UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 20-F

TABLE OF CONTENTS

Certain Defined Terms

As used herein, the term “Pioneer” refers to Pioneer Corporation, the registrant, and “we” and “our” refer to Pioneer and its consolidated subsidiaries as a group, unless the context otherwise indicates.

References in this annual report to fiscal years refer to the 12-month periods ended March 31 of each calendar year.

Billion is used in the American sense of one thousand million.

Cautionary Statement with Respect to Forward-Looking Statements

Statements made in this annual report with respect to our current plans, estimates, strategies and beliefs, and other statements that are not historical facts are forward-looking statements about our future performance. Forward-looking statements include but are not limited to those statements using words such as “believe,” “expect,” “anticipate,“intend,” “plans,“plan,” “strategy,” “prospects,“aim,” “forecast,” “estimate,” “project,” “may”“anticipate,” “strategy,” “prospects,” “may,” “might” or “might”“will” and words of similar meaning in connection with a discussion of future operations, financial performance, events or financial performance.conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on our management’s assumptions and beliefs in light of the information currently available to it. We caution that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore you should not place undue reliance on them. You also should not rely on the beliefbelieve that it is our obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We disclaim any such obligation. Risks and uncertainties that might affect us include, but are not limited to, (i) general economic conditions in the markets in which we sell our markets,products, particularly levels of consumer spending; (ii) exchange rates, particularly between the yen and the U.S. dollar, euro, and other currencies in which we make significant sales or in which our assets and liabilities are denominated; (iii) our ability to continue to design and develop and win acceptance of our products and services, which are offered in highly competitive markets characterized by continual new product introductions, rapid developments in technology and subjective and changing consumer preferences; (iv) our ability to implement successfully our business strategies; (v) our ability to compete and develop and implement successful sales and distribution strategies in light of technological developments in and affecting our businesses; (vi) our continued ability to devote sufficient resources to research and development, and capital expenditure; (vii) our ability to continuously enhance our brand image; (viii) the success of our joint ventures and alliances; and (ix) the outcome of contingencies.

PART I

Item 1. Identity of Directors, Senior Management and Advisers

	Not applicable

Item 2. Offer Statistics and Expected Timetable

	Not applicable

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Item 3. Key Information

A. Selected financial data

The following table presents selected consolidated financial informationdata as of the registrant at the dates and for the periods indicated. We derived the consolidated statement of income data for each of the three years indicated,in the period ended March 31, 2004 and has been derivedthe consolidated balance sheet data as of March 31, 2003 and 2004 from our audited consolidated financial statements include elsewhere herein. We derived the consolidated statement of income data for each of the two years in the period ended March 31, 2001 and the consolidated balance sheet data as of March 31, 2000, 2001 and 2002 from our audited consolidated financial statements which are not included elsewhere herein, whichherein. Our audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except for segment data which is prepared in accordance with the regulations under the Securities and Exchange Law of Japan.

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Exchange rates (yen per U.S. dollar)

The exchange rate between the yen and the U.S. dollar, based upon the noon buying rate in yen for cable transfers in New York City as certified for customs purposes by the Federal Reserve Bank of New York, was ¥120.47¥110.60 = US$1.00 on August 4, 2003.

Additionally, our operations may be indirectly affected by the economic conditions of regions where our competitors manufacture their products. For example, if a competitor enjoys lower local labor costs, it may be able to offer similar products at a lower price. As a result, our sales may be adversely affected. Also, a decrease in the value of the local currency in a region that produces parts and raw materials may lead to a decrease in production costs (on a yen or a U.S. dollar basis) not only to us but to other manufacturers as well. Such a trend may in turn bring about vigorous export competition and price-cutting, both of which could adversely affect our business results and financial condition.

Fluctuations in foreign currency exchange rates may adversely affect our business results and financial condition

Our operations involve the global production and distribution of products. Revenue and expense items that are denominated in local currency, such as sales, expenses and assets in each region, are translated into yen in preparing our consolidated financial statements. Depending on the rate of exchange at the time of currency translation, the values of such items in yen may be affected, even if their value has not changed in their original currency. Also, fluctuations in exchange rates may affect the local prices of our products and negatively impact their competitiveness in local markets. Generally, an appreciation of the yen against other currencies, particularly the yen against the U.S. dollar and the euro, in which we make significant sales, may adversely affect our business results and financial condition. Conversely, a depreciation of the yen against other currencies would have the opposite effect.

An increase in the value of currencies in regions where we operate and produce may lead to an increase in the costs of manufacturing and procurement in those regions. Such an increase could accordingly adversely affect our profit margins and reduce our price competitiveness, thereby adversely affecting our business results. We engage in currency hedging transactions to attempt to minimize the negative effects of short-term fluctuations of foreign exchange rates among major currencies such as the U.S. dollar, euro and yen. However, as a result of mid-to-long-term exchange rate volatility, we cannot execute planned procurement, production, logistics, and sales activities with any certainty and, consequently, fluctuations in exchange rates may adversely affect our business results and financial condition.

If we are unable to innovate and to develop attractive new products, our future growth and profitability may be adversely affected

We derive a substantial portion of our revenues from sales of innovative new products. We expect that sales of our new products — products—currently including DVD-related products, plasma and organic electroluminescent (OEL)light-emitting diode (“OLED”) displays and car navigation systems — will continue to account for a substantial portion of our revenues, and we expect our future growth to rely primarily on the continued development and sale of innovative new products.

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While we believe that we are capable of continuing to develop innovative and attractive new products, the industry in which we operate is characterized by rapid changes, including technological changes. The process of developing and marketing new products is inherently complex and uncertain, and there are a number of risks, including the following:

•		We cannot assure youThere can be no assurance that we will have adequate funding and resources necessary for investments in new products and technologies.
•		We cannot assure youThere can be no assurance that our long-term investments and commitment of significant resources will result in successful new products or technologies. For example, we have invested substantial resources in the expansion of our production capacity for plasma display panels (“PDPs”) to meet anticipated demand, but such demand may not materialize.
•		We cannot assure youThere can be no assurance that we can anticipate successfully the new products and technologies

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		which will gain market acceptance and that such products can be successfully marketed.
•		We cannot assure youThere can be no assurance that our newly developed products or technologies can be successfully protected as proprietary intellectual property rights.
•		Our products may become obsolete due to rapid advancements in technology and changes in consumer preferences.
•		A delay in commercializing new technologies now under development may prevent us from keeping up with market demand. For example, if we lag behind our competitors in the commercialization of active-matrix full-color OELOLED displays, which are now under development in our affiliated company, ELDis, Inc., we may not secure significant portions of this market.

Our failure to anticipate adequately changes in the industry and the market, and to develop attractive new products, including any of the risks described above, may reduce our future growth and profitability and may adversely affect our business results and financial condition.

