Fujitsu lowers stake in plasma display venture

Fujitsu will sell a majority of its stake in a 50-50 plasma display joint venture with Hitachi, the companies announced Wednesday.

Through the deal--revealed amid falling margins and an increasingly competitive market--Hitachi will acquire 30.1 percent of Fujitsu's holdings in Fujitsu Hitachi Plasma Display Limited (FHP), as well as Fujitsu's plasma display patents. The transfer is expected to be completed by the end of March. Neither company disclosed financial details of the deal.

FHP will become a subsidiary of Hitachi, which will use the plasma technology in other electronics devices with networking capabilities.

FHP is one of the leading manufacturers of plasma panels in the world, but falling margins are conjuring a dark future for the plasma display market, according to Riddhi Patel, an analyst with research firm iSuppli.

"The plasma market is growing, but margins are diminishing faster than companies anticipated," Patel said.

Pricing pressures from other plasma panel makers, as well as an upsurge in technologies such as liquid-crystal display, have depressed the plasma market. Fujitsu is the latest to have pulled back resources. NEC sold its plasma business to Pioneer last year. Sony was also rumored to be pulling back on its plasma efforts, but the electronics company denied the speculation. Plasma panels are the main component in flat-panel televisions.

Analysts expect the plasma market to see more consolidation in the coming year.

Trends playing out in the plasma market are likely to repeat themselves in other panel technology markets, such as LCD, and may already be occurring.

As recently as 2002, an undersupply of plasma panels and a growing demand for plasma televisions led to healthy margins. In the first half of 2004, however, LCD makers started increasing production of larger-size panels and the projection TV market began to take off as prices came down. Plasma makers were forced to lower prices to compete.

The pressure never let up, and prices and margins quickly fell. That was good news for consumers--prices for plasma TV sets dropped from an average of $3,500 in the fourth quarter of last year to $3,190 for a 42-inch high-definition set, with some reaching as low as $1,999.

The drop will continue, according to iSuppli, with average prices hitting $2,500 by the end of the year.

Similar price declines are expected for other technologies.