Exiting plasma television: folding up ¥500 billion of in-house production (2013)

The glory of vertical integration, and its price

Plasma was one extreme of the vertical-integration philosophy that had run since the Philips alliance — make the main components yourself and complete assembly in-house. A strategy of perfecting picture quality with in-house panels can, if it works, create a gap rivals cannot imitate. But as LCD’s price destruction advanced, the heavy fixed costs inherent in making things oneself became, conversely, a constraint. That the vertical integration which had once made Matsushita strong reversed into a weakness amid the market’s change is where the essence of this retreat can be seen.

Tsuga’s words — “we have no intention of making panels in-house” — went beyond the tidying of a single business to contain a farewell to the in-house-production creed that had run since Konosuke. What to hold in-house, and what to buy from outside. Matsushita, which in the 1952 Philips alliance had “bought” a footing of its own in technology with management strength as the consideration, chose half a century later to survive by letting go of the in-house production of panels, once its symbol. The glory of vertical integration and its price are condensed in this one retreat.