Benefits may not be gained from the acquisition of the shares in NEC Plasma Display Corporation (“NPD”), the subsidiary of NEC Corporation (“NEC”), and related intellectual property rights held by NEC

On July 1, 2004, Pioneer and NEC concluded the stock transfer agreement under which NEC will transfer to Pioneer 100% of the issued share capital of its subsidiary, NPD, and the intellectual property rights relating to plasma displays held by NEC. See “Item 4.A. History and development of the Company—Principal capital expenditures, investments and divestitures.”

The expected acquisition of the shares in NPD and related intellectual property right held by NEC may not yield expected benefits to us. Achieving these benefits depends on the timely, efficient and successful execution of a number of post-acquisition events, including integrating the business of NPD into our operations, distribution networks, marketing programs and information systems. Our ability to integrate the operations of NPD may be adversely affected by many factors, including information system integration and employee relations. In addition, NPD may not perform as we expect.

Furthermore, a significant portion of NPD’s customers for original equipment manufacturer (“OEM”) products are major players in the electronics industry who are in direct competition with us. There can be no assurance that such customers will not cease to utilize NPD’s services.

Any failure to realize the benefits expected from the acquisition, or the failure of NPD to perform as we anticipate, could have a material adverse effect on our business results and financial condition.

As our exposure to the PDP market as a result of the acquisition of NPD will increase significantly, lack of growth in the PDP market may adversely affect our business results and financial condition

The acquisition of NPD will increase our production capacity significantly. In addition, we are focusing on the plasma display business to establish it as a core of our business. If the plasma display market does not grow as we anticipate, such increased production capacity may not be used efficiently or in a cost-effective manner. There can be no assurance that the PDP market will continue to grow. Any such lack of growth may adversely affect our business results and financial condition.

Competition generally, and especially on price and standardization of products, may adversely affect our business results and financial condition

The electronics industry, including the audio, video and car electronics industry, is intensely competitive. We expect to face increased competition in the various product and geographic markets in which we

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operate. Our competitors include manufacturers and distributors, some of which have greater capital resources available for research, development, production and marketing. In addition, as new technology develops and as new electronics products gain increased market acceptance, it is possible that new competitors or alliances among existing competitors may emerge and rapidly acquire significant market share. While we believe we are one of the leading global manufacturersinnovators of advanced, high-quality and value-added electronics products, we cannot assure youthere can be no assurance that we will be able to compete effectively in the future. Pricing pressures or loss of potential customers resulting from our failure to compete effectively may adversely affect our business results and financial condition.

For example, competitors in the plasma display market may substantially increase their production capabilities or introduce alternative products at a lower price and cause market competition to intensify further. Moreover, due to standardization and the relative ease of imitation of products such as DVD players, competition from manufacturers in emerging markets may also continue to intensify. Our research into the development of new products generally requires large costs that competitive imitators may not need to incur. In an aggressive price-cutting environment we may find it difficult to maintain or increase our market share or remain profitable against low-cost and low-budget competitors.

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Failure of our DVD-recorder format to gain broad market acceptance may adversely affect our business results and financial condition

Currently, there are a number of competing recording formats for digital versatile discs (DVDs)(“DVDs”): the DVD-RW, format commercialized by us, Sony, Sharp and others, the DVD-RAM, format commercialized by Matsushita, Hitachi, Toshiba and others, and the DVD+RW, format commercialized by Philipsas rewritable formats, and others.the DVD-R and the DVD+R, as write-once formats. Each of the recording disc formats makes use of its own distinct technology and is generally incompatible with other formats.

Our DVD recorders for home-use adopt DVD-RW and DVD-R formats, while our recordable DVD drives for PCs support DVD-RW/+RW and DVD-R/+R format recording and DVD-RAM format playback.

The question of which format will prevail as the industry standard is not yet settled. Should the DVD- RW formatour adopted formats fail to be accepted as thede facto industry standard, or otherwise fails to gain wide acceptance, our business results and financial condition wouldwill be adversely affected.

Substantial decline in our royalty revenue as a result of the expiration of our existing patents relating to laser optical disc technologies may adversely affect our business results and financial condition

OurThe licensing of our patent license and other intellectual property rights make a significant contribution to our net income. Although less than 2% of our revenue in fiscal 20032004 was generated by our worldwide patents relating to laser optical disc technologies, these rights were responsible for approximately 35%26% of our operating income in fiscal 2003.2004. The legal protections afforded these rights have a limited duration under applicable laws, and the length of protection varies from country to country or region. A significant portion of such patentspatent rights have expired in Europe and Japan at the end ofduring fiscal 2003.2003 and 2004. As a result, our royalty revenue has starteddeclined substantially from previous years and may continue to decline substantially.in the future. This decline in royalty revenue may in turn have an adverse impact on our business results. WhileAt the same time, we are working to acquire patents owned by third parties and licensing such patents, we also license patents for third parties as a licensing agent.patents. We do not expect that the revenue, if any, from such new patents/agenciespatents will be sufficient to offset the decrease in royalty revenue resulting from the expiration of our existing patents. Royalty revenue from patent licensing also depends to a material degree on the sales of patented products by our licensees, making it hard for us to predict actual royalty revenue amounts. For a discussion of our patent licensing business, see “Item 4.B. Business overview–overview—Nature of operations.”

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If we are unable to manage successfully the risks inherent in our international activities and our overseas expansion, our business results and financial condition could be adversely affected

A substantial portion of our manufacturing and marketing activity is conducted outside Japan, including in the United States, Europe, and in developing and emerging markets in Asia. There are a number of risks inherent in doing business in such overseas markets, including the following:

•		Unexpected legal or regulatory changeschanges;
•		Unfavorable political or economic factorsfactors;
•		Difficulties in recruiting and retaining personnelpersonnel;
•		Labor disputes including strikesstrikes;
•		Less developed technological infrastructure, which can affect our production or other activities or result in lower customer acceptance of our products and services;
•		Potentially adverse tax consequences; and
•		Social, political or economic turmoil due to terrorism, war, or other factorsfactors.

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In order to produce our products competitively and to reduce costs, we aim to continue expanding our production and parts procurement in the Shanghai and DongguanGuang Dong areas of the People’s Republic of China (China)(“China”). Nevertheless, we may experience difficulties in managing a production facility and entering into business arrangements in China in light of unexpected events, including political or legal changes, labor shortages or strikes or changes in economic conditions in China. Furthermore, the current outbreakoutbreaks of epidemics such as SARS (Severe(“Severe Acute Respiratory Syndrome)Syndrome”) or avian influenza in China may, depending on how this epidemic develops in the future,they develop, adversely impact our operations in China, including delays in production due to travel restrictions on employees, as well as disruptions in parts procurement and factory operations. Accordingly, such incidents could have an adverse impact on our business results and financial condition. For information on our China plants, see “Item 4.A. History and development of the Company–Company—Principal capital expenditures, investments and divestitures.”

