Pioneer will stop making plasma display panels and instead buy them from Matsushita Electrical Industrial, the world's top plasma maker.

The two companies will combine their plasma technologies under the deal, which they predicted would bring 'significant synergy effects'.

The tie-up enables Pioneer to continue to sell plasma televisions while cutting its losses, and should give Matsushita a sales boost.

'The big reason for Pioneer's losses was the plasma display, and that factor will disappear,' said Kazuharu Miura, analyst at Daiwa Securities.

Pioneer - which last month predicted a fourth straight year in the red - has had a hard time in recent years after being saddled with overcapacity in plasma display panels even as prices keep declining.

'Pioneer did not have a lot of products in Japan, but it has built a very good name for itself in Europe,' said Osamu Hirose, an electronics analyst at Tokai Tokyo Research Center.

'Pioneer was in the plasma business from the early days of the technology.'

'Its patents might have also been an incentive for Matsushita.'

Pioneer's problems arose in 2004 when it bought the plasma display panel-making operations of NEC Corp, hoping to become the world leader. But one of its key customers, Sony Corp, later stopped making PDP TVs.

Last October Pioneer said it was freezing plans to build a new plant.

The deal with Matsushita is the latest in a series of tie-ups in the flat television industry, where companies are enjoying brisk sales but facing intense price competition, forcing them to drive down costs through alliances.

Sony and Sharp announced in February they were teaming up in liquid crystal display panels, a rival technology. Sharp has also struck a deal to buy image-processing chips from Toshiba. -- AFP