Consumer durables TV battleground shifts from price to digital technology
The growing sophistication of the television market is changing the nature of the quest for market share. Christine Chan and Renee Lai report
03/12/98
South China Morning Post
Page 3
(Copyright 1998)
Digital television has emerged as this year's battlefield in the mainland TV wars following two years of bloody price slashing that has squeezed profit margins for many domestic manufacturers.
Reflecting rising consumer demand for better audio and visual performance, major domestic TV companies are convinced that digital television is becoming the name-of-the-game after wide-screen sets.
Nanjing Panda Electronics Co's spokesman Shi Qiusheng said: "TV manufacturers have realised that price competition has done great harm {to their companies} and the focus should be on competition for quality and technology."
Last year, the average price for television sets in the mainland dropped 20 per cent in a sales war triggered by Sichuan Changhong Electronics Group, the mainland's largest TV maker, which first slashed prices in 1996.
Commercial launches for digital television sets are planned this year by major players including Changhong, Panda and Qingdao Haier Group.
Last September, Haier - the mainland's biggest maker of home electrical appliances excluding television sets - launched its bid for the mainland market by selling 13 different models.
The Qingdao-based firm's trial in digital TV products captured the public's imagination for high definition and resolution TV sets.
Haier's new digital product, which it develops in co-operation with Philips, has been hailed by industry observers as a marketing and promotions coup.
"As it was Haier's first foray into the TV market, the campaign was successful and attracted strong feedback from the public. Our products have been hitting the shelves in big cities," a company sales official said.
One of its more popular models - a 25-inch all-in-one set that includes video compact diskette ( VCD ) display functions - is priced to retail at 4,980 yuan (about HK$4,630).
A 29-inch model is priced up to 6,980 yuan, depending on digitalisation features and whether the set offers divided screen and Nicam functions.
Although priced about 1,000 yuan higher than ordinary sets, Haier's products are still cheaper than imports.
Another company official said: "Digitalisation is the global trend in the industry.
"Consumers want higher display and audio quality from digital TV sets. They want to catch up with the market. It's not just a matter of price."
Haier's success with its trial run has prompted the firm and rival manufacturers to step up efforts for bolder product launches this year.
Haier is projecting sales of all models will reach two million sets in 1998, an ambitious figure in the context of a national demand of less than 20 million last year.
Changhong's attempt to launch its own digital TV sets is also being closely monitored by industry players. Wang Junmai, Changhong's assistant to the president, said the group would roll out "several million" digital TV sets this year following completion of its trial run which began in 1996.
The group, which initiated the price wars two years ago in a bid to capture a larger market share, saw its total share rise from 22 per cent in 1995, to 27 per cent in 1996 and 35 per cent last year.
The firm is projecting market share of more than 40 per cent for the current year.
Changhong sold more than six million TV sets last year, accounting for one-third of sales nationwide, boosting turnover to more than 18 billion yuan. Net profit was forecast to grow more than 50 per cent to about 2.6 billion yuan last year.
This year, Changhong hopes to sell more than eight million TV sets, of which 60 per cent will constitute new products, such as digital sets and 38 inch wide-screen sets.
Mr Wang said Changhong's technical and development capabilities allowed it to manufacture digital sets more cheaply than other domestic producers including Haier. Its strategic alliance with Japan's Toshiba Corp has also helped.
"Changhong will launch various models and functions, designed to meet the needs of different groups of customers, with quality comparable to imported products from Japan," he said.
The company will introduce digital models including 25 inch, 29 inch, 34 inch and 38 inch sets. Its digital sets will also provide some computer functions, for example, a display calendar covering 300 years.
"Under the country's Ninth Five Year Plan, Beijing has been encouraging the use of digital technology in TV sets to upgrade and improve display clarity of existing analogue systems," Mr Wang said.
He said the mainland was in a gradual transition towards developing full digital television. Until now the broadcasting backbone in the mainland has been analogue, which is also used in Hong Kong.
It is forecast that full digital TV sets, which receive digital broadcasting signals, will become popular in US households by 2006.
Panda plans a commercial launch of its digital TV sets by mid-year. Mr Shi said the company planned to earmark about 10 per cent of its production for digital sets but the final figure would depend on market demand. Last year, Panda manufactured 1.3 million sets.
Mr Shi said the company would price the new product in a range affordable to middle-class consumers. For example, its 25 inch digital TV set would retail for less than 4,000 yuan, while the 29 inch model would be less than 5,000 yuan.
The country's second-largest TV maker, Konka Group, is taking a different approach. Assistant general manager Chen Xuri said it would avoid the crowded mainland market and opt to manufacture digital sets compatible with US standards for export.
"Competition is too stiff in the mainland. We believe it is worthwhile to develop the internationally recognised digital TV technology for the export market," he said.
Konka's commercial launch will begin next year. Assisting that effort, the company is investing US$10 million in a research and development facility in Silicon Valley, California, this year.
An analyst in Shanghai said the success of the launch of digital television in the mainland would depend on consumer behaviour, because mainland consumers remained very price cautious.
"There are some high-end consumers who will buy the new products, but many will buy big-screen TV sets which are priced reasonably, while rural customers will buy 21 inch or 25 inch sets," he said.
With high television penetration rates reported in major mainland cities, the demand for TV sets will come mainly from replacement and rural markets.
"Television sets are a very mature market and the demand growth is unlikely to be significant," the analyst said. |