Our dependence on certain third-party manufacturers and suppliers for parts and components could adversely affect our business results and financial condition

While we strive to produce key components and parts internally, we are dependent on a number of outside manufacturers and suppliers. Third parties manufacture some of our most important components and parts, including semiconductors. Our arrangements with third-party manufacturers and suppliers are generally on a renewable short-term basis. While we have sought to assure supply where necessary through strategic alliances and other measures, we cannot assure youthere can be no assurance that we will not face shortages of key components from time to time. See “Item 4.B. Business overview–overview—Raw materials and sources of supply” for a discussion of our outside manufacturers and suppliers. If we are forced to change our contracted manufacturers and suppliers, this could result in a reduction in the availability of components and parts essential to us or in an increase of our costs. In addition, in periods of high demand for consumer electronics products and when new components such as next generation semiconductors are introduced, producers of components and parts may not be able to produce enough components to meet our demand on a timely basis. We may also experience shortages or other material disruptions in our supply of components and parts due to natural disasters or other events beyond our control. Shortages of key components could result in increases in their prices, insufficient supply and quality control problems, and could adversely affect our business results and financial condition, as well as lead to strained relationships with our original equipment manufacturing (OEM)OEM customers.

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Our performance in the OEM business is substantially dependent on the performance of our customers’ business

We caterprovide our OEM business to automobile manufacturers, electronics manufacturers, personal computer (PC)(“PC”) makers, the broadcasting industry and other large-scale businesses worldwide. The products we supply include car stereo products, car navigation systems, DVD-R/RW drives, DVD-ROM drives, set-top boxes for cable-TV and digital satellite broadcast and OELOLED displays. Sales to business customers in these areas are significantly affected by the respective customers’ business results and by factors that are beyond our control. Further, price cuttingprice-cutting to meet customer demands may cause a reduction in our profit margin. The under-performance of a customers’ business, the unexpected termination of contracts, changes in the purchasing practices of our OEM customers or aggressive price cuttingprice-cutting to satisfy a large business customer’s demands may adversely affect our business results and financial condition.

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Because our products and technologies are dependent on the service of capable engineers and other key personnel, difficulty in recruiting and developing key personnel could have an adverse impact on our future growth, business results and financial condition

Our products and technologies are complex, and our future growth and success depend to a significant extent on the service of capable engineers and other key personnel, and hiring and training additional highly-skilled engineers and other competent personnel are important for our success.

Failure to recruit and develop key personnel may adversely affect our future growth, business results and financial condition. On the other hand, aggressive hiring of, among others, capable engineers who are experienced with the latest technology, may increase, sometimes substantially, both recruiting and actual labor costs. In addition, continued re-training of currently employed personnel, which may introduce higher costs, might also be necessary to maintain a superior level of innovation and technological advance. Such increased costs could have an adverse impact on our business results and financial condition.

Limits on intellectual property protection may make us vulnerable to competition from third parties that use our technology and expertise

While we have developed technology and expertise which differentiate our products from those of our competitors, some of our unique technology and expertise is either not fully capable of being protected by intellectual property rights or protected only to a limited extent pursuant to legal limitations in certain jurisdictions. Accordingly,Although we have the ability to diminish illegal imports of such products into certain jurisdictions through exercise of our legal rights, we may be unable to effectively to prevent third parties from using our intellectual property rights to produce products similar to ours. In addition, we may be unable to prevent third parties from developing technologies that are similar or superior to our technology, or from designing around or reverse engineering our patents and trade secrets. Moreover, our future products and technology might later be found to infringe upon a third party’s intellectual property rights.

Product defects resulting in a large-scale product recall or successful products liability claims against us could result in a significant cost or impact on our reputation and adversely affect our business results and financial condition

We manufacture various products at our plants worldwide in accordance with internationally accepted quality-control standards. We cannot be certain, however, that all of our products are defect-free and may not be recalled at some later date. Furthermore, although we maintain insurance against product liability claims, we cannot be certain that such insurance can adequately satisfy the liabilities ultimately incurred. In addition, insurance may not continue to be available on terms acceptable to us. A large-scalelarge-

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scale product recall or a successful products liability claim against us could result in significant costs or have a negative impact on our reputation, which may in turn lead to a decrease in sales, adversely affecting our business results and financial condition.

Failure to achieve the goals of collaborations, tie-ups, and joint ventures with third parties may adversely affect our business results and financial condition

As part of our technological development process, we conduct many joint activities with other companies in the form of collaborations, technological tie-ups, or joint ventures intended to optimize management resources and utilize the synergy of combined technologies. We expect to continue to adopt an active approach to exploiting these opportunities. If differences arise among the participants of these joint activities due to managerial, financial or other reasons, we may not achieve the goals of these development projects, which may in turn adversely affect our business results and financial condition.

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Governmental regulation may limit our activities or increase our costs of operations

Pioneer’s business and operations are subject to various forms of government regulation in countries in which we do business, including required business/investment approvals, as well as export regulations based on national security or other reasons and other export/import regulations such as tariffs. In addition, commercial, antitrust, patent, consumer, taxation, exchange control and environment/recycling laws and regulations also apply. If we are unable to comply with these regulations, they can serve to limit our activities. In addition, compliance with these regulations could result in increased costs. Accordingly, these regulations could adversely affect our business results and financial condition. See “Item 4.B. Business overview-Governmentaloverview—Governmental regulation” for a discussion of certain government regulations applicable to us.

Damage to our production facilities as a result of disasters, power outages or similar events may significantly reduce our production capacity, and adversely affect our business results and financial condition

We periodically carry out disaster prevention checks and facility maintenance at all of our facilities to minimize potential negative impact caused by disruptions on our manufacturing lines. We cannot assure you,There can be no assurance, however, that we can completely prevent or mitigate the effect of a disaster, outage or other disruption at our production facilities. For example, our plasma display products are currently manufactured mainly at our Shizuoka and KofuYamanashi plants, and we are in the process of expanding our manufacturing lines there. Accordingly, our plasma display panel production capacity could be significantly reduced in the event of a major earthquake or other disruption of operations at the Shizuoka and KofuYamanashi plants.

Employee retirement benefit costs and obligations may adversely affect our business results and financial condition

Pioneer is obligated to pay certain employee retirement benefit costs and obligations to qualifying employees upon their retirement. The amount of such employee retirement benefit costs and obligations are dependent on assumptions used in the relevant actuarial calculations. These assumptions include discount rates, future compensation levels, return on assets, retirement rates and mortality rates, which are based upon current statistical data, as well as long-term returns on pension plan assets and other factors. If actual results differ from the assumptions or assumptions are changed, the resulting effects are accumulated and systematically recognized over future periods and, therefore, generally affect recognized expense and recorded obligations in future periods. Our pension benefit costs have been increasing in recent fiscal years due to declining discount rates and negative returns on pension plan assets, and further

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declines of discount rates and lower returns on pension plan assets may adversely affect our business results and financial condition. In connection with the return to the Japanese government of responsibility for pension obligations under the governmental welfare component of our pension plan, we will transfer some of our pension plan assets to the Japanese government. Such transfer will be accounted for upon completion of the transfer to the government in accordance with U.S. GAAP and may result in a negative impact on our business results and financial condition. The impact of the transfer depends on pension plan assets to be transferred.

