

Monday, February 7th 2005, 9:51 am

By: News On 6

TOKYO (AP) _ Matsushita and Hitachi agreed to tie up in the plasma display panel business while Sharp and Fujitsu reached a deal on liquid-crystal displays Monday, as plunging prices and heated competition force Japanese electronics giants into partnerships.

The deals _ within hours of each other _ underscore how Japanese manufacturers are pooling resources in the booming market for slim digital TVs to ward off competition from cheaper Asian rivals, including Samsung Electronics Co. and LG Electronics Inc. of South Korea.

``The Japanese companies are being forced to come together,'' said Mitsuhiro Osawa, analyst at Mizuho Investors Securities in Tokyo. ``Samsung isn't merely playing catch-up with the Japanese. It is a giant that is there to be dealt with.''

Osawa believes the Japanese made the mistake of assuming that significant growth in panel TVs won't come until 2006 and 2007, ahead of the 2008 Beijing Olympics, and weren't prepared for the price drops set off by their Asian rivals.

Plasma display panels dominate the market for the large, thin TVs that are replacing old-style television sets. But liquid-crystal displays, originally too expensive to be viable in large sizes, are increasingly cutting into that market.

Hitachi Ltd. and Matsushita Electric Industrial Co. Ltd., which makes the Panasonic brand, said they will work together in research and marketing of plasma display panels in a deal that will make them a major player in the sector.

The agreement covers standardizing next-generation plants, collaborating in marketing and cross-licensing technologies.

Separately, Sharp Corp. and Fujitsu Ltd. said they agreed to transfer the research, manufacturing and sales operations of Fujitsu's LCD subsidiary to Sharp, Japan's No. 1 LCD maker.

Terms of the deal were not disclosed, and a final agreement was expected in March, with Sharp taking over Fujitsu's workers, plant and intellectual property, both sides said. Monday's deal will allow Sharp to expand its LCD business, which is competing against Samsung, the world's biggest LCD producer.

Sharp has been an exception among Japanese companies in posting booming profits despite price declines in electronics goods and components. But even its earnings growth has slowed in recent months because of surging competition that is driving down prices faster than expected.

The agreement between Sharp and Fujitsu also signals Fujitsu's exit from the panels business.

Last week, Hitachi said it was beefing up its plasma display TV business by buying technology from Fujitsu, a pioneer in the technology, and taking an 80 percent stake in the plasma display venture it has with Fujitsu.

Sony Corp. has already said it is focusing its strategy on LCDs. Sony has a partnership in LCDs with Samsung Electronics.

The latest alliances follow a spate of tie-ups several years ago, spanning areas as wide as cell phones, digital home appliances and computer chips. At that time, Japanese electronics makers sank into losses _ again amid diving prices and competition from Asian rivals. Although their performance has improved, the relief turned out to be sadly short-lived.

The companies have cut jobs by the thousands and reshaped strategy to focus on key products with the best prospects. They have returned to profit, boosted by healthy global demand for slim TVs, DVD recorders and digital cameras. But even those products considered high-end, the longtime strength of the Japanese, are dropping in price _ good news for consumers but a curse for the manufacturers.

In recent weeks, Sony, Toshiba Corp. and NEC Corp. have all pared down sales forecasts for the fiscal year ending in March.

While reporting better earnings for the quarter ended Dec. 31, Hitachi acknowledged that the declining prices of electronics products and devices have forced it to slash its profit outlook for the year to 50 billion yen (US$479 million; euro370 million), half its initial forecast. Matsushita also reduced its profit outlook for the fiscal year.