Growth decelerates after strong double-digit increase a year agoA shaky global economy is pulling down the vibrant domestic market in China for liquid crystal display televisions (LCD TV), reducing growth this year to a bare sliver, according to an IHS iSuppli China Research topical report from information and analytics provider IHS.
Domestic consumption of LCD TVs in China is forecast to reach 40.5 million units by year-end, up by the slimmest of margins—a negligible 1 percent—from 40.2 million units in 2012. The exceptionally weak performance is a far cry from the robust 15 percent increase of the market last year over 2010, when LCD TV usage among the domestic population surged to 35.1 million units.
The drop will be short-lived, however, as prospects are set to improve next year. The local LCD TV market is expected to pick up from its currently debilitated state, growing 7 percent to 43.5 million units. Barring any sudden economic headwinds, the China market should continue to expand, with domestic LCD TV usage reaching 53.0 million units by 2016,.
Even with the healthy projections ahead, the stark reversal in 2012 offers a strong contrast to the performance of years past. A distinct chill has set in that has dampened consumption in an otherwise thriving sector, traceable to the tide of negative effects stemming from global economic uncertainties, IHS iSuppli believes.
Three factors, however, will help the market recover next year: economic recovery on the domestic front, stimulus policies from the Chinese government and the continuing decline of LCD TV prices.
Chinese manufacturers continue to churn out sets
In contrast to the large reduction in consumption of LCD TVs among the domestic populace, Chinese output of LCD TVs does not appear to be slackening for the year. Chinese LCD TV manufacturers—producing the sets either for export or for other global entities that hire Chinese makers as outsourced partners—will make an estimated 75.1 million LCD TVs by the end of 2012, up a solid 8 percent from 2011.
Nonetheless, the Top 6 Chinese LCD TV manufacturers continue to lose money in the business. Lacking know-how in core technologies and faced by a strong currency in the Chinese yuan, China’s foremost LCD TV makers are finding it hard to reduce cost and simultaneously develop products for the high end. Companies occupying this highest echelon include TCL, Hisense, Skyworth, Changhong, Konka and Haier.
The difficulties of the Top 6, in turn, are providing unexpected opportunities for the second rung of domestic LCD TV players, such as MTC and Tsinghua Tongfang, to move up. Enjoying lower operating costs, these Tier 2 players are ending up in better financial shape than their rivals at the very top.
Other changes are afoot
Other dramatic changes are sweeping the LCD TV supply chain in China. For instance, so-called semi-knockdown (SKD) and complete knockdown (CKD) service providers have emerged, producing TV boards with integrated chipsets and displacing traditional TV manufacturers from their own game in the process. Another development has seen the weakening of traditional design houses—their role taken over by semiconductor suppliers now able to provide total solutions for TV manufacturers.
Elsewhere, competition within the Chinese LCD TV semiconductor space is intense but extremely lopsided. A single entity—MediaTek of Taiwan—is the dominant player after it swallowed fellow Taiwanese competitor MStar Semiconductor. The combined entity now rules 89 percent of the LCD TV chip space in China, with rival Realtek—also from Taiwan—at a very distant second with 4 percent.
The remaining 7 percent is hotly contested by nine companies—local and foreign alike. These include Shanghai-based Amlogic; Taiwanese players Sunplus Technology, Novatek and Silicon Integrated Systems; French-Italian entity STMicroelectronics via its Genesis acquisition; as well as U.S.-based Sigma Designs via Trident, along with other American firms Pixelworks, Marvell and Broadcom.
Both Qualcomm and Nvidia from California are also contemplating entering the Chinese LCD TV chip market, joining their four American cohorts in making a play for the vast Chinese LCD TV space. The TV chips that go into Chinese-made sets will increasingly peddle sophisticated features, including Internet connectivity, 3-D capabilities and light-emitting-diode (LED) backlight technology.