5G TV stirs up the market. Has the color TV business become a "drag"?

In 2008, Hisense Electric had its heyday, with its flat-panel TV market share ranking first in the Chinese market for five consecutive years. Hisense Electric is planning to change its company name, which has been used for more than 20 years. According to the 2019 semi-annual report, after Hisense Electric developed and upgraded its laser display technology, its laser TV sales increased by 104% year-on-year.

Recently, Hisense Electric issued an announcement on the proposed change of the company's full name and stock abbreviation, stating that the company will change its name from "Qingdao Hisense Electric Co., Ltd." to "Hisense Visual Technology Co., Ltd." and the stock abbreviation from "Hisense Electric" to "Hisense Visual".

"It needs approval from the shareholders' meeting and relevant industrial and commercial departments before it can be passed. The company has already sent a notice to the shareholders' meeting." On December 5, a relevant person in charge of Hisense Electric's secretary's office told the Times Weekly reporter.

In the announcement, Hisense Electric explained that the name change was to better reflect the company's main business and strategic positioning, meet the company's brand management and brand development needs, and thus enhance the company's influence.

"Hisense Electric does not sound as influential as Hisense Visual, and the name change will also lead to changes in the company's business, which is inevitably related to the transformation of products. But if we do not return to building on existing core products, changing the name will not bring incremental value to the products." On December 5, home appliance analyst Hong Shibin told the Times Weekly reporter.

Color TV business becomes a drag

According to public information on the Internet, Hisense Electric was listed on the Shanghai Stock Exchange in 1997 and is mainly engaged in the research, development, manufacturing and sales of televisions, digital TV broadcast receiving equipment and information network terminal products.

With the intensified competition in the home appliance industry and the entry of Internet companies, the color TV business is becoming a drag on Hisense Electric's development.

According to financial report data, Hisense Electric achieved revenue of 23.644 billion yuan and net profit attributable to shareholders of 265 million yuan in the first three quarters of this year, a year-on-year decrease of 2.91% and 21.1% respectively.

In 2018, the company achieved revenue of 35.128 billion yuan, while its net profit attributable to the parent was only 392 million yuan, accounting for only about 1% of the total revenue.

Regarding the fluctuations in performance, Hisense Electric explained in its annual report last year that demand in the color TV industry was weak. Although the company's TV market share and brand index continued to rise, it still had a significant impact on the company's current scale.

"The entire color TV industry is currently in a transition period of major changes and has shown a downward trend in recent times, but this does not only affect our company," the person in charge of Hisense Electric's secretary's office told the Times Weekly reporter.

As he said, TV manufacturing companies that had reached a certain scale during the color TV bonus period are now experiencing varying degrees of performance fatigue.

In the first half of 2019, Konka and Changhong's net profit excluding non-recurring items was -623 million yuan and -45.998 million yuan respectively, among which Changhong's net profit excluding non-recurring items decreased by 150.7% year-on-year.

According to data released by Aowei Cloud Network in October, in the first half of this year, the domestic color TV market retail volume and retail sales were 22 million units and 64 billion yuan, respectively, down 2.7% and 11.8% year-on-year; it is estimated that by 2020, the retail volume of China's color TV market will reach 45.73 million units, down 2.6% year-on-year.

"The color TV business has now become a burden for Hisense Electric, and even for the entire industry. This is because the color TV industry has relatively thin profits and fierce competition, coupled with the popular Internet TVs as well as communications, mobile phones and other industries that are entering the home appliance sector. Ultimately, color TVs do not have an advantage, and even selling them at low prices cannot effectively increase sales." Home appliance analyst Hong Shibin told the Times Weekly reporter.

Faced with the sluggish development of the industry, Hisense Electric is trying to stabilize its performance by expanding in overseas markets.

In 2015, Hisense Electric acquired 100% of the shares of Sharp's factory in Mexico and the right to use the brand in the rest of the American market except Brazil for five years.

Hisense Electric has also invested heavily in overseas advertising and marketing.

As of 2018, Hisense Electric has sponsored international events such as the 2016 European Cup, the 2018 World Cup European Qualifiers, and the 2018 Russia World Cup, aiming to increase brand exposure in overseas markets.

In the "2018 China Enterprise Overseas Image Survey Report", Hisense Electric ranked second only to Huawei.

However, overseas expansion also brings huge expenses.

Data shows that Hisense Electric's advertising investment during the 2018 World Cup in Russia alone exceeded RMB 1 billion. That year, Hisense Electric's total marketing expenses increased by 24.53% year-on-year, seriously affecting the company's profitability.

5G TV stirs up the market

Faced with the pressure of declining performance, Hisense Electric is also trying to make changes at the technical level.

"The company's current development can no longer be simply defined by electrical appliances. Display and video technologies have become the foundation of the company's development. Previously, it was only televisions in the home, but now the products have been extended to smart homes, smart commercial use, cloud platform operations and other different scenarios. The company's display technology can be used." The person in charge of the secretary's office told the Times Weekly reporter.

At the same time, Hisense Electric is also trying to expand into the OLED field.

It is understood that OLED has the characteristics of self-luminescence and does not require a backlight source, which gives OLED TVs a natural advantage in color. Moreover, without the backlight module, OLED TVs can be made lighter and thinner.

Although OLED technology has good prospects, Hisense Electric still faces tremendous competitive pressure.

On the one hand, as the first company to introduce OLED technology, Skyworth currently has a great advantage in the OLED field; on the other hand, companies such as Huawei and Xiaomi are currently working hard to create the concept of 5G TV, which has a great impact on traditional TV manufacturers including Hisense.

"The market competition brought by Huawei and Xiaomi has always existed, and the company also welcomes competitors to promote industry development. Hisense focuses on display technology and applications. After years of accumulation, the company is still very confident in this regard." The person in charge of the secretary's office of Hisense Electric told the Times Weekly reporter.

Despite this, industry insiders believe that Hisense Electric still needs to speed up its pace.

"Hisense does not have much advantage in competing with mainstream electrical appliance companies because it is at a disadvantage in terms of scale, sales, understanding of new technologies and control over users," Hong Shibin told the Times Weekly reporter.

Hong Shibin believes that Hisense Electric should continue to develop in the direction of intelligence, because the future development of electrical products is nothing more than two points.

First, electrical appliances will truly become smart home ports, whether they are monitors, display screens, mobile phone screens or computer screens, which are the current and future development direction of intelligence; second, the scope of application will expand outward, such as smart streets, smart communities, and even extend to smart societies. Smart appliances will serve as terminal ports for connecting with the outside world.

Wu Zhanghao, vice president of LG Display and director of TV business, predicted that OLED TV sales in China will reach 300,000-400,000 units in 2019, and OLED TV sales in China are expected to reach more than 1 million units in 2020.