The Times, They Are a Changin’

Back in the day – the old days of black and white – the television market was dominated by American manufacturers like RCA, Motorola and Zenith. As color TV emerged so did Japanese firms like Panasonic, Sharp and Sony that changed public perceptions about Japanese quality to become the most highly-valued brands. These brands dominated all kinds of consumer electronics. More recently, Korean companies like Samsung and LG (formerly Gold Star) have penetrated the electronics marketplace and cut deeply into the market share of Japanese firms. This is a natural business evolution and it’s happening again as Chinese manufacturers are making significant inroads. Today’s names to watch are TCL and Hisense.

It’s an interesting phenomenon. The process begins when established manufacturers subcontract for components from lower cost countries. The subcontractors learn how to produce the products and create their own manufacturing capacity. As they enter the marketplace their lower-cost products gain market share from market leaders. Those upstarts who will emerge as industry leaders invest in research and development to pioneer new ideas, features and value. As market leaders gradually lose market share, they cut back on their investment in innovation leaving themselves vulnerable to further losses. Eventually, new market leaders emerge and establish their own brand reputation as premium producers of innovative quality products. The former leaders slowly drift into obscurity.

Changing Times

Despite the move to flat-screen TVs, television sales have been in decline for several years. According to The Verge, “Sharp just pulled out of North America and sold its branding to Hisense. Sony has considered spinning off its TV division, and Panasonic is closing and selling off its TV factories.” While Bloomberg reports that, “Sony hasn’t turned a profit in its TV business in 10 years.”

The large high-end Korean producers, Samsung and LG, are now the market leaders but even they are struggling to maintain profitability. Meanwhile, Chinese companies, TCL and Hisense are making big plays to take-over.

Alcatel One Touch Pixi.

Alcatel One Touch Pixi.

TCL claims to be the third largest TV manufacturer in the world, reminding people that, “We’ve been making high quality CRT, plasma and LCD televisions for over three decades.” And that, worldwide, TCL sold 18 million TVs last year, compared with typical sales of 6 million units in the U.S. by market leaders. In 2008, Samsung began outsourcing production of its modules to TCL, which also produces Alcatel smartphones worldwide. Meanwhile,Hisense established U.S. distribution agreements with Wal-Mart, Sam’s Club, Costco, and Best Buy. With miniscule market share, Hisense has nowhere to go but up. Hisense recently acquired rights to the Sharp brand.

Time for Innovation

Simply selling low-cost units is not the key to long-term success, emerging manufactures also need to innovate and add value if they are to grow their brand. TCL says they have 35 research centers around the world – including one U.S. facilities in Silicon Valley and through a joint venture lab with MIT in Boston. The company was first to the market with Roku, Smart, high-definition, flat-screen televisions. These innovative sets appeal to growing numbers of people wanting to cut the cable cord and utilize their Internet connection to stream content to their television.

TCL - World’s Largest, 110-inch curved screen Ultra-High Definition TV

TCL – World’s Largest, 110-inch curved screen Ultra-High Definition TV

TCL then garnered a prestigious CES 2016 Innovation Award its TCL 110’’ curved-screen, Ultra High-Definition (UHD) TV. This is a company that’s investing in quality and innovation, in contrast to Japanese manufacturers that are dropping out, or scaling back from the television market.

Chinese electronics companies are no longer content to produce cheap components for the big name manufacturers and they’ve already begun to make their inevitable move into the mainstream, challenging Samsung and LG. Despite its impressive advances TCL, for now, remains virtually unknown in the US market. Hisense is little better known but its expanding sales network is certain to enhance its name recognition. Over the long run, TCL seems to offer a brighter upside due to its focus on innovation. Time will tell, but clearly the times are changing.