Changes in business or economic conditions or other uncertain or unforeseen factors may make it difficult for us to achieve strategic aims and targets

Consistent with the strategies set out in “Item 4.B. Business overview—Strategy,” we announced in fiscal 1999 our “Pioneer Group Vision,” a medium-term initiative, with the intent of revitalizing us and our business through the achievement of two financial targets by the end of March 2006, as well as four business targets. See “Item 4.B. Business overview—Strategic Focus—‘Pioneer Group Vision’.” However, changes in business or economic conditions or other uncertain or unforeseen factors, including (but not limited to) the risks and uncertainties set out inCautionary Statement with Respect to Forward-Looking Statements, may make it difficult for us to achieve our aims or meet the targets that have been set in time or at all, or to maintain such aims or targets. There can be no assurance that we will be successful in achieving our strategic aims or meeting the quantitative or qualitative targets set out in “Pioneer Group Vision” or that our management will not change such aims or targets in the future.

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Item 4. Information on the Company

A. History and development of the Company

History

Pioneer was incorporated under the Japanese Commercial Code of Japan (the “Commercial Code”) as a joint stock company (Kabushiki Kaisha) in May 1947, with the name Fukuin Denki Kabushiki Kaisha, succeeding to the business founded in January 1938 by the late Mr. Nozomu Matsumoto. The present name, Pioneer Kabushiki Kaisha, was adopted in June 1961. Its English name was changed from “Pioneer Electronic Corporation” to “Pioneer Corporation” in June 1999.

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Our business dates from January 1938 when we began the manufacture of audio speakers. In June 1955 we commenced the manufacture of audio amplifiers. During the 1960s, we expanded our line of products to include hi-fi stereo sets and components, hi-fi car stereos, as well as telephone-related equipment. Since the early 1960s we have established business offices and subsidiaries in and outside Japan to support our expanding manufacturing and sales activities. During the 1970s we expanded our business to include equipment related to cable-TV systems. Pioneer’s shares of common stock were listed on the Tokyo Stock Exchange and Osaka Securities Exchange in October 1961 and April 1968, respectively. In addition, Pioneer’s ADSsAmerican Depositary Shares (“ADSs”) were listed on the New York Stock Exchange (“NYSE”) in December 1976.

In the 1980s, we began to expand our business base to include audio/video (AV)(“AV”) equipment. We started marketing laser disc (LD)(“LD”) players and LDs, and commenced our own music and video software business in Japan. Also, we introduced the world’s first car compact disc (CD)(“CD”) players. We also broadened our business base in commercial and industrial markets with such products as optical memory disc drives for use in computers, laser karaoke (sing-along) systems and multiscreen video systems.

In the 1990s, we released to the Japanese consumer market the world’s first car navigation system incorporating the Global Positioning System (GPS)(“GPS”). In addition, we introduced DVD players and thin-profile color plasma displays and began supplying digital direct-broadcast satellite (DBS)(“DBS”) decoders to a European pay-TV company. Our other recent industry firsts include four-color OELOLED displays and DVD recorders.

In fiscal 2001, we started supplying to PC makers DVD-R/RWrecordable DVD drives that can record up to seven times as much data as conventional CD-R/RW drives. In fiscal 2002, we introduced to the Japanese consumer market hard disk drive (HDD)(“HDD”) car navigation systems with faster search and display of routes to designated destinations. In fiscal 2003, we launched in Japan DVD recorders equipped with large-capacity HDDs, as well as car navigation systems incorporating a data communication module for access to the latest map data. Also, in June 2003, we began introducing recordable DVD drives for PC use, which are compatible with DVD-R, -RW, +R and +RW discs, to worldwide markets. In fiscal 2004, we started supplying passive-matrix full color OLED display panels in cellular phones.

Effective April 1, 2003, Pioneer Video Corporation, a wholly-owned subsidiary of Pioneer, established Pioneer Micro Technology Corporation, by spinning off its semiconductor business. On the same day, Shizuoka Pioneer Corporation, a wholly-owned subsidiary of Pioneer, merged with Pioneer Video Corporation and changed its trade name to Pioneer Display Products Corporation.

Registered office

Pioneer’s registered office is located at 4-1, Meguro 1-chome, Meguro-ku, Tokyo 153-8654, Japan. ItsPioneer’s telephone number is 81-3-3494-1111.

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Principal capital expenditures, investments and divestitures

CapitalIn fiscal 2002, 2003 and 2004, our capital expenditures consisted principally of facilities and molds for production and totaled ¥46,909 million, ¥40,493 million and ¥57,978 million, respectively. They were paid for principally out of our internally generated working capital. See the table in “Item 3.A. Selected financial data” for figures. The facilities for production comprised those for OELOLED displays and DVD pickups, and plants and machinery for plasma displays. See the table in “Item 4.D. Property, plants and equipment,” for a list of our principal plants.

In fiscal 2004, in order to meet fast-growing demand for DVD recorders and recordable DVD drives, we invested ¥1.3 billion in building the second manufacturing line for optical pickups, which are key parts of DVD recorders and recordable DVD drives, at Guang Dong Plant in China. This line started its operation in November 2003 and our overall production capacity for optical pickups reached one million units per month.

To improve cost competitiveness and to reallocate a major portion of production to China, Pioneer established two production subsidiaries in Chinaaddress expanding demand for plasma displays, in fiscal 20012004, we invested ¥22 billion in building a more efficient production system, including the building of new manufacturing lines at our plants in Shizuoka and these plants began operationYamanashi, in Japan. Our overall production capacity increased about 67% to 250 thousand units annually through the expansion of the Shizuoka Plant, which was completed in August 2003. The ongoing building of a new line of the Yamanashi Plant is expected to be completed by fall of 2001. We continue expanding parts procurement, designing products,2004 and increasing the proportion ofincrease our total production in China. Capital expenditures relatedcapacity to these two plants for fiscal 2002 and fiscal 2003 were ¥4.2 billion and ¥3.2 billion, respectively.600 thousand units annually. In fiscal 2004,2005, we plan to spend ¥3.5approximately ¥30 billion, including ¥6.2 billion paid by June 30, 2004, in relation to expand production capacityPDP-related capital expenditure not including investment related to the acquisition of these two plants further,NPD as described below.

On July 1, 2004, Pioneer and NEC concluded the stock transfer agreement under which includesNEC will transfer to Pioneer 100% of the constructionissued share capital of an additional production line for DVD-R/RW drivesits plasma display manufacturing subsidiary, NPD, and the intellectual property rights relating to plasma displays held by NEC. We expect to invest approximately ¥40 billion in the Guang Dong Plant. Upon completionacquisition of the new production lineNPD and NEC’s intellectual property rights in the fall of 2003, the monthly production capacity for DVD-R/RW drivesfiscal 2005. This acquisition is expected to reach one million units.

