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Matsushita & Sony resume rivalry in digital arena - VHS vs BetaMax Revisited!
TOKYO, June 20 (Reuters) - Japanese arch-rivals Matsushita Electric Industrial and Sony Corp are preparing to go head-to-head in a battle similar to one they fought nearly 20 years ago, this time for world domination in memory devices.

Last time, the world's top two consumer electronics makers played their video cassette formats off against each other, with Matsushita's VHS triumphing over Sony's Beta.

Now Sony has the chance to erase the memory of that defeat as the Japanese companies launch their battleplans for next-generation memory devices, yet many analysts say it may have to wave the white flag again.

The two firms are trying to make their products the industry standard, thus seizing control of a market in related digital consumer goods likely to be worth 2.5 trillion yen ($23.69 billion) by 2003.

Matsushita will on June 30 roll out a flash memory card-based audio player, a next-generation audio system and a recordable DVD player, all incompatible with Sony's technology.

The major battle appears to be over flash memory cards, which can be used to record data on digital cameras, music players and next-generation mobile phones and computers.

"We expect the global memory card market will explode 100-fold in less than 10 years. Let's say we are in a marathon race, and Sony is just 100 metres ahead of us," said Matsushita DVD business development director Sakon Nagasaki.

Matsushita is playing catch-up, but some analysts predict it can see off Sony again with an open format strategy that has attracted nearly 90 manufacturers worldwide, against Sony's 58.

"Matsushita has a better chance of winning since it has more high-profile collaborators," said ING Baring Securities analyst Kazushige Hata. "The conqueror will get an advantage in moving ahead with new products suitable for the digital network era."

Other analysts say the result may not be as clear-cut as the knockout blow delivered by VHS to Beta.

"The two standards may co-exist," said Motoharu Sone, an analyst at Tsubasa Securities. "Consumers will use different systems for different purposes."


Matsushita, whose brands include Panasonic and Technics, will on June 30 launch a 55-gram audio player that can be worn as a watch, dangled around the neck, offering one hour of CD-quality sound with a removable 64 megabyte Secured Digital (SD) Memory Card.

The postage stamp-sized SD Card, developed by Matsushita, Toshiba Corp and U.S.-based SanDisk Corp, is smaller than Sony's chewing gum-sized Memory Stick (MS).

Sony has been using MS in digital camcoders, "Walkman" music players and robotic pet entertainer "Aibo" for about two years.

It plans to ship 10 million MS units and eight million MS-compatible products in the business year to next March.

"We are behind Sony, but we aim to grab 30 percent market share through our strong partnerships," said Nagasaki.

Partners in the SD group include Microsoft Corp, Eastman Kodak Co and Toyota Motor Corp while Sony has enlisted General Motors Corp and Palm Computing Inc.

"Many hardware and software makers, including the movie and music industries, will promote this format," Nagasaki said.


"The important thing is not the number of licensees but how quickly we can come up with products using MS," Sony's MS division senior general manager Masaharu Yanaga said.

"Later this year, we plan to introduce a lot of innovative consumer items such as mobile phones that can play music". Sony aims to win half the market for flash memory cards.

Matsushita plans to add SD-based computers, mobile phones and home appliances in the same period.

"Matsushita, which has a technological advantage in mobile phones, is likely to attract many more consumers once it launches a new phone system compatible with the SD Memory Card," said UBS Warburg analyst Masahiro Ono.

Global demand for flash memory cards is seen growing to an annual 250 billion yen in sales with related consumer products swelling to 2.5 trillion yen in 2003. In both instances, that is a 10-fold rise on 1998.

Kazuharu Miura, an analyst at Daiwa Institute of Research, said: "The SD group will attain superiority due to its greater number of partners and Matsushita's strong position in the mobile phone market."


They also stand in opposite camps of the high-quality audio formats that will eventually replace CDs and in the field of DVD recorders, heir to the video cassette recorder.

Later this month, Matsushita will launch a DVD audio player, incompatible with Sony's SACD (Super Audio CD) launched in May 1999, and its first recordable DVD player using DVD-RAM (random access memory) that is supported by Toshiba and Hitachi Ltd but incompatible with the Pioneer-led DVD-RW (rewriteable) format that Sony intends to support.

Analysts predict the loser will have to make a compromise over DVDs and favour Matsushita as the likely victor.

"The winner will enjoy a technological advantage enabling it to develop new products, based on the standard, earlier than competitors," UBS's Ono said.

"But the loser can quickly catch up by adopting the other format, just as Sony did with VCRs. Both manufacturers will stand solid in the digital age."

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