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Summary
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Abstract
The Chinese manufacturers of low-end color television sets have
been experiencing hardship in the recently years due to lack of
core technologies. The tendency for low-end color televisions
towards homogenization has given rise to the extreme reduction
of profits and the price wars; the Chinese color television industry
does not possess upstream resources and no any complete industrial
chains at all. The research and development of IC of analog TV
demands a large amount of capital, human resources, and time investment,
and also needs the strong supports from semi-conductor industry.
However, there is no enough support from the semi-conductor industry,
and no enterprise is willing to invest human resources, capital,
and time in the technical field. The design of every one of the
CRT TV in China is based on the foreign design. Chinese color
TV manufacturers actually provide the large-scale assembly lines
in the midstream and downstream of the industrial chain. Consequently,
when the low-end color televisions become high homogeneity, the
price wars are unavoidable.
The Chinese color TV manufacturers had once seen some hope due
to the promotion of exports, but the rise of the prices of the
raw materials in 2004 again place the Chinese color TV production
industry in an unfavorable environment. The key spare parts of
low-end color TV are glass bulb, deflection coil, iron and steel,
and ABS engineering plastic, whose prices all are increasing.
The major raw material of glass bulb is glass; most of the glass
bulb production enterprises have built their production centers
in China, which has the largest market and cheap labor. The glass
is mostly purchased in China, but the price of glass keeps rising
because of the rapid development of real estate industry, urban
infrastructure sector, and automobile industry. The rise of the
price of the raw materials can surely be reflected in the products,
which means the price of glass bulb is also rising correspondingly.
The major component of deflection coil is copper, which price
was, from the beginning of 2004 to the first days of March, 2004,
rapidly increased by 30%. The highest price in the London Mental
Exchange was $3055 per ton, a record high in eight years. ABS
engineering plastic uses petroleum as its key raw material; the
price of oil has been skyrocketing due to the uncertain situations
in Iraq, which hit a 21 year record high. Since the situation
in Iraq will still be tense in future, the OPEC will restrict
the output of oil. In turn, the petrochemical industry will inevitably
increase the price of ABS because of the pressure from the price
increase of oil. The price of steel is also going up quickly;
the real estate industry, infrastructural construction, and automobile
industry have all witnessed the rapid growth, and the demand for
steel far exceeds the supply, therefore, the price rise becomes
unavoidable.
Compared with low-end color TV, high-end color TV surely has handsome
profits. The gross profit of low-end color TV is lower than 8%
while that of the high-end ones is 15% at least. The Chinese color
TV production enterprises, long haunted by the problem of low
profits, will surely seek for their chances in the high-end field.
The success in the high-end color TV market requires two preconditions:
one, the availability of the upstream resources; second, the understanding
of the brand resources. The channel resources and low labor costs
are not very important factors.
The importance of the upstream resources of high-end color TV
lies in that such resources are in the possession of few manufacturers,
which makes it scarce and hardly accessible. Almost none of the
domestic enterprise has upstream resources while those foreign
brands possess, at least, one kind of such upstream resources.
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Major Spare Parts of the
Upstream |
Major Manufacturers |
| PDP |
PDP panel board |
Panasonic.Fujitsu, Hitachi.Pioneer
£¨acquisition of the PDP department of NEC£©. LG.Samsung SDI.Orion.Formosa.CPTF
|
| 27 inch-plus CD-TV |
LCD-TV Panel board with
over five generation lines |
| Sharp |
Feb, 2004 |
6 |
| LG. Philips LCD |
3rd Quarter, 2004
|
6 |
| Chi Mei |
1st Quarter, 2005
|
5.5 |
| AUO |
1st Quarter, 2005
|
6 |
| Samsung |
2nd Quarter, 2005 |
7 |
| CPTF |
3rd Quarter, 2005 |
6 |
| QDI |
3rd Quarter, 2005 |
6 |
| HannStar |
4th Quarter, 2005 |
6 |
|
| DLP rear projector |
DMD chip |
Texas Instruments |
| LCD rear projector |
HTPS TFT-LCD Panel Board |
Sony(no exports).Epson |
| LCOS rear projector |
LCOS Panel Board |
Aurora.SpatiaLight.Microdisplay.Brillian.Himax.