In fiscal 2003, we started constructionbe completed by September 30, 2004. With this acquisition and the new line of a new manufacturing line for plasma displays atthe Yamanashi Plant as described above, our plant in Shizuoka, Japan, to meet potential demand for plasma displays. Moreover, we plan to add another line in our Kofu Plant, whichtotal capacity is expected to start operation inadd up to more than one million units a year. In order to carry out this investment, on March 5, 2004 we issued the springaggregate principal amount of 2005. This will bring our annual production capacity to approximately 500 thousand units. The planned investment for these two lines aggregates to approximately ¥42 billion, including ¥5 billion paid by March 31, 2003.¥60,000 million of its Euro Yen Zero Coupon Convertible Bonds due 2011. See “Item 4.B. Business overview—Strategic Focus—‘Pioneer Group Vision’.”

In order to improve management efficiency by concentrating resources in strategic businesses, in July 2003 Pioneerwe reached a preliminary agreementagreements to sell 100% of our shares in two of its wholly-owned subsidiaries, Pioneer LDC, Inc. (“PLDC”) and Pioneer Entertainment (USA) Inc. (“PEUSA”), to Dentsu Inc. (“Dentsu”), Japan’s largest comprehensive advertising agency. These subsidiaries arewere engaged in the audio/videoAV software businesses in Tokyo, Japan and in California, U.S.A., respectively. The individual termstransfer of all the shares of PLDC, and 90% of the shares of PEUSA owned by us was completed by fiscal 2004. The remaining shares of PEUSA owned by us are expected to be transferred to Dentsu by September 30, 2006.

In March 2004, Q-Tec, Inc., which was a 99.26% owned subsidiary of Pioneer, became an independent company through a Management Buyout after it acquired all of the shares owned by Pioneer, forming a business alliance with Vision Capital Corporation and Memory-Tech Corporation. Q-Tech, Inc. is one of the largest manufacturers in the Japanese postproduction industry which offers high-quality total services including editing of video and audio products such as animation, movies, commercials, and broadcast programs, DVD encoding/authoring and pressing.

The amount paid to us in respect of these share transfers, includingsales of subsidiaries that are engaged in the transfer price, are yet to be determined. (Seeaudio/video business was ¥4.9 billion in fiscal 2004. See Note 213 in “Notes to Consolidated Financial Statements.”)

We intend to fund the capital requirement to fulfill these capital expenditure plans through internally generated cash.16

B. Business overview

Strategy

We aim to be a leading provider of advanced, high-quality, value-added electronics products worldwide for consumer and business use. Our corporate philosophy is to “Move the Heart and Touch the Soul,” with products that are designed to increase satisfaction, comfort and convenience in everyday life.

To achieve our goals, we are pursuing the following strategies:

	•		Developdevelop innovative, technologically-advanced products that meet and stimulate market demanddemand;
	•		Enhanceenhance our brand recognition and promote customer satisfactionsatisfaction;
	•		Leverageleverage our leadership position in the car electronics businessbusiness;
	•		Focusfocus on our strategic products targeting global marketsmarkets; and
	•		Adoptadopt optimal production methods to maximize profitabilityprofitability.

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Develop innovative, technologically-advanced products that meet and stimulate market demand

We believe our core strength is our ability to innovate. Throughout our history, we have focused on the development of unique products, and have attempted to be the front-runner and market leader in our product areas. Such areas have included dynamic speakers, car audio, LD and car navigation systems. Consistent with our strategy, we have introduced into the market several cutting-edge products, such as plasma displays and digital broadcast set-top boxes.DVD products. In the DVD market, we were the first to commercialize a DVD recorder. We were also the first to introduce a four-color OELOLED display to the market. We intend to continue to take advantage of this strategy and attract customers by introducing differentiated products into the market ahead of our competitors.

Enhance our brand recognition and promote customer satisfaction

The cornerstone of our business foundation lies in the quality of our products and their ability to inspire consumer confidence. Accordingly, we focus on the enhancement of our brand image and customer satisfaction. In addition to the extensive quality control and assurance measures on the production side, we invest in various marketing campaigns to maintain and enhance the value of our brand. Combined with our worldwide brand slogan of “sound. vision. soul,” we aim to establish Pioneer as a brand driven by innovation and clearly differentiating ourselves from our competitors. We believe customer satisfaction is based not only on reliability and technology, but also on the impact of the quality of sound or vision delivered by our products.

Leverage our leadership position in the car electronics business

We believe one of our strengths lies in our core business segment, the car electronics business. We are one of the leading manufacturers in the world consumer market for car audio products.products and car navigation systems. We were the first in the industry to introduce car navigation systems to the Japanese consumer market in fiscal 1991 and have maintained a leading position by offering affordably priced and easy-to-operate DVD-ROM and advanced HDD-equipped models. In addition, in November 2002 we released in the consumer market the world’s first car navigation system that incorporates a data communication module for access to the latest map data. Sales in this category are gradually shifting from the consumer market to the OEM market as automobile manufacturers place greater emphasis on differentiation of their cars, and we intend to expand our market share by increasing OEM sales.

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Focus on our strategic products targeting global markets

We focus on our strategic products where we are more likely to secure the “first-mover advantage” as a means of establishing market leadership. As part of our efforts to secure these leading market positions, we strive to play a major role in setting product standards. For example, we are promoting the DVD-RW format in DVD recorders and DVD-R/RWrecordable DVD drives. This format has already gained support from other major consumer electronics companies such as Sony Corporation and Sharp.Sharp Corporation (“Sharp”). We also aim to differentiate ourselves by introducing to targeted markets innovative plasma displays, OELOLED displays and HDD car navigation systems. We market these strategic products on a global basis. Although certain technological customization is required, most of our key products are currently sold in virtually all major economies in the world.

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Adopt optimal production methods to maximize profitability

We strive to adopt ideal production methods catered to each type of product and market demand. While we focus on reducing manufacturing and operating costs, our goal is to achieve overall efficiency in production by, for example, taking into account the proximity of the end-market, production facilities and labor costs. Consequently, to produce our strategic products we established two new plants in China and started production of DVD-related and car electronics products in fiscal 2002. We are continuing to expand parts procurement, design products, and increasehave increased the proportion of our production in China. Also, toTo meet the fast-growing demand for plasma displays, we began addinghave built a more efficient production linessystem at our plasma display panel manufacturing subsidiary. We are in Shizuoka and Kofuthe process of building our fourth production line in Japan, and aimwhich is expected to expand annualstart operation by fall of 2004. Moreover, the acquisition of NPD is expected to be completed by September 2004. Following these measures, we plan to establish in fall 2004 an overall production capacity to approximately 500 thousand units by the springsystem capable of 2005.yielding more than one million panels annually. To enhance cost competitiveness and achieve economies of scale, we sell our key products on an OEM basis to other manufacturers. In addition, targeting optimally efficient control of inventory worldwide, we introduced supply chain management in April 2002 to certain departments within the Pioneer group.optimize efficiency of inventory control worldwide.

