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Pioneer to ally with Matsushita on PDP technology? June 28, 2006

Posted by fukumimi in Economy & Business, electronics, Japan, technology.

This news is a little bit old, having made the newspapers in early June. Article from the Asahi Shimbun here (Japanese).
Pioneer, the struggling consumer electronics firm is rumoured to be considering an alliance with Matsushita.

Pioneer was a pioneer in the PDP business (pardon the pun). However as a relatively small player, it has been struggling, although its technology is well regarded. Its strengths are in the high end market, which is beyond the reach of most consumers. The rumoured deal might see Pioneer supply high end panels (full HD, large size panels) to Matsushita, whilst Matsushita would supply lower end PDP modules to Pioneer, which would allow Pioneer to beef up its product range, especially in the volume sector. (There might also be Pioneer branded LCD panels from the Matsushita/Hitachi factory, although one has to wonder whether the Pioneer brand would be competitive in the LCD market as a late entrant with an OEM supplied, badge engineered product)

Is this really the best way forward for Pioneer? It has been struggling and has announced that it will no longer be developing its own DVD recorder related microprocessors and software, rather it will be sourcing from Matsushita going forward. Pioneer was a pioneer in the DVD-R market as well…..

The PDP and DVD-R stories illustrate the fact that Pioneer have the technological capacity and market reading foresight. However it would appear they cannot sustain their initial lead, and get overtaken by a bunch of fast followers, Matsushita being a great example of a leading player of this strategy. (Which is why techie types tend to turn their noses up at Matsushita. A bit like they do at Toyota (which, to be fair, is trying to lead things (sucessfully so far, it would seem) in the hybrid sector)

It’s not like Matsushita isn’t working on high end PDP either. They have been exhibiting the world’s largest 103″ PDP every opportunity they get. Will the internal political machine be willing to overcome the dreaded NIH syndrome, and work with Pioneer at the higher end of the market?

Pioneer is doing brisk business elsewhere, notably in the car audio and navigation markets, where it is a market leader.

My personal opinion is that Pioneer would be better off remaining independent, and not get too draw into any relationship with a much bigger partner. I actually think this company would be an interesting proposition for a private equity play.



1. Gen Kanai - June 28, 2006

Pioneer as a PE play? Interesting… hasn’t seem to have paid off for you-know-who who owns D-M.


2. fukumimi - June 28, 2006

Yes, the D-M thing did cross my mind.

However, I think that there are big differences between the two.

Denon and Marantz whilst being reputable brand names with a lot of history, are mainly in a market with poor potential. The audio market is mature (and diminishing, especially in the middle range market where these brands mainly operate) and is increasingly commoditized. Unfortunately, not many people appreciate the finer things in life when it comes to audio equipment. For many, Bose is some sort of paragon of audio.

For those that do have money, they seem to go with Bling Bling equipment from the US or Europe. The higher range D/M equipment seems to be more highly thought of overseas, if going by media coverage is any indicator (Although because Japanese audio magazines (and reviewers) suck big time, and are just glorified catalogues and go out of their way not to pan any equipment, you have to read between the lines).

On a side note, it is really distressing to see tens of thousands (if not more) $$$ worth of equipment being shown off by some rich guy who has invested all these $$$ but has the rig set up like some rank amateur. Huge speakers shoehorned into corners, a big cupboard or similarly resonant obstacle placed square between the speakers, a huge reflective glass coffee table set up between the listening position and the speakers, etc etc (eg StereoSound’s long running corner where Sugano-san visits some guy with a mega-rig and complements them on their system. Unless the laws of physics apply differently in Japanese listening rooms (which they don’t), most of the setups look like recipes for one-note bass destroying the balance of the system, and no stereo imaging to speak off).

Anyway, I digress.
Neither Marantz or Denon have a bunch of R&D people investigating new core technologies in markets which are attractive.

I feel that Pioneer has a more solid R&D background, witness their technical prowess in PDP technology, they also were doing research into blue lasers 10 years ago (using PPLN crystals as second harmonic generators if I recall correctly) for the nex gen. optical storage technology (the foundations of Blu-Ray, even if GaN laser diode technology rendered Pioneer’s efforts obsolete. These efforts require a little bit more bleeding edge technical expertise than either crafting a new amplifier (which is as much an exercise in electro-mechanical tuning which requires an artistic touch and not much esoteric engineering skills) or buying in a light engine, LCD/DLP chips, and optics engines to build a LCD/DLP projector (Ok, you might need some people to tune the software algorithms, but again that is as much an artistic endeavour, when you are stuck using off the shelf components for the main parts of the projector assembly)

It’d be interesting to look at Pioneer, and see if there isn’t a way to extract more value from its components.

Sat Nav systems in Japan are world leaders, and with Sat Nav taking off globally, that business seems to be in a sweet spot. The convergence of Sat Nav and the A/V system in cars is another plus for Pioneer, who are strong in the sound system market as well.

Pioneer’s PDP unit does produce some good technology, get some people who are good at cost reduction and yield improvement to reengineer the production line, and I think Panasonic might still have a chance. Their high end screens are highly regarded.

It’s a shame they are reducing their optical disc efforts, as they had a bunch of really good CD players in the past, and they were the main force behind laserdisk also, so optical disc storage related stuff is a big part of Pioneer’s history (at least for the last couple of decades). I would have liked to have seen this unit spun out or something, so that the dedicated engineering staff with lots of experience in this area are kept working on what they know and probably love, rather than shifting them to the car audio unit or something as I hear is likely to happen.

Pioneer’s TAD unit is a big name player in the PA market, it supplies units to PA rigs which are found at your typical stadium rock concert, and also to Disneyland, and multitude other places where high power, high performance, rugged devices are required.

All in all, from a technical standpoint I think there is a lot of talent at Pioneer, and I think it is a waste to see resources diverted just because a change in the strategic direction of a company. Especially in engineering related disciplines.

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