A market report on China’s TV industry in Q1 was jointly released recently by China Video Industry Association (CVIA) and All View Cloud (AVC), a leading data company of China. The report goes through the performance of China’s TV industry in Q1 and forecasts possible market opportunities down the road.
Peng Jianfeng, Secretary General of CVIA, points out that, China’s TV industry is adopting a quality-driven growth pattern to replace the previous quantity-driven one, amid China’s slowing economic growth, sluggish real estate market, swelling middle class and popularization of audiovisual terminals. Currently, the top priority of this industry is consumption upgrading, which involves (1) size upgrading, with size of TV in the living room up from 40+ to 50+ and bedroom from 30+ to 40+, (2) function upgrading, through a transformation from analog TV to smart TV and HD TV to UHD TV, (3) and demand upgrading, through promotions of 70-inch and bigger QLED TV, OLED wallpaper TV, 100-inch ultra-short throw laser projector TV, SRS Sound bar, etc., meeting the rising demand of China’s middle class and affluent class. Under high pressure posed by a hike in cost of core components, raw materials and labor, this sector must be very cautious to avoid price battles. In the long term, undercutting each other does no good and it is the value competition that enterprises should turn to on their way of industrial upgrading and sustainable development.
Weng Zhenhua, General Manager of Brown Goods Division of AVC, shares his analysis on market performance of China’s TV industry in Q1. According to him, fueled by a drop in panel price, active involvement of Internet enterprises and continued price battles, the market size of TV industry exceeded 50 million units in the past 2016, up by 7.8% year-on-year. In 2017, enterprises face high cost pressure posed by a rise in panel price. Yet there’s still room for market growth as foreign-invested brands step up their efforts in market expansion and more Internet brands get involved. In Q1 2017, China’s TV industry has witnessed sales volume of 11.79 million units, down by 5.2% year-on-year, and sales of 38.9 billion Yuan, a year-on-year rise of 1.8% thanks to a climb in average price brought by rising cost. This sector demonstrates the following features:
Foreign brands picked up amid the shrunken market in Q1 2017. Statistics from AVC suggest that, foreign brands took a market share of 16.2% in Q1, a year-on-year increase of 5.8%. Sharp, of all, secured the most dazzling performance. Foxconn’s acquisition gives Sharp an edge with integrated resources along the industrial chain. And with more investments put in advertisements and promotions, it achieved a year-on-year growth of 42.6% in Q1. Market share of Internet brands went down by 4.1%, accounting for 10.8% of the market.
More Internet brands entered the market in Q1. Loaded with contents from its own online TV platform-MGTV, IMGO TV integrates Skyworth as the manufacturer, Gome as the distributor and Everbright as the investor. FFALCON, built on advantages brought by TCL’s industrial chain, meets users’ demand in both hardware and software. These Internet brands bring new energy to the industry, and are expected to unleash market demand after their promotions kick in in April.
This industry has never stopped its pace of technological innovation. New models released in spring are expected to set the trend of technological innovation in 2017. With 157 released in store and 165 online, the number of new models on the market is less than same time last year, yet they embody technologies of more diversity. Artificial intelligence becomes a buzzword and has been frequently seen in new products rolled out in 2017, such as Mi’s 4A series, Changhong’s Q5N series, TCL’s XESS series, Leshi’s Unique series, Lenovo’s i3 series, and Whaley’s A series. They are loaded with smart functions such as voice identifying, content identifying and recommending and are capable of self-learning.
With rising cost of panels yet little bargaining space of terminal products, the market shrunk both online and in store in Q1. According to statistics from AVC, traditional promotions at special occasions such as New Year, Spring Festival, and World Consumer Rights Day fail to power a growth as much as usual.
The skyrocketing surge of online market slows down due to a slower growth rate of China’s Internet users, and online platforms’ rapid offline expansion in small cities and towns. To date, Suning.com registers 2500 stores across China, while JD.com owns 1000.
According to AVC, online market size of TV industry registered 3.59 million units in Q1, accounting for 30% of the whole market, a slight increase of 0.6% year-on-year. Offline market saw continued fall.
(1) Larger size
Rising panel price doesn’t stop TV industry’s pace to go bigger. For large size TVs, panel cost remains to account for around 30% of all cost. But for small and medium size TVs with panel cost accounting for 50%, the pressure is high. Statistics from AVC suggest that, the market share of large size TVs (55 inches and bigger) took up a market share of 36.4%, up by 9.7% year-on-year, of which that of 55-inch products increased by 6.8%. For medium and small size TVs (50 inches and smaller), the market share dropped by 8.7% year-on-year.
(2) Edgy industrial design
According to AVC, 32% of consumers care the style of TVs. In Q1, products with typical industrial designs expand their presence: TVs with curved panel accounted for 6.9% of the market, a year-on-year increase of 3.8%, and ultra-thin TVs took up 2.2%, up by 0.8% year-on-year, while frameless TVs made up 1.3%, a year-on-year rise of 0.2%. Split design is setting the trend of TV industry in 2017, with a market share of 0.5% in Q1, up by 0.2% year-on-year. Color wise, gold tone products accounted for 11.1% of the market, a year-on-year rise of 6% while rosy gold tone products made 5.0%, up by 5% year-on-year.
(3) Bigger memory
Currently, the memories of TVs are mainly 4GB and 8GB. An upgrade in memory paves the way for the expansion of smart TVs. In Q1, smart TVs accounted for 84% of the market, up by 7% year-on-year. Households using TV per month registered 76%, and the average operating hours per TV posted 89 per month. As the consumer base expands, the value of TVs is transferring from traditional TVs to smart TVs.
Weng Zhenhua believes that, a low supply of panels gave rise to a hike in panel cost. And this hike posed high pressure on finished product makers and as a result, led to a weak start of TV industry in Q1 2017. Starting from April, TV industry is set to launch a new round of promotions. It is expected that, the June 18th promotion festival will drive up the sales significantly. Sales volume of Q2 is estimated to reach 11.24 million units, a year-on-year rise of 1.5%, and sales to reach 35.1 billion Yuan, a year-on-year rise of 7%.
Cui Jilong, Senior Research Manager of Industrial Chain Division of AVC, shares his view on the panel market, pointing out that, panel cost takes up an increased proportion of as high as 60% in the cost of TVs, which consolidates its position in the supply chain and provides a possibility of dividing the current industry pattern. Cui believes that there’re risks in front of the panel sector: on one hand, production lines of the 10th generation or later have been used to great length, yet the possibility of fully consuming these capacities is low; on the other hand, the big fluctuation of panel price in short cycle will lead to a swing of profit for enterprises, resulting in an unsteadiness that could pose negative effects to the industry in the long round.