Strategic Focus—“Pioneer Group Vision”

Consistent with the strategies described above, in fiscal 1999 we announced “Pioneer Group Vision,” a medium-term initiative, with the intent of revitalizing Pioneer and its business through the achievement of two financial targets by the end of March 2006, as well as four business targets. They are as follows.

Financial targets for the fiscal year ending March 2006:

	•		¥1.2 trillion of consolidated operating revenue
	•		ROE (Return on Equity) in excess of 10%

Business targets:targets

(i) No. 1 in DVD worldwide

We believe the DVD format will remain the dominant high-density, high-capacity medium for sound, video and data recording, storage and playback for the foreseeable future. As one of the leaders in this field, we have introduced attractive models of consumer-use DVD recorders, DVD home theater systems, DVD car navigation systems as well as DVD-R/RWrecordable DVD drives for PC use. Pioneer believes that these DVD products have a competitive edge in design, function and price, contributing to the expansion of its DVD business.

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(ii) Establishing a business foundation for plasma displays and OELOLED displays

We believe large-screen plasma displays offer significant advantages over cathode ray tubes (CRTs)(“CRTs”) and liquid crystal displays (“LCDs”). Among other advantages, it is technically easier to enlarge plasma displays are thinnerthan CRTs and lighter than CRTs.LCDs. Thus, we expect that plasma display panels in the future will capture a substantial portion of the larger-screen TV market, in which currently CRTsis expanding with the advent of high-quality pictures such as DVD and projection TVs are dominant.digital TV broadcast. Since introducing the first plasma displays in fiscal 1998, we have established a solid presence both in consumer and commercial markets worldwide as a result of our excellent reputation for the large-screen high-resolution images of our plasma displays. To meet increasing demand, we aim to continue expanding our production capacity of plasma display panels by establishing production lines at our Shizuoka and Kofu plants in Japan, enabling us to produce approximately 500 thousand units per year by the spring of 2005.

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OELOLED display is another type of display, which we are promoting aggressively. OLEDs are particularly well-suited for small size displays, such as cellular phone displays. In fiscal 1998, we became the first in the world to market car electronics products equipped with an OELOLED display, and in fiscal 2000 we were the first companyin the world to mass-produce four-color OELOLED displays. OELs are particularly well-suited for small size displays, and in fiscal 2001 we supplied OEL displays for use in cellular phones of a major U.S. cellular phone manufacturer. To strengthen our market position, in fiscal 2001, Tohoku Pioneer Corporation, Pioneer’s majority-owned subsidiary, established a joint venture company, ELDis, Inc., in fiscal 2001 with Semiconductor Energy Laboratory Co., Ltd. and Sharp Corporation to develop and manufacture active-matrix full-color OELOLED displays.

(iii) From stand-alone to network

Our current approach is to develop network-related products drawing upon our strength as a consumer- and business-use electronics product manufacturer. We believe we have a competitive advantage in the interface function, where information is delivered to users. We believe we have an excellent brand image, as well as many years of experience in analog/digital cable-TV and digital broadcast markets through the sale of our set-top boxes. We are strengthening the synergy of digital home network-linkage of entertainment/information systems, such as audio/videoAV components, DVD players, DVD recorders, plasma displays and set-top boxes.

(iv) Toward the key-device, key-technologies business

To keep up with the accelerated pace of change in the electronics industry, it is important for us to promote key technologies and key devices, collaborating with third parties when beneficial. We believe such collaboration generates synergies that can create new advances in our key technologies and optimizes the use of our resources.

We believe that a producer of key devices is better able to develop and offer broader product differentiation and to influence the direction of market trends than a company that merely assembles products. Our strategically important key devices are DVD pickups, plasma display panel modules, speaker units, CD mechanisms for car manufacturers and OELOLED display panels for mobile phone companies.

Nature of operations

We develop, design, manufacture and sell electronics products such as audio, video and car electronics on a global scale. We are one of the leading innovators of differentiated DVD products and plasma displays. We are also haveone of the largest worldwide market shareleading manufactures of car electronicsaudio products such asand car navigation systems.systems in the consumer market.

Our principal production activities are carried out in Asia, including Japan. Our products are generally sold under our own brand names, principally “Pioneer.” Our primary markets are Japan, North America, Europe and Asia. WeAsia and we sell our products to customers in consumer and business markets through sales

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offices in Japan, and through sales subsidiaries of Pioneer and independent distributors outside of Japan. In addition, on an OEM basis, we market certain products, such as car electronics products, DVD-R/RWrecordable DVD drives, digital broadcast set-top boxes and OELOLED displays to other companies.

18As a result of the sale of subsidiaries in the audio/video software business in fiscal 2004, the gain from such sale, as well as the operating results of the discontinued operations, are presented net of tax as a separate line item in the consolidated statement of income in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

InAlso, in fiscal 2003,2004, we reclassified reportable segments into four categories —changed our business segment classification for certain businesses. Results related to DVD drives for PCs have been moved from “Others” to “Home Electronics,” “ Car Electronics,” “Patent Licensing,” and results related to plasma displays for business use have been moved from “Home Electronics” to “Others.” PreviousCorresponding figures for the corresponding periodprevious fiscal years have been restated accordingly. (The consolidated financial statements included in this annual report and the financial information below are prepared in accordance with U.S. GAAP, except for segment data which is prepared in accordance with relevant regulations under the Securities and Exchange Law of Japan. Specifically, such segment information is required to be reported by reportable industrial segment, whereas segment information is required to be reported by reportable operating segment under U.S. GAAP.)

The profit margins in the “Patent Licensing” segment are substantially higher than those in the other three segments, since costs related to patent licensing are limited principally to amortization of patent rights and expenses for licensing activities.

The following table sets forth our operating revenue from unaffiliated customers by business segment for the respective periods indicated:

Operating Revenue from Unaffiliated Customers by Business Segments
(In millions of yen, except for percentage amounts)

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Home Electronics:

This segment includes stereo systems, receivers, amplifiers, tuners, CD players, CD recorders, minidisc (MD) systems, cassette tape decks, speaker systems, DVD players, DVD recorders, laser disc (LD) players,recordable DVD drives, DVD-ROM drives, home-use plasma displays, projection TVs, stereo systems, individual stereo components, equipment for cable-TV systems, digital broadcast set-top boxes and telephones.

Sales by product for fiscal 2003 in Home Electronics are as follows:Recordable DVD players and DVD recordersdrives accounted for the largest sales in this segment.segment for fiscal 2004. In Japan, DVD recorders, particularly those equipped with a large capacity HDD that we launched in fall 2002, recorded a large increase in sales. Plasmaaddition, home-use plasma displays for home use have rapidly grown, and contributed significantly to sales in this segment. Sales of stereo systems accounted forMoreover, DVD recorders contributed significantly to sales in this segment reflecting a significant portion oflarge increase in sales as well.during fiscal 2004.

