Struggling Japanese electronics maker Pioneer said on Tuesday it wants to boost output of plasma display panels (PDP) by the 2008 Beijing Olympic games and may look for a partner to help turn the loss-making business around.
Pioneer's plasma display business has been bleeding red ink amid tough competition with larger and more efficient rivals such as Matsushita Electric Industrial and due to the burden of excess capacity stemming from its acquisition of NEC's PDP operations in 2004.
Any new investment would mark a sharp turn in strategy for Pioneer, which has been forced to scale back capacity at a time when Matsushita and other display makers have been ramping up output to meet fast-growing demand for flat screen TVs.
"Our PDP business mounted a large loss in the last business year because of a mismatch between sales and production capacity," Pioneer President Tamihiko Sudo told a news conference.
"With flat TV market expected to expand, our target users will inevitably increase. We expect a shortage of output capacity in the future, and we have begun considering creating a new panel plant."
The Asahi Shimbun daily reported earlier on Tuesday Pioneer planned to spend more than 20 billion yen ($178 million) to build a new PDP production line in Japan and increase its capacity by up to 40 percent, with construction to begin by next March.
Sudo said no details had been decided but that he was considering various options including tie-ups with other firms.
Pioneer controlled about 6 percent of the global plasma TV panel market in the first quarter of 2006, according to research firm DisplaySearch, putting it behind LG Electronics Inc. , Matsushita, Samsung SDI Co. and Fujitsu Hitachi Plasma Display, a unit of Hitachi Ltd. .
Pioneer also said it would aim to boost sales to 950 billion yen and its operating profit margin to 3 percent or higher in the business year to March 2009 by erasing losses in its home electronics unit and maintaining healthy margins in its car electronics division.
For the year ended March, Pioneer posted group sales of 755 billion yen and an operating loss of 16.41 billion yen ($146 million), hurt by charges to cut PDP capacity, losses related a decision to pull the plug on a type of organic light-emitting diode (OLED) panel and to cover an early retirement scheme.
It forecast a return to the black this business year, with operating profit seen totalling 12 billion yen. The market consensus is lower at 9.2 billion yen, according to a poll of 12 analysts by Reuters Estimates.
Sudo denied a Nihon Keizai business daily report over the weekend stating that Pioneer would stop developing conventional DVD recorder models, but said the company would look to collaborate with other makers in development and production to lower costs.
The Nihon Keizai had said on Sunday that Pioneer, the world's fourth-largest DVD recorder maker after Matsushita, Philips Electronics and Sony Corp. , would seek a tie-up with Matsushita in next-generation models. "By leveraging existing assets, we will curb development investment for DVD recorders whose high costs weigh on profitability," he said. "And we will focus more on the European market, where we are strong at, and development and sales of Blu-ray disc players."
Pioneer said it would postpone the North American launch of next-generation DVD players using Blu-ray technology to this autumn from its previous launch schedule of June, citing a delay in the development process.