Sales volume drops, costs rise, and the TV industry is going through its toughest test in a decade

Halfway through 2017, the home appliance industry has released relevant performance reports. Among all categories, the TV industry has seen a decline in profits or even losses that have not been seen in many years. What exactly is the reason for the shrinking profits of the TV industry? How long will this situation last? How do the leaders of the leading domestic TV companies respond? Let's take a look at the investigation of the reporter of the financial channel.

TV sales offline and online growth is weak

Zhu Xigui is a salesman in a home appliance store. He has been selling domestic brand TVs for more than four years. At 4 p.m. on Sunday, July 30, it should have been the busiest time, but the store was empty with few customers.

Zhu Xigui, a TV salesman: We have sold 33 units from July to now. Last July, we sold more than 50 units. I have felt a bit of pressure since the second half of last year, since October.

The TV sales industry is getting worse year by year, and the hard work has become the common feeling of offline TV salesmen. The reporter observed that in the store, only four customers entered the store in an hour from 3 to 4 pm on weekends, two of whom consulted with the salesperson, but did not reach a single order. The cold sales situation in the TV industry is not only seen in offline stores, but also in online stores. On a large home appliance sales platform, the number of TV sales has also declined.

Yang Zisheng, General Manager of the Black Appliances Business Department of JD.com's Home Appliances Division: Sales volume has decreased, but sales revenue has increased slightly. Compared with our air conditioners and other categories, the growth is very weak.

According to data monitored by third-party market research company iiMedia Research, in the first half of 2017, China's color TV shipments were 22.51 million units, a year-on-year decrease of 10.8%; retail sales were 75.4 billion yuan, a slight increase of 0.8%, showing an overall trend of decreasing volume and increasing value.

Peng Xiandong, general manager of the consumer electronics division of China Market Research, said that the color TV industry faced unprecedented difficulties in the first half of this year, with overall sales data declining.

The TV industry suffered a setback, and the increase in panel prices was the main reason!

The dismal online and offline sales in the first half of this year are just a microcosm of the survival of TV companies. Recently, several major TV manufacturers in China have released their sales performance in the first half of the year. It can be said that the entire industry suffered a Waterloo in the first half of 2017.

Lai Weide, Chairman of Skyworth Digital: Compared with last year, the situation in the first half of this year has declined in terms of quantity, but has remained basically the same in terms of revenue. This is basically the same as the situation in the national TV market, which is not particularly good and the growth has slowed down.

Chang Dong, assistant to the chairman of Konka Group, said that color TV is still the main business of Konka Group and is facing great industry difficulties.

The sales of several major domestic TV companies in the first half of 2017 were much worse than before. Shenzhen Konka A said in its interim performance forecast that the company's net profit was about 26 million to 32 million yuan, and its main business suffered a certain amount of loss; Hisense Electric's net profit in the first quarter of 2017 was 91 million yuan, down 74.4% year-on-year; Sichuan Changhong lost 176 million yuan in the first quarter of 2017, a 248% increase in losses year-on-year; Skyworth Digital's sales volume decreased in five of the first seven months of this year, and its TV sales in June decreased by 31% compared with the same period last year. Only TCL Multimedia had a net profit of 144 million yuan in the first half of this year, up 63.9% from the same period last year, but as the only company with profit growth, TCL also deeply felt the industry's recession.

Li Dongsheng, Chairman and CEO of TCL Group, said that the current business situation is still difficult because the domestic market is declining and the global market is growing slowly. This decline in growth has brought more intense price competition. From the perspective of the entire industry, this year has been a difficult first half of the year.

So, what exactly caused the industry-wide downturn in the first half of this year?

Panels account for more than 40% of the cost of all TV raw materials, so the rise in panel prices will inevitably lead to a rise in TV prices. According to data from China Market Research, since the second quarter of 2016, TV panel prices have risen by nearly 45%, with the largest increase in the size of 65 inches, with prices rising by more than 60%. In stark contrast to TV companies, the first half of this year has been a very profitable half year for panel companies, with the overall industry profit margin reaching 30%, and all of them have achieved a turnaround or even a significant increase in profits.

Peng Xiandong, general manager of the consumer electronics division of China Market Research: One is that the size has increased and the consumption has increased; the second is that major international manufacturers have shut down the production lines that were previously used to produce large-size LCD TVs; the third is that Japan's Sharp has made great changes in its supply structure. It no longer supplies and sells to Samsung and other large Chinese machine manufacturers, but only supplies itself internally. This has caused a change in the supply and demand relationship, and prices have risen accordingly.

