How can China's TV industry, which is caught in a state of internal involution, save itself and others?

Users are walking away from their TVs with disdain.

In 2012, the average daily usage time of smart TVs was 164 minutes, but in 2019, this figure was only 117 minutes. Compared with TVs that can only be used to watch long videos, users still prefer mobile phones. Data shows that a large number of users still choose to watch movies and TV series on their mobile phones even when they are at home.

Sales volume declines, users flee, and the color TV industry is caught in a state of internal competition

Involution, also known as "overcrowding", originally refers to "under population pressure, farmers continue to increase labor input in the rice planting process to obtain higher yields. However, the ultra-intensive labor input has not brought about a proportional increase in output, and the marginal return per unit of labor has decreased."

This was originally a difficult sociological term, but because many people today can personally experience this social phenomenon, it has become a "hot word" on the Internet. The involution of education, manpower and other aspects has made everyone in it feel stressed.

The same is true for China's color TV industry.

After entering the stock market, the color TV industry has basically settled down. In 2016, the retail volume of color TVs in China exceeded 50 million units for the first time, reaching 50.89 million units. At that time, some industry insiders optimistically predicted that the sales volume of color TVs in 2017 would exceed 53 million units. However, the reality is that since then, the retail volume of color TVs in China has turned around all the way, and the scale has never touched the ceiling of 50 million units, but has repeatedly fluctuated between 45 million and 48 million units.

With the size of the cake fixed, the industry quickly entered a state of super internal competition where everyone was competing to the bottom line.

As TV technology continues to innovate and panel sizes continue to rise, the average price of color TVs in China has been falling. In 2019, the average price of color TVs was 2,809 yuan, down 9.4% year-on-year, the lowest in a decade. Compared with 2015, the average price of color TVs fell by more than 500 yuan, a drop of 16%.

What's even more frightening is that the number of color TVs owned has decreased for the first time, with the number of TVs per 100 households falling to 119, a year-on-year decrease of 2.5%.

Why has the color TV industry become so inward-looking? How should the Chinese color TV industry save itself and others in this situation?

The profits of white and black appliances are inverted, is it just because white appliances are not involutionary?

The market size has shrunk and users' purchasing desire has decreased. But strangely, since 2013, China's TV industry has continued to welcome new players.

Xiaomi, LeTV, Fengxing, Baofeng... Even the TV market, which has become a completely red ocean in the past two years, has welcomed a series of cross-border players from mobile phone brands such as Huawei, OnePlus, and OPPO.

However, unlike the mobile phone industry, the TV industry is more homogenized. In recent years, mobile phone brands have gradually stepped out of the homogenization quagmire by virtue of their technological accumulation. Xiaomi's AIoT, Huawei's night scene and zoom photography, OV's selfie and fashion have all become the basis for brands to enhance their premium capabilities.

In contrast, the color TV industry has made almost no technological achievements and is still at the level of "all relying on suppliers" for technology. The cruel internal competition is inevitable.

The negative consequence is that brands continue to break through the bottom price of their products, and they are obsessed with how to lower the prices of their products while providing similar products to their competitors.

Therefore, apart from the industry average price which continues to drop to the bottom, the only thing left is the even more tragic industry net profit margin.

The quality of TV products is actually getting higher and higher. Panels have evolved from CRT to LCD, and now to OLED, QLED, and Mini LED. Chips are also constantly adding AI, picture quality, and even 5G functions. However, the infinite beauty of technology cannot cover up the embarrassment of TV brands with a net profit margin of less than 2%.

In contrast, the net profit margin of white appliances such as refrigerators, air conditioners, and washing machines is as high as 9%, while the net profit margin of small appliances such as ovens and electric kettles is 8%, and the net profit margin of kitchen appliances such as range hoods and stoves can even be as high as 15%. As the king of home appliances with the highest technological content, the embarrassing status of televisions can be seen from this.

Smart TVs involve panels, picture quality chips, intelligent system software, content libraries, etc., so their technological content is naturally not comparable to that of white goods, small appliances, and kitchen appliances, which have not undergone major changes in a century. However, when it comes to the market, their situations are very different.

