LeEco's acquisition of Vizio shows that Chinese companies are opening international doors in new ways

China has always been a market region that major companies and brands in the world attach great importance to, especially for the technology industry. The country with a population of over 1.4 billion not only has huge market demand, but also plays a leading role in the global sales of products. The productivity base and OEM manufacturing capabilities behind it have also made "made in China" an essential label for most consumer electronic products.

However, under these "halos", the development trajectory of China's local technology brands has always been rather awkward. The lack of core technological competitiveness has often made them just downstream assembly plants and channel dealers of international giants upstream in the production chain. It is common nowadays for a domestic mobile phone or smart terminal product to have only the trademark and all other parts are foreign brands. Going abroad also faces numerous obstacles.

At the end of July this year, LeTV announced that it would acquire Vizio, the second largest TV manufacturer in the United States and the largest smart TV manufacturer, for US$2 billion in all cash. This has created a new breakthrough in how Chinese companies can rewrite their image and role on the international stage.

The combination of LeTV and Vizio is a reshaping of Vizio by LeTV

The core businesses of LeTV and Vizio are both focused on the television field, and both have achieved remarkable results in their respective Chinese and American markets. However, unlike the latter, LeTV not only manufactures TV hardware, but also provides content in almost all areas of concern to users, such as film, television, music, sports, and games, which makes this acquisition meaningful.

Looking forward, whether it is Lenovo's acquisition of IBM's personal computer business or Geely Automobile's acquisition of Sweden's Volvo, there are many cases of Chinese companies acquiring foreign brands. However, we can generally regard the purpose of these initiatives as expanding product lines or absorbing foreign technologies, that is, allowing PC manufacturers to have more PCs to sell and car manufacturers to sell more and better cars. However, it is rare to see how much change Chinese companies can bring to foreign brands during the acquisition process.

It has to be said that one of the main purposes of LeTV's acquisition of Vizio is to completely upgrade this traditional American TV brand. LeTV, which is striving to build an "platform + content + terminal + application" ecosystem, this time also intends to export its own accumulated advantages, which are completely different from traditional TV manufacturers, to Vizio's products.

Now that traditional domestic hardware companies are emphasizing the transformation to the Internet, we can also understand that LeEco is helping American companies complete the process of moving from tradition to the Internet. After the completion of this acquisition of Vizio, LeEco's large-screen ecological platform will have more than 28 million smart TV entrances. It is a foreseeable fact that the number of LeEco's potential members will continue to expand. With this number, LeTV + Vizio will inevitably create product value that has never been seen in the era of traditional hardware manufacturing.

The TV industry's "disruptive development" will be led by disruptors

As the most indispensable electronic product in the family living room and the core role in the future smart home environment, in recent years, TV products can be said to have become a "battlefield" in the field of science and technology. It has led Apple to update Apple TV again after several years, and also made LeTV's acquisition of Vizio the focus of global attention.

In general, the long-standing television industry has passed its peak period of market performance, which has prompted industry giants to try their best to become the game-changers of the industry's second revolution. For example, Apple has shouted "The Future of TV is Apps", hoping to bring new variables by starting with applications.

But from iOS on mobile devices to TVOS on TVs, Apple can provide a good platform for products and services, but this cannot be compared with the content services that users really need, especially when it comes to the issue of "what to watch" that TV users are most concerned about. Even in the United States, Apple absolutely needs to attract "foreign aid" such as Netflix and HBO for Apple TV.

Unlike Apple, LeTV's accumulation of large-screen content resources is almost simultaneous with the production of TV terminals. This may be the important reason why international giants such as Apple, Google, and Amazon have been rumored to have shown strong interest in acquiring Vizio but have not been successful, and ultimately the American TV giants married LeTV.

The ecological development advocated by LeTV enables its products to meet all the needs of users within this ecosystem. Backed by the LeTV ecological system, massive film and television dramas, sports events, and even a large number of 4K ultra-high-definition sources and high-quality games, TVs that can output LeTV content are accomplishing things that previous TVs could not have imagined.