Elcos(eLCOS Microdispay Technology).Taiwan Micro Display Corp(TMDC£©.Intel.Sony
|
| Circuit |
Controlling IC |
Genesisi.Pixelworks.Trident.Zoran.Topro.MagicPixel.
Micronas .Oplus |
The problems with the Chinese color TV production enterprises
lie in two aspects: the upstream can not possess key spare parts
while the downstream is no match to foreign companies in terms
of brand image. The advantages in terms of channel and cost, which
we are proud of, play no significant role in big cities. Consequently,
the domestic color TV manufacturers found a new way to seek survival,
that is, to publicize the "concepts" to change the impression
of over-reliance on foreign technology and spare parts in the
past. The concepts such as "high definition" and "digital
TV" become popular almost overnight.
In fact, the best way out is to unite the upstream enterprises
or to purchase the upstream enterprises by capital operations;
if the above are not feasible, the Chinese manufacturers can also
unite the downstream enterprises to gain more favorable conditions
and have more say in the procurement of upstream resources. The
best example of this measure is the merger of TCL and Thomson.
On November 3rd, 2003, TCL and Thomson signed an agreement of
strategic co-operation, which aroused extensive concern of the
color TV industry worldwide. According to the agreement of co-operation,
the two parties will merge their business in color TV and DVD,
and even their capital so as to establish a brand new TCL-Thomason
Electronics Corporation. The TCL-Thomson Electronics will mainly
engage in the development, production, and sale of color TV and
DVD products. The annul output of color TV sets will be more than
22 million with estimated annual sale stands at 18 million, accounting
for 15% of the global color TV market. The corporation is so far
the largest color TV production enterprise in the world.
Although Thomson does not have any upstream resources, the market
formed by this merge is so huge that no upstream manufacturer
can afford to ignore it. On May 18th, Multi-Media Business Department
of TCL held a news conference named "Welcome China's New
Era of Large-screen LCD TV" in Guangzhou, and announced that
it will cooperate with global TV LCD manufacturers and the biggest
home appliance retailers in China, such as Gome, Suning, and Yongle,
to launch a campaign of promoting large-screen LCD TV in China.
The prices of LCD TV jumped after that day, which makes it possible
to buy a large-screen LCD TV with less than 10,000 yuan, a reduction
of some 30%.
Although TCL does not have its special LCD-TV panel, the move
proved that TCL is so confident that it can have access to upstream
resources. Konka soon felt the pressures. On June 1st, 2004, Konka
sent a delegation to visit Taiwan Proview and Teco and seek to
establish cooperation with Teco on LCD-TV and PDP.
In fact, there are plenty of partners with whom we can cooperate,
such as Tatung, the mother company of CPTF, Hansicaili, subsidiary
of Hannstar, Dahui, subsidiary of QDI, Amtran, professional monitor
manufacturer, Sampo, professional PDP manufacturer, and Kolin,
the professional manufacturer of Lcos.
In the era of digital TV, the experiences accumulated by a few
electronics giants in Japan and Europe in analog circuit IC design
are of no significant importance, and the barrier of TV IC design
sustained with their dozens-of-year experiences has been smashed.
The major parts of digital TV, such as MPED decoder, scaler, OSD
and etc, are usually the strongholds of small IC companies. In
the field of MPED decoder, Ali and Mtk (both DVD IC producer in
Taiwan) and Zoran (in U.S.) are all good at MPEG encoder; and
scalers are the patent of LCD controlling IC manufacturers. The
electronics giants even have to unite with these small companies
to produce digital TV, especially the complete solution of LCD-TV.
The WEGA engine of Sony and GIGA of Panasonic, once the proud
of electronics giants, began to devaluate. Since the technical
barrier for accessibility is removed, the strategy of possessing
the upstream resources becomes the only key to success.
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Vertical Markets