In fact, a range hood is equivalent to a high-power fan with reverse suction, which sucks in the fumes and then discharges them through a pipe. An air purifier has even less technical content, it is just a fan + filter.

It is no exaggeration to say that if you let someone like Geng Shougong who has certain hands-on skills, he can even build a range hood and air purifier from scratch at home.

But, believe me, just like no one can make a mobile phone at home, no one can make a TV by themselves. You can make the fan motor by yourself, and you can make the chip yourself, can you try?

However, in the home appliance market, due to the extreme involution of color TVs, the technology and profits of black and white TV products have clearly been inverted.

The color TV industry is in a fierce battle. Most of the brands that entered the market in 2015 and 2016 have failed, and Xiaomi is almost the only Internet brand left. However, the manufacturers of white goods, small appliances, and kitchen appliances are doing very well. Although the old air-conditioning brand Chigo has collapsed recently, the overall market structure is stable and the elimination rate has remained extremely low.

So how did the internal circulation of the color TV market come about?

Difficulties both inside and outside: the long road of involution for Chinese TV brands

There is a saying that is very revealing, saying that the reason why super-involution has occurred in China's television industry is largely due to the fact that the domestic television OEM factories' technical strength and production capacity are too strong.

In recent years, the global panel industry has shown a situation where China is advancing and South Korea is shrinking, while Japan is retreating. With the advantages of the entire industrial chain, TV sets manufactured in China account for more than 66% of global sales. Of the 200 million TVs sold worldwide each year, 150 million are produced in China.

More importantly, China's related OEM factories have sufficient production capacity and strong technical capabilities. It is very easy to find a OEM factory in China to produce TV products. The low threshold of zero technical barriers directly set off a new wave of Chinese TV brands after 2014, attracting a large number of mobile phone brands to join the market.

This situation has completely pushed the Chinese television industry into a stage of internal competition, with prices continuing to tilt towards consumers, directly overdrawing the industry's profits and future.

The internal conflicts in the TV industry have always been noticed by white appliance manufacturers, which has led the industry to be wary of the emergence of "cost-effective players".

For example, when a brand known for its “cost-effectiveness” wanted to enter the air-conditioning market, it was unanimously resisted by the white goods industry. Several air-conditioning manufacturers even formed an offensive and defensive alliance and came up with a “weeding plan”, refusing to manufacture air-conditioning products for it.

Therefore, although this brand of air conditioners is manufactured by Changhong and others, it does not have a price advantage among products of the same level, and its quality is also somewhat different from first-tier brands such as Haier, Gree, and Midea, making it unable to make a splash in the market.

Similar to the air-conditioning industry, in other refrigerator and washing machine fields, since high-quality production lines are in the hands of leading brands, it is difficult for emerging brands to find sufficiently excellent OEM factories.

To sum up, the reason why there is no overly fierce price war in the white goods industry is also related to the industry's self-discipline. Facts have proved that only when manufacturers guarantee a certain net profit margin can the industry have a healthy ecology and a long-term future, which also guarantees the long-term interests of users.

Of course, there are also external factors behind the inward-looking nature of China's television industry.

To put forward a more pessimistic point of view, the reason why China's panels and TV terminals are able to surpass Japan and South Korea is largely because Japan and South Korea themselves have given up on this bone that has little meat and is difficult to chew.

Although China's panel industry and foundries have a large number of process patents and strong production capacity, the upstream core technology and production equipment are still in the hands of Japan and South Korea. They have simply delegated the high-investment, high-risk, and high-manpower-demand production links to China.

Japan and South Korea earn huge profits by occupying the upstream technology and equipment positions, and then invest in basic research; while China's process patents are only useful for this production line, and once the route is changed, the patent will be immediately invalidated. To put it bluntly, there is still a huge gap in the industry-university-research route.

In addition, China's color TV brands are big but not strong, and they do not pay enough attention to brand building. Although their products are good enough, they are still unable to compete with international high-end brands such as Sony and Samsung in the high-end market, and can only rush on the road of internal circulation.

Can the Chinese television industry help itself and others and put an end to its internal struggle?

The answer is yes.