In addition, industry insiders analyzed that the industry's recession this year is unprecedented in the past decade, and Chinese TV companies have experienced a very painful half year. The main reason is the rise in panel prices. In addition to the rise in panel prices, the impact of mobile terminals such as mobile phones and notebooks on TVs has also had a significant impact on the industry. In addition, the recent cooling of the real estate market has also had a certain impact on the sales of the TV industry in the first half of this year.

TV companies are struggling to survive in the cracks, hoping that users will return to the living room

Due to the increase in panel prices, the profits of TV companies have shrunk significantly. In the first half of 2017, Chinese TV companies had a very difficult half year. However, they did not sit still and wait for death, but tried to find a living space in the cracks. Let's take a look at what efforts they have made.

A large home appliance company in Shenzhen is holding a nationwide sales training session for its newly released new product. Remote voice control has become the main feature of this TV. Unlike the previous remote control, which required giving instructions, this TV can meet the user's direct voice instructions without the need for a remote control. It can also control other devices in the living room, such as humidifiers and sweeping robots, through voice.

Zhang Haoran, training manager of Konka Tianjin Branch: The product technology and features are very distinct. We have indeed seen something different in terms of product technology. It can not only be displayed better at the terminal, but also greatly help boost the confidence of direct salesmen.

In addition to voice interactive control, "black technologies" such as face recognition are also beginning to be used on televisions.

Fan Weiji, product management manager of TCL Multimedia Product Center, introduced that through face recognition technology, the TV has already presented relevant information about the star in the picture. On the right is an introduction to some TV series and movies that the star has participated in. The audience can directly choose to watch more TV programs.

In addition to working hard on hardware research and development, in order to cope with the increase in panel prices, TV manufacturers are also working hard to quickly eliminate the original inventory and replace it with larger screens and higher value-added products. In the showroom of a TV store, within the same area, there have been significant changes in the layout of the exhibition this year and last year.

Not only is the average size of offline TVs increasing, but online sales data also shows that the sizes of TVs sold online are getting bigger and bigger. On JD.com, more than half of the TVs sold online are 55 inches or larger. The accelerated replacement of screen sizes by manufacturers is mainly to eliminate the inventory of previous low-profit products. Industry insiders told reporters that at present, the products with relatively high gross profit margins in the market are 55 inches and 65 inches. The rapid update of products by TV manufacturers has also changed consumers' willingness to buy.

According to data from China Market Research, the main size in 2015 was still 32 inches, accounting for about 30% of the market, while 55 inches accounted for less than 18%. By the first half of 2017, 32-inch TVs only accounted for 17% of the market, while 55-inch TVs accounted for 35%. The average size of TVs sold in China has approached 50 inches.

In addition to seeking innovation in hardware, intelligence and other aspects, opening up sales channels has also become the direction of Chinese TV companies' efforts. This is a batch of 65-inch TVs that will be launched in the North American market in October. Their packaging is slightly different from that of domestic TVs.

Zhao Dali, Director of TCL Multimedia's Huizhou TV Factory: In the past, overseas markets, such as long-distance transportation, would cause some LCD glass screens to crack. We have made improvements here by adding cushions or honeycomb panels to act as a buffer.

Each cushion will increase the cost by 1 to 3 US dollars, but in order to better expand the market, such cost must be paid. In the first half of this year, the company mainly relied on overseas strategies to reverse the adverse situation.

Li Dongsheng, Chairman and CEO of TCL Group, told reporters that the growth of the company's overseas business this year is the most important driving force for the growth of its color TV business. In the U.S. market, the company did 1.76 million in the first half of this year, which is the same as the full-year figure last year.

Zhao Dali, who has worked on the front line for seven years, has a deep understanding of this profit growth. The increase in overseas orders has kept the production lines engaged in overseas business in full production, with people stopping but machines not running. Among the nearly 20 production lines under his management, an increasing proportion is tilted towards supplying overseas markets.

Lai Weide, Chairman of Skyworth Digital: In the past two years, we have successively acquired some brands abroad, such as Toshiba's business and factories, which radiate the entire ASEAN region, Metz in Germany, and Startup in Austria, etc. At present, 45% of our products are exported abroad.

As the overall quality of Chinese televisions improves and the Chinese market becomes increasingly saturated, more and more Chinese companies are looking to the world, which will also become an important pillar for the rise of Chinese television companies.

Lin Huanyu, chief analyst of the home appliance industry at CICC Securities: From now on, many Chinese brands have seen a significant increase in their popularity in North America, Australia, and Europe. In addition, with the penetration of sports and culture and entertainment, the local popularity of Chinese brands as a whole and the loyalty of foreigners to Chinese brands have also increased significantly.

The difficulties in the first half of 2017 are not necessarily a bad thing for Chinese TV companies. How to fight back in a market full of uncertainties still leaves more hope for each brand.

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.