We believe the traditional home audio markets of Japan, North America and Europe have matured and accordingly, price competition in these markets is strong. We do not expect the traditional home audio markets in these regions to grow substantially. We believe growth will come from new products, such as DVD-related products and plasma displays. JEITA (Japan Electronics and Information Technology Industry Association) forecasts an approximately 50% increase in consumer DVD player and DVD recorder sales worldwide, from 45 million units in 2002 to 68 million in 2007. It also forecasts that sales of plasma displays worldwide will increase approximately 10 times, from 0.4 million units in 2002 to 4.4 million in 2007. In our DVD business, we are shifting the emphasis from price-competitive DVD players to higher value-added DVD recorders and DVD home theater systems. Moreover, our DVD-related products as computer peripherals have shifted from DVD-ROM drives to recordable DVD drives. In our plasma display business, we continue to promote vigorously promote 50- and 43-inch models of high-definition plasma displays in the worldwide market. Japan Electronics and Information Technology Industry Association (“JEITA”) forecasts an approximately 37% increase in consumer DVD player and DVD recorder sales worldwide, from 62 million units in 2003 to 85 million in 2008, and strong growth in recordable DVD drives from 23 million units in 2003 to 88 million units in 2006 worldwide. It also forecasts that sales of plasma displays worldwide will increase approximately 8 times, from 1 million units in 2003 to 8 million in 2008.

Car Electronics:

This segment includes car stereos, car CD players, car MD players, car DVD players,AV systems, car speakers and car navigation systems.

Sales by productOverall, car stereos accounted for the largest sales in this segment for fiscal 2003 in Car Electronics are as follows: Car CD players2004. In Japan, our car navigation systems accounted for the largest sales, while overseas car stereos accounted for the largest sales in this segment. In Japan, our car navigation systemsSales based on OEM accounted for approximately half of sales32.3% in this segment.

Both in Japan and outside Japan, sales in this group are generally made in the consumer market and to automobile manufacturers on an OEM basis for installation in new cars on production lines or as optional parts. Sales in this category are gradually shifting from the consumer market to the OEM market, as automobile manufacturers place greater emphasis on differentiation of their cars. Our strong brand recognition in both markets is helping us maintain our leading market share of car electronics products on a global basis. We became the first manufacturer in the world to introduce car navigation systems for the consumer market when we launched our first car navigation systems to the Japanese market in fiscal 1991, and since then have maintained a leading position by offering affordably-priced and easy-to-operate DVD-ROM and advanced HDD-equipped models. We plan to expand this business in Europe and North America, where the markets are expanding recently. JEITA forecasts that sales of car navigation systems worldwide will increase approximately 2.52 times, from 4.15.2 million units in 20022003 to 11.410 million in 2007.2008. In November 2002, we released in the consumer market the world’s first car navigation system that incorporates a data communication module for access to the latest map data. In the car audio business, we also strive to widen our market share with new products and innovations, such as car CD players with OELOLED displays and in-car entertainment systems. As we keep introducing innovative car electronics products, we will continue to seek to distinguish our products from our competitors.

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Patent Licensing:

This segment includes the licensing of patents related primarily to laser optical disc technologies.

Most of the royalty revenue from this segment is obtained from licensing patents relating to laser optical disc technologies that are held by Discovision Associates (“DVA”), our wholly-owned U.S. partnership. The legal protections afforded these rights have a limited duration under applicable laws, and the length of protection varies from country to country or by region. Although a significant portion of these patents have expired in certain countries/regions such as Japan and Europe, some have not expired and remain valid.DVA continues to collect royalty revenue. We are currently seeking to develop new sources of revenue by acquiring patents held by third parties and licensing such patents, and also by licensing patents for third parties as a licensing agent.

Royalty revenue from Patent Licensing of digital playback/recording equipment, such as CD-ROM and CD-R drives, accounted for a substantial portion of revenue in this segment in fiscal 2002. In addition, patent licensing of digital discs contributed significantly to royalty revenue. As world PC market sales continued to slump, our revenue from patent licensing was negatively affected in fiscal 2003. Additionally, a number of these patents in Europe and Japan expired at the end of fiscal 2003, further resulting in a substantial decrease in royalty revenue.patents.

Revenue from the Patent Licensing segment is substantially less than from our other segments, constituting less than 2% of operating revenue for fiscal 2003.2004. However, the contribution of this segment to our operating income is substantialsignificant compared to its contribution to our operating revenue, constituting approximately 35%26% of our operating income in fiscal 2003.2004.

Others:

This segment includes products primarily for business use, such as DVD-R/RW drives, DVD-ROM drives,business-use plasma displays, business-use AV systems, OLED display panels, factory automation systems OEL display panels,and devices and parts.

Devices and parts, DVDs, LDs, prerecorded videocassettes, CDs, and optical disc manufacturing systems.

Sales by product for fiscal 2003 in this segment are as follows: DVD-R/RW drivesincluding semiconductors related to laser pickups, accounted for the largest sales in this group. DVDssegment for fiscal 2004. Factory automation systems and business-use plasma displays also contributed materially to sales in this segment, due mainlysegment.

OLED displays, which are particularly well-suited for small size displays, such as cellular phone displays are expected to become the expansion of the DVD player market, especially in Japan.

Our computer peripheral sales have shifted from DVD-ROM to DVD-R/RW drives.next generation display. In fiscal 2001,2000, we began supplying DVD-R/RW driveswere the first in the world to PC makers on an OEM basis. The DVD-R/RW drives can record, both on a write-once DVD-R disc and a rewritable DVD-RW disc, up to seven times as much data as on a CD-R or CD-RW disc.mass-produced four-color OLED displays. In fiscal 2002,2004, we launchedstarted supplying passive-matrix full color OLED display panels in cellular phones. To strengthen our market position, in fiscal 2001, Tohoku Pioneer Corporation, Pioneer’s majority-owned subsidiary, established a Pioneer-brand DVD-R/RW drive, the world’s first model that readsjoint venture company, ELDis, Inc., in fiscal 2001 with Semiconductor Energy Laboratory Co., Ltd. and writes data on all DVD-R, DVD-RW, CD-RSharp to develop and CD-RW discs. In fiscal 2003, we introduced new DVD-R/RW models which are capable of 4X recording for DVD-R discs and 2X recording for DVD-RW discs, respectively. JEITA forecasts strong growth in write-once/rewritable DVD drives including DVD-R/RW drives, from 5.5 million units in 2002 to 52 million units in 2005 worldwide.manufacture active-matrix full-color OLED displays.

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Principal markets

The following table sets forth our operating revenue from unaffiliated customers by geographic market for the respective periods indicated:

Operating Revenue by Geographic Market
(In millions of yen, except for percentage amounts)

Note:

Operating revenue by geographic market represents revenue from unaffiliated customers, based on the geographic location of each unaffiliated customer.

