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Last updated: December 20, 2005 5:01 pm

Hitachi raises flat-panel TV profile

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Hitachi is going on the offensive in the flat-panel TV market by increasing worldwide production capacity fivefold in the next two years and tripling its advertising budget.

Hitachi, which is Japan’s second largest plasma-display-panel TV maker after Matsushita, said on Tuesday it would expand its PDP operations to make up for a drop in market share and turn the division profitable by the second half of next year.

The group’s renewed commitment to its PDP business comes just a week after it announced that Etsuhiko Shoyama, Hitachi’s president, would resign to make way for a younger successor. Mr Shoyama’s decision to step down earlier than expected spurred speculation that he was taking responsibility for the group’s poor performance.

However, Makoto Ebata, vice president and head of the platform group, said on Tuesday that the PDP business was on track to turn profitable next year and that Hitachi aimed to make a 5 per cent operating profit margin.

“We believe we will not lose to anyone, in terms of costs, because of our technology and development capability,” he said.

Under the new plan, Hitachi will focus its investment on high definition PDP TVs, which it expects to be the main growth sector. Production capacity of the panels at its manufacturing facility will increase threefold to 300,000 panels a month, with the start of a third line between 2007 and 2008.

Hitachi hopes to reduce the number of parts it uses in PDP TVs by 30 per cent, and materials costs by 50 per cent, next year.

The aim is to generate revenues of Y1,500bn ($12.8bn) from digital products, of which PDP TVs would comprise just under half.

Mr Ebata dismissed suggestions that the group might spur further consolidation in a sector where sharp price falls have made it difficult to generate profits. “We have no plans [to further consolidate] but from now on we will reap the fruits of what we have invested [in PDP] so far,” he said.

However, he declined to set any specific profit targets in the near term and failed to dispel concerns as to whether the group could really turn the business profitable.

One analyst said it was “totally unclear how they are going to make profits”.

“Fujitsu Hitachi PDP [its manufacturing plant] will lose Y41bn this year. Their plan to turn the TV business profitable by the end of 2006 is not achievable if they include FHP,” he said.

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