The television industry is facing a challenging period as panel prices continue to rise, leading to a slump in demand and profit margins plummeting below 1%. The first half of the year has been particularly tough for the color TV sector. Despite these difficulties, the brand landscape isn't uniformly affected. Data from Ove Cloud indicates that active Internet brands and strong domestic traditional brands have seen their market shares decline, whereas foreign brands are expanding. Notably, Philips has seen significant growth, with sales of 1.329 million units placing it first among foreign brands. Its flexible approach has also injected some optimism into the industry.
**Heavy Pressure on the Color TV Industry and Expansion of Foreign Brands**
For the first half of the year, the color TV industry has been under immense pressure. Output data from the Ministry of Industry and Information Technology shows a slight dip in production, indicating an industry operating at a low level. From January to May 2017, color TV output was 0.6 million units, representing a 7.3% year-on-year decrease. Retail sales data from Aowei Cloud reveals that domestic color TV sales in China amounted to 21.81 million units, a 7.3% drop year-on-year.
Profitability remains a major concern. In 2013, the net profit margin for China's color TV industry was 3%, dropping to 1.5% in 2014, and falling below 1% in the first half of this year. The persistent rise in panel prices is a key factor behind the shrinking profit margins. For instance, the 55-inch UHD panel saw a 19% year-on-year increase in June 2017, yet the corresponding TV set prices have either remained stagnant or even decreased by 1%.
Under these pressures, Internet brands and domestic traditional brands have seen their market shares decline. Internet brands now hold 12% of the market, down by 4 percentage points, while domestic traditional brands' share slipped by 0.3 percentage points to 69.1%. Conversely, foreign brands have expanded, increasing their share to 18.9%, up by 4.3 percentage points.
**Why Have Foreign Brands Expanded Amidst Adverse Conditions?**
Three primary reasons explain this phenomenon:
Firstly, Internet brands have struggled collectively. Leading Internet brand Letv has been impacted by financial issues, causing its TV sales to fall. During the 414 E-Commerce Festival, Letv's sales dropped from 549,000 units last year to 386,000 units this year, marking a 30% year-on-year decline. Letv's sluggish performance has dragged down the entire Internet camp, with other brands also struggling due to rising panel prices and diminishing Internet dividends. Consequently, the 4 percentage points lost by the Internet camp were largely captured by foreign brands.
Secondly, foreign brands have adopted effective strategies. Represented by Philips and Sharp, these brands have expanded through competitive pricing and multi-dimensional distribution channels, achieving notable success. Ove Cloud data shows that the price-to-market-average ratio of foreign brands in June 2017 was only 1.29, compared to 1.72 in the same period in 2016. Factors like price, channels, and brand strength have enabled some foreign brands to gain momentum, particularly Philips TV. Sales from January to June reached 1.329 million units, topping foreign brands.
Thirdly, foreign brands possess a supply chain advantage. Internet brands and most domestic brands face significant challenges in the panel and manufacturing supply chains. Here, foreign brands have a distinct edge. For example, Philips enjoys stable, high-quality upstream panel and production capacity provided by LGD, Samsung Display, Panda Electric, and TPV. Philips' upstream competitiveness is robust. Similarly, Sharp, supported by Foxconn, has integrated its upstream and downstream supply chain. Among domestic brands, only TCL rivals this capability. Thus, under high-cost conditions, foreign brands maintain stronger overall competitiveness, contributing to the decline in traditional domestic brands' market share and the rise of foreign brands.
**Three Key Insights from the TV Industry**
Compared to previous trends, foreign brands like Philips have shown noticeable recovery over the past two years. While Internet brands aim to disrupt models and domestic brands debate technological directions, foreign brands appear more pragmatic. Philips serves as a prime example, employing flexible and efficient strategies.
Firstly, Philips doesn’t pin its bets on a single technology. Domestic brands like Hisense, Skyworth, and TCL advocate for different display technologies—laser, OLED, and quantum dots respectively. Unlike Philips, which covers multiple popular technologies including OLED, quantum dots, HDR, and curved screens, ensuring adaptability to market changes.
Secondly, Philips emphasizes core technology accumulation. Beyond common technologies, Philips has proprietary black tech enhancing visual quality and reducing blue light harm, winning industry accolades and consumer affection.
Lastly, Philips operates locally with接地气pricing and localized content management, setting a benchmark for foreign brands in China.
In the second half of the year, anticipated panel price corrections could alleviate industry costs, potentially narrowing sales declines. Under these circumstances, the industry should refocus on strategic adjustments across product, technology, channel, and marketing dimensions to boost both profitability and sales volume.
For more information on smart TVs and boxes, visit Sofa Butler, China’s leading resource for TV box and smart TV news.
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