Under pressure, foreign capital contrarian growth Philips brings to the TV industry three inspiration
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The color TV industry is currently facing significant challenges as panel prices continue to rise, leading to a decline in demand and a drastic reduction in profit margins. By the first half of the year, these margins had fallen below 1%, making the situation particularly tough for players in the sector. However, it's notable that not all brands are experiencing equal declines. Data from Ove Cloud Network indicates that while active internet brands and traditional domestic brands have seen their market shares drop, foreign brands are expanding their presence. Notably, Philips has shown impressive growth, ranking first among foreign brands with sales of 1.329 million units in the first half of the year. Its adaptable strategies have provided some positive inspiration for the industry.
**Heavy Pressure on the Color TV Industry and Contrarian Expansion of Foreign Brands**
In the first half of the year, the color TV industry faced immense pressure. Output figures from the Ministry of Industry and Information Technology showed a slight dip in production, with January to May 2017 output at 0.6 million units, marking a year-on-year decrease of 7.3%. Retail sales within China also reflected a challenging scenario, with domestic color TV retail volume dropping by 7.3% year-on-year, reaching 21.81 million units.
Profitability has been equally grim. In 2013, the industry’s net profit margin stood at 3%, declining to 1.5% in 2014, and by the first half of this year, it plummeted below 1%. Rising panel prices have been a key factor in squeezing profit margins. For instance, the 55-inch UHD panel saw a 19% increase year-on-year in June 2017, yet the corresponding TV models have either remained static or dropped in price.
Under these pressures, the market shares of internet brands and domestic traditional brands have shrunk. Internet brands now hold 12% of the market, down by 4 percentage points, while domestic traditional brands dropped slightly to 69.1%. Conversely, foreign brands have seen their share expand by 4.3% to reach 18.9%.
Why have foreign brands managed to grow despite the industry downturn? There are several reasons:
Firstly, internet brands are collectively struggling. Leading internet brand LeTV has been impacted by financial difficulties, causing a year-on-year drop in sales during the 414 E-Commerce Festival from 549,000 units to 386,000 units. This decline has affected the entire internet brand segment, with panel price hikes and diminishing internet dividends further complicating matters.
Secondly, foreign brands have adopted effective strategies. Brands like Philips and Sharp have expanded through competitive pricing and multi-dimensional distribution channels, achieving noticeable success. In June 2017, the average price ratio of foreign brands to the market average was 1.29, compared to 1.72 in the same period in 2016. These strategic moves have strengthened foreign brands' positions, particularly Philips, whose shipments from January to June topped 1.329 million units.
Thirdly, foreign brands enjoy superior supply chain advantages. Most internet and domestic brands struggle with panel and manufacturing issues. Foreign brands, however, boast strong upstream capabilities. Philips benefits from partnerships with LGD, Samsung Display, Panda Electric, and TPV, ensuring stable access to high-quality panels and production capacities. Sharp, supported by Foxconn, has also integrated its supply chain. Only TCL among domestic brands matches this capability. Thus, foreign brands remain more competitive in the high-cost environment.
**Three Insights from the TV Industry**
Foreign brands, led by Philips, have made a noticeable recovery over the past two years. While domestic brands debate technological directions and internet brands attempt to disrupt traditional models, foreign brands demonstrate pragmatism. Philips, for example, employs flexible and efficient strategies:
Firstly, it avoids betting on a single technology. Unlike domestic brands with differing views on OLEDs, quantum dots, and lasers, Philips covers multiple popular technologies, including OLEDs, quantum dots, HDR, and curved screens. It also plans to release 8K products by the end of the year, ensuring adaptability to changing market trends.
Secondly, it focuses on core technology development. Philips’ unique technologies enhance picture quality and reduce blue light harm, earning industry accolades and consumer appreciation, especially among families with children and the elderly.
Thirdly, it maintains a grounded approach. Despite its global standing, Philips remains accessible, leveraging localized content management and partnerships with platforms like Penguin TV, Ali Family Entertainment, and PPTV.
These strategies—differentiation, core capability building, and user focus—are key lessons from Philips. As panel prices are expected to correct in the second half of the year, the industry should adjust its strategies to boost both profitability and sales volume. For smart TV enthusiasts, resources like the Sofa Butler provide comprehensive insights into the latest developments in the smart TV ecosystem.