The six-month financial picture for China's major television manufacturers is seemingly bright and crystal-clear, with some companies reporting more than a 40% growth in net profits.
After two years of net losses, TCL Corp, which owns the world's largest TV maker, TCL Multimedia Technology based in the city of Huizho, Guangdong province, was back in the black with a net profit of 45 million yuan (US$5.94 million) in the first half. The Shenzhen-based Konka Group, a TV and cellular-phone manufacturer partially owned by France's Thomson SA, said first-half net profit jumped about 43% to 42.47 million yuan. And Sichuan Changhong Electric, one of China's largest TV makers, said its first-half profit rose by more than 50% to more than 190 million yuan.
But the picture is fuzzy for other aspects of an industry that is coping with declining export figures, increased import sales by non-Chinese manufacturers, the demise of the traditional cathode-ray technology, and an unbalanced domestic market for the two competing new technologies.
Xiahua Electronics, a major TV manufacturer based in Xiamen, Fujian province, said it is likely to report first-half losses after a year of net losses in 2006 as it struggles with weak export orders.
Xiahua's losses signal a warning to the other nearly 160 Chinese TV manufacturers as they struggle with an overall drop in TV exports in the first half of 2007. China Customs' statistics showed that China's color-television exports dropped nearly 50% year on year. In the first half of this year, China exported 22.55 million color TV sets, a 48.7% drop from the same period in 2006.
Industry experts blamed yuan appreciation, increased costs of upstream raw materials such as panels, and an increased foreign patent fee, which is now about $10 for each TV set China exports. Many Chinese TV manufacturers are also apparently a technological step or two behind the global market, which is seeing a huge growth in plasma and liquid-crystal sets, one Chinese home-appliance-industry analyst said.
"The global market is undergoing a rapid shift from traditional cathode-ray tubes [CRT] to plasma and liquid-crystal display [LCD] TV products, but a lack of core technology related to flat-screen manufacturing is a problem for most domestic TV manufacturers," said Luo Qinqqi.
Domestic TV manufacturers are also fighting the technology war on the home front, as a similar adjustment is taking place in the Chinese TV market, he said.
According to recent research by the China Video Industry Association (CVIA) and Beijing-based Sino Market Research, in the first half of the year, 38.35 million color TV sets were produced in China. In the domestic market, 17.86 million color TVs were sold, a 4.2% year-on-year jump in the first six months. The sales generated 51.1 billion yuan, up by 11%.
But except LCD TVs, almost all other kinds of TVs including plasma TVs experienced a drop in sales. Sales of CRT sets reached 14.10 million units in China, accounting for 79% of the total, down by 7% year on year, this despite sales of extra-thin CRT TV, which doubled during the same period to 2.38 million units.
Meanwhile, more flat-screen TVs, including LCD units, were sold over the past three years. About 3.34 million LCD TVs were sold in the first half in mainland China, up by 140%, accounting for 18.7% of the total.
It is worth noting that the LCD sales represented 54% of the total sales of color TVs in China, 16 percentage points higher than the sales of the traditional CRT versions.
According to the Ministry of Information Industry (MII), sales of plasma TVs reached 325,000 units in the first half, down by 27.8% from the same period last year. In China, the sales ratio of LCD to plasma TVs has widened to 81:19, the MII said. However, globally the sales ratio of LCD sets to plasma screens is 4:6.
Given the unbalanced sales of LCD and plasma TVs, there will be sharper competition among domestic TV manufacturers to produce LCD TVs, which will also increase pressure to lower LCD prices.
"The unbalanced development of LCD and plasma TVs in China not only doesn't match the global demand for flat-screen TVs, but is also not good for the overall development of color TVs in China," Luo said. "The technology problem also places heavy pressure on TV makers regarding cost controls, largely due to the huge patent fee."
Zhao Bo, a senior official of the MII's electronic-product sector, said he expects a vicious price war to rage among domestic TV makers next year when high-definition TV programs will be broadcast into every Chinese TV-owning household.
Chinese TV manufacturers are also facing pressure from more technologically advanced Western, Japanese and Korean TV makers that have their dropped prices. According to statistics from the CVIA and Sino Market Research, non-Chinese TV makers dropped their prices by about 10% in the first half of 2007, a tactic that enabled them to get more than half of the share of China's LCD market.
In fact, in terms of sales and sales volume, the top seven non-Chinese TV makers are overtaking the top seven Chinese manufacturers.
In the first half of the year, the top seven foreign TV makers, including Philips, Samsung, Proview, the world's fifth-largest LCD monitor maker, and TPV Technology, the world's largest maker of flat-screen monitors, produced 2.72 million LCD TVs. Of those, 68.2% were exported, 24.7% of which went to China.
Cheng Jie, senior research manager of Sino Market Research, also attributed the imported TV makers' success in grabbing more than 50% of China's LCD TV market to their "hard work".
"Apart from cutting prices, foreign TV manufacturers have invested a lot of time and effort in product function, design and sales channels in recent years, which enable them to get a bigger market share in the country's LCD TV market," he said.
Two months ago, Yu Chuxing, manager of an art institution in Guangzhou, bought a 32-inch LCD TV, produced by Samsung, for about 7,000 yuan, which is equal to two months of his salary.
"A foreign LCD brand gives me more confidence than domestic brands due to their better quality and competitive price-value ratio," he said.
Thanks to the increasing number of after-sales service centers set up by foreign brands in the country, Yu also said he is not worried about future maintenance. "In fact, their product quality has ensured the durability of their products, so I didn't think twice about the after-sale service before choosing the foreign brand," he said.