The so-called involution, in the final analysis, is to be trapped in an "island" of the stock market, forced by internal competition to continuously increase investment, but unable to obtain more output, unable to use "quantitative change to achieve qualitative change", and the marginal benefit of labor is infinitely approaching zero.

Economists generally believe that there are two main ways to solve industrial involution: 1. Introducing external variables; 2. Upgrading the industry itself.

The simplest idea is of course to introduce external variables, break down silos, and make the pie bigger.

For example, since the domestic TV market entered a red ocean state, brands such as Hisense, Skyworth, and Xiaomi have begun to expand overseas, and even OnePlus TV was directly released overseas. By expanding overseas markets, we can break the constraints of the domestic existing market and invest in a larger incremental market.

Or, through brand building and product upgrading, they can enter the high-end color TV market and earn profits in the high-end market.

Industrial upgrading corresponds to Japan and South Korea's technological blockade of China. In today's LCD and OLED era, Japan and South Korea already have first-mover advantages and have built technological barriers with patents, which are difficult for the Chinese color TV industry to bypass.

However, now that Mini LED technology is about to be launched, Micro LED is recognized as the next-generation display technology. In Mini LED and Micro LED technology, China is not far behind, and may even be able to overtake other countries in display technology.

Of course, both of these points require a lot of time and money, and need to be carefully considered, slowed down, and planned step by step.

However, there are more immediate ways to break the industry's internal circulation and achieve the goal of saving others and ourselves as soon as possible.

That is to win back users by paying attention to user needs, sticking close to usage scenarios, and creating a smart TV software content ecosystem. By iteratively upgrading the system function ecosystem of smart TVs, we can attract more users, expand the market scale, and break the existing market.

OTT can give the color TV industry a second spring, and a software content ecosystem that is close to user needs can also give the color TV industry a third spring.

For example, relevant institutions have pointed out three new tracks for the smart TV industry through big data: education, music karaoke, and games.

In 2020, the online education industry achieved explosive growth, and at the same time, it also gave rise to the demand for education on large screens in living rooms. During the epidemic period at the beginning of the year, the demand for education even caused small-size TVs of 39 to 43 inches to surpass 55 inches and become the most popular TV size.

In addition, educational scenarios will also give smart TVs higher value. According to data from China Research and Development Institute, including K12 education, higher education, adult education and other online education markets, China's distance education already had a market size of 414 billion yuan in 2019. Targeting the education market can make the color TV industry's pie bigger.

Looking at the karaoke market, it is becoming an important living room entertainment scene for smart TVs. In recent years, the number of online karaoke users in my country has been growing. Last year, the number of online karaoke users in my country exceeded 282 million.

The last important scenario is large-screen gaming. In 2019, large-screen console games accounted for 48.8% of the North American game market, while this figure was only 0.3% in China. China has great potential for large-screen gaming in living rooms.

Moreover, gamers are the least Buddhist. In the eyes of gamers, 8K, 120Hz, HDR, and HDMI2.1 are not just parameters, but their actual gaming performance. Therefore, when the average price of TV fluctuates around 2,000 yuan, the average price of gaming TVs has remained stable at more than 6,000 yuan.

In fact, with giants such as Alibaba, Tencent, Huawei, Google, Nvidia, Microsoft, and Amazon entering the cloud gaming market, streaming games have also begun to take shape.

Compared with traditional console games, cloud games have no hardware threshold and cost, can run smoothly on smart TVs, and the format of no download and installation required further lowers the threshold. Smart TV users can play 3A games on PC with zero money and time cost, and get a better gaming audio and video experience on a large screen. It must be said that it is extremely attractive to players.

It is not impossible for the Chinese TV industry to escape the curse of internal circulation and achieve the goal of saving others and saving itself as soon as possible. In the long run, it is necessary for every industry to focus on building brand power, impacting the high-end market, and entering the overseas market; increasing R&D efforts, achieving industrial upgrading, and breaking through the core technology blockade of external forces.

At the moment, stopping the price war is the first step to end the internal circulation. We should attract users with applications and content that are close to user scenarios, break the homogeneity and decorative nature of color TVs, and let users return to the big screen in the living room, so as to achieve "saving others" and ultimately "saving ourselves", break the diminishing marginal benefits of the color TV market and get out of the internal circulation dilemma.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.