As flat screen prices plummet, Pioneer strikes a deal

In a deal spawned by the flat panel TV industry's current price war, financially struggling Pioneer Corp. has agreed to stop making plasma panels and buy them instead from Panasonic's parent company Matsushita.

Pioneer has shown an operating loss for three consecutive years now, while dealing with an oversupply of plasma display capacity in the face of falling prices.

As part of the agreement, Pioneer -- a long-term player in plasma -- will provide technology and engineers to Matsushita, which plans to begin supplying displays to Pioneer by June of 2009.

LCD panels have also undergone price drops which have resulted in new partnerships. In February of this year, for example, Sony announced plans to start buying LCD panels from Sharp, and to invest $926 million in an LCD plant being built by Sharp in Japan.

But the LCD industry could be feeling a lot less pain than its plasma counterpart, because for LCDs, the falling prices seem to carry a silver lining in the form of increased demand.

LCDs are starting to show up in more high-end HDTVs as an alternative to plasma, now that prices of large-screen LCDs -- which were previously higher than those of plasma -- are becoming more affordable.

According to some experts, although plasma still does a better job in some areas, such as color contrast, LCD technology is particularly well suited to providing the high pixel resolution needed by HDTV.

HDTV sales are starting to surge right now, according to recent industry research. Meanwhile, lower priced small screen LCD technology has long been common in DTVs and computer monitors, anyway.

In a recent phone conference with analysts, one US retailer cited a growing consumer preference for large screen LCD TVs.

"Our weakest [sales] areas have included projection, tube, and plasma TVs, as the consumer shifts sales focus to large LCDs, which is a trend that we've been seeing across the industry," said Bruce H. Besanko, CFO of Circuit City.