Of course, some people will inevitably say that the core of a TV is always the screen, and this is why Samsung TVs can dominate the world with annual sales of more than 40 million.

But it is also obvious that TV manufacturers including Samsung, which win by screen manufacturing, have unknowingly evolved into the role of upstream suppliers of new-era TV brands like LeTV. In today's highly homogenized hardware world, competition in the manufacturing link can no longer be called the core competitiveness of a brand. Only "breaking the screen" and the competition within the large-screen TV can be regarded as the mainstream voice of the industry.

When consumers buy TVs, they are no longer simply buying a big screen, but rather choosing a set of large-screen smart terminal products that combine content experience. Vizio has become a part of the LeTV ecosystem and has taken the lead in standing on the right side. Just as LeTV's founder, chairman and CEO Jia Yueting believes that the industry leader Samsung will eventually be overthrown, the future of the TV industry's "breakthrough screen development" has begun to tilt towards the more far-sighted side.

In the future, who will have the last laugh?

Since its advent, the development of television has roughly gone through two stages.

First, there is the development at the manufacturing level. From CRT to flat-panel LCD, and from full HD to 4K resolution, what has changed is the product form.

Next is the development at the functional level. The addition of networking and intelligence has transformed the large screen in the living room from a carrier into an aggregation entrance for resources. This is also the stage we are experiencing now. What has changed is the basic attributes of the large TV screen.

Where will the TV industry go next? Perhaps the most noteworthy point is what kind of manufacturers can be called TV manufacturers in the future?

Objectively speaking, TV companies in the future will inevitably need two "production lines". One is the production line for terminal equipment, which is responsible for combining the various parts of the TV together and using the best software and hardware solutions to create products with the best operating experience.

The other is the production line of content resources, which is responsible for presenting the richest content to users on the big screen, continuously updating the resources that users care about, and even creating more diverse gameplay for TV based on terminal hardware.

Observing the overall market environment, LeTV, which has two "production lines", is almost "unique". Precisely because the two "production lines" are progressing in tandem, LeTV has defeated almost all domestic TV brands. The successful acquisition of Vizio by LeTV also means that the international market has gradually realized the advanced nature of LeTV's concepts.

Steve Jobs, the evangelist of the smart technology industry and founder of Apple, once said that companies that fail to keep up with changes will fail. He predicted that the technology industry will encounter major changes every ten years, and more and more industries and companies will undergo earth-shaking changes due to new marketing models and business models inspired by the Internet.

Although Jia Yueting has stated more than once in public that profit is never the main goal, and this view will affect LeTV's future development for three to five years or even ten years, according to the 2016 semi-annual performance forecast recently released by LeTV, operating income is approximately 8.921 billion yuan to 11.152 billion yuan, an increase of 100% to 150% over the same period last year, doubling. Among them, the rapid development of the super TV, which has accumulated sales of about 7 million units as of June 30, 2016 in three years since its launch, played a key role.

What cannot be ignored is that based on the nearly 30 million smart TV entrances that LeEco's large-screen ecological platform will soon have, the number of monthly active users as high as 730 million has exceeded the total number of monthly active users of Twitter and Snapchat. LeTV has been actively cultivating users' paid usage habits and continuously exploring value-added projects such as large-screen advertising. In the first half of 2016, LeTV's membership and distribution business revenue reached 3.109 billion yuan, a surge of 120.94%, and advertising business revenue reached 1.56 billion yuan, an increase of more than 50%.

In fact, it can be inferred that LeTV has all the conditions to achieve profitability by the middle of next year with its single TV business, and it is very likely that LeTV TV will achieve full-year profitability as expected by 2018.

It is true that legendary figures like Steve Jobs led Apple to create a new era of smartphones and mobile communications, and their influence continues to this day. However, when it comes to the large-screen TV, which is the most important in smart life scenarios, it has to be said that neither Samsung, which "sells screens", nor Apple, which "sells OS", may be the best candidates to lead the next generation. LeTV and its ecological development concept represent Chinese companies in drawing a blueprint that is also of subversive significance for the times.

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.