OFweek Smart Home Network News reported that the performance of the color TV and air conditioning industries in 2017 was strikingly different, especially given the challenging economic environment. While the air conditioning market flourished with a 9.9% year-on-year increase in sales reaching 49.6 million units, the color TV market experienced a downturn, with sales dropping by 7.3% compared to the previous year, totaling 21.81 million units sold. Despite the color TV market's overall revenue rising by 4.3% to reach 74 billion yuan, companies struggled to maintain profitability due to rising panel costs.
The situation for color TV companies became increasingly dire as panel prices continued to rise, squeezing their profit margins. According to General Manager Weng Zhenhua of AVC’s Black Power Division, the challenges faced by these companies were compounded by the diminishing returns of internet-based marketing strategies, frequent price wars, and the saturation of the market. The influx of numerous internet brands, including those offering low-cost options, has led to significant overconsumption of the market, particularly affecting traditional TV manufacturers.
In 2016 alone, the color TV industry launched 18 promotional campaigns, a sixfold increase from the previous year. These aggressive pricing strategies aimed at attracting consumers by promoting the idea that higher quality could be achieved at lower prices. However, this strategy backfired, as it lowered consumer price expectations and further compressed profit margins for manufacturers.
While the air conditioning industry saw robust growth, the color TV sector found itself caught in a vicious cycle of intense competition. Unlike the air conditioning market, where a few dominant players like Gree dominate the landscape, the color TV market remains fragmented. Major brands such as Hisense, Skyworth, TCL, Changhong, and Konka have struggled to establish pricing power, resulting in ever-decreasing profit rates. The entry of internet TV brands intensified the price wars, pushing margins even lower.
Moreover, China's color TV industry has historically lacked core technologies, leaving it vulnerable in the global supply chain. Key components like panels, which account for approximately 65% of the cost of a TV set, are predominantly controlled by South Korean, Japanese, and Taiwanese firms. Companies like TCL, through its subsidiary Huaxing Optoelectronics, have made strides toward self-sufficiency, but most others remain dependent on external suppliers, limiting their bargaining power.
In stark contrast, white goods such as air conditioners and refrigerators are less affected by these issues. The core technology behind white goods, such as air conditioning compressors and motors, is largely under the control of domestic leaders like Gree, Meizhi, and Welling. This has allowed these companies to maintain stronger market positions and avoid the pitfalls faced by their counterparts in the color TV industry.
Furthermore, white goods serve a more functional purpose, fulfilling essential needs like cooling, heating, and food preservation. Their lack of direct competition with smartphones or computers has insulated them from some of the pressures faced by color TV manufacturers. Meanwhile, color TVs face fierce competition from mobile devices, laptops, and tablets, which have transformed the way people consume media.
As one observer noted, "Color TV companies are fighting a multi-front battle—against international competitors, internet upstarts, rising component costs, and the encroachment of alternative screens." This complex ecosystem has left many traditional color TV companies struggling to adapt, much like a master who underestimated the disruptive potential of shared bicycles in Morocco. The challenges facing the color TV industry highlight the urgent need for innovation and strategic adjustments to secure future growth in an increasingly competitive market."
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