Seasonality

Global sales of the consumer electronics products are seasonal. Sales for the third quarter (ending December 31) of each fiscal year are generally higher than those of other quarters of the same fiscal year, due to increased demand during the year-end holiday season. In Japan, sales of car electronics products generally increase in the summer months, due to increased car usage for summer vacations.

Marketing channels

We sell our products to a large number of retailers and distributors through our sales offices in Japan and through Pioneer’s sales subsidiaries and independent distributors outside Japan. In addition, we market certain products, such as car electronics products and DVD-R/RWrecordable DVD drives, on an OEM basis to other manufacturers for resale under their own brand names. Our business is not materially dependent upon any particular customer or group of customers. Most of our sales are made from inventory rather than against customer orders. Our products are generally are sold under our own brand names, principally “Pioneer.”

After-sales service

We maintain a policy of providing repair and other services in the countries where our products are sold. In Japan, after-sales service is provided through Pioneer’s wholly-owned service subsidiary, Pioneer Services Network Corporation (PSN)(“PSN”), and authorized servicing companies. Pioneer established PSN in April 2000 to enhance the efficiency of our operations for after-sales services and to offer such services with higher quality. In countries where Pioneer’s subsidiaries are located, such as the United States and certain European countries, after-sales services are provided by such subsidiaries or through their authorized independent servicing companies. In other countries, such services are generally performed by our local distributors.

In line with general industry practice, most of the products we sell to consumers are provided with a warranty for free repair work, generally for a period of one year from the date of purchase. Parts are kept available for after-sales service for a period ranging generally from two to eight years after discontinuation of production, depending on the characteristics of the parts.

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Raw materials and sources of supply

We purchase a variety of raw materials and parts for use in the manufacture of our products. We generally maintain two or more suppliers to prevent a shortage of raw materials and parts. In accordance with corporate policy, however, we develop and manufacture certain key parts internally for our products, including plasma display panels, laser pickups and certain integrated circuits (ICs)(“ICs”) and large-scale integrations (LSIs)(“LSIs”). We also purchase certain completed products, then sell them under our own brand names.

No single source accounted for more than 5% of total supply purchases in fiscal 2003.2004. We have not experienced any material difficulties in obtaining raw materials, parts and products and believe that we will continue to be able to obtain them to meet our needs.

Semiconductors account for the largest percentage of parts purchased in fiscal 20032004 (on a yen basis), representing approximately 40% of our total purchases. We purchase semiconductors from various suppliers, mainly pursuant to the terms of our basic supply agreement. Our basic supply agreement generally has a term of one year, with an automatic renewal clause. Where we do not have two or more suppliers, we seek longer term contracts or bulk purchases and place our order 3three to 4four months earlier than our usual practice to reduce the risk of being unable to obtain key parts. We purchase a portion (approximately 10%) of our semiconductor parts, which are custom-made for our needs in accordance with our designs and specifications, from STMicroelectronics N.V. While we do not currently have an alternative source for the type of semiconductors supplied by STMicroelectronics N.V., we have entered into a strategic alliance with STMicroelectronics N.V. to secure a stable source of supply.

The political instability in the Middle East affects the stable supply of petroleum which may cause an increase in the price of plastic materials used in our products. In addition, the rapid economic growth in China may cause a shortage of steel materials and nonferrous metals. We continue our effort to procure a stable supply of these materials and maintain costs at appropriate levels.

To date, the prices of parts and other principal raw materials used by Pioneerus to produce its products have remained relatively stable.

We plan to increase the percentage of raw materials and parts we purchase through online network systems, including the Internet. We believe this will contribute to more timely manufacturing and a decrease in production costs.

Patents and licenses

We hold a variety of patents, including those relating to laser optical disc technology, in Japan and other countries, while we in turn are licensed to use a number of patents owned by third parties. We consider certain patents licensed from third parties to be important to our business. In particular, the patents licensed from Dolby Laboratories Licensing Corporation, U.S.A. for such devices as noise reduction, from Koninklijke Philips Electronics N.V., the Netherlands for CD products and LD products, from Thomson Licensing S.A., France for CD products and LD products and from MPEG LA, L.L.C., U.S.A. for digital video products, are utilized in products accounting for a substantial portion of our net sales. Termination of such license agreements would have a material adverse effect on our business, although we have no reason to believe that such termination will occur.

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Competition

We believe that we compete successfully and that we have aare one of leading market positioninnovators with respect to car electronics, plasma displays and DVD-related products. Our products, however, are exposed to intense competition in Japan and overseas. Our competitors, which vary in size, area of distribution, range of products and financial resources, are principally companies based in Japan and Europe, some of which are large, integrated home electric or electronic appliance manufacturers having substantially larger capital resources than we do.us. The electronics industry in general has been subject to substantial price competition in light of decreased demand. In addition, electronics companies in Asia, particularly those from Korea and China, pose a severe threat through price competition. To counter this intense competition, we place great emphasis on extensive marketing to stimulate demand for innovative and value-added products. Furthermore, we concentrate our efforts on technological research, quality control, sales promotion and the lowering of production costs by increasing procurement of parts and products made outside Japan and other measures. See also “Item 3.D. Risk factors — factors—Competition generally, and especially on price and standardization of products, may adversely affect our business results and financial condition” and “Item 4.B. Business overview — overview—Strategy.”

Import restrictions

In certain areas of the world, our products encounter tariffs and other import restrictions. Tariffs applied to our products vary depending upon the classification of such products and the countries into which such products are imported. Import restrictions, such as prohibitions on imports of certain products, vary from nation to nation. To respond to this situation, we manufacture our products in certain locations outside Japan as well as commissioning their production to independent manufacturers.

Governmental regulation

Our business activities are subject to various governmental regulations in countries in which we operate, including regulations relating to business/investment approvals, export regulations including those related to national security considerations, tariffs, antitrust, intellectual property, consumer and business taxation, exchange controls, and environmental and recycling requirements.

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C. Organizational structure

Our basic corporate structure, including some but not all of our operating subsidiaries, is shown in the following chart:

Note:

Effective April 1, 2003, Pioneer Video Corporation, a wholly-owned subsidiary of Pioneer, established Pioneer Micro Technology Corporation by spinning off its semiconductor business. On the same day, Shizuoka Pioneer Corporation, a wholly-owned subsidiary of Pioneer, merged with Pioneer Video Corporation and changed its trade name to Pioneer Display Products Corporation.

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The following table sets forth the principal subsidiaries owned, directly or indirectly, by Pioneer.

D. Property, plants and equipment

Our manufacturing operations are conducted principally in Japan, Southeast Asia and China. Of the total of 34 plants, 16 plants are in Japan and the remaining 18 are outside Japan. The following table sets forth information, as of March 31, 2003,2004, with respect to our principal plants.

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