Chinese Firms' Ascendancy in This Market

“More and more people are turning away from television” has been the dominant narrative haunting the television industry for the past few years.

The past few years can be summed up as “sluggish” for the domestic television industry.

According to data from Lottu Technology, the overall shipment volume of the Chinese television market in 2023 was 36.56 million units, an 8.4% decrease compared to 2022, marking a new low in a decade.

However, as we enter 2024, this trend is showing new changes:

On one hand, major panel manufacturers are deliberately controlling production and adjusting their operating rates to regulate supply and demand in the upstream of the industry chain; on the other hand, the “trade-in” subsidy policies for durable consumer goods have been coming one after another, bringing a glimmer of hope to the television industry.

Moreover, the “Double 11” shopping festival is often referred to as a barometer of consumer trends, and for those watching the television industry, this year's Double 11 is indeed worth observing.

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Comprehensive reports from various companies indicate a pronounced structural change in the television market, driven by the younger generation's pursuit of high-quality living, which is no longer limited to simple price comparisons, but increasingly focuses on the technological sophistication and user experience of the products. This shift in consumer mindset is propelling the television industry out of a price war and into a battle for value.

1. Domestic Replacement Runs Parallel to High-End Disruption

This year’s Double 11 has revealed a striking observation on major e-commerce platforms: the presence of domestic brands has surged, while foreign brands are scarcely seen.

Under the wave of technological innovation, the television industry, having experienced the past phase of “over-competition,” is now displaying a clear trend of development this Double 11.

It is worth noting that domestic brands have risen significantly, leading to a marked increase in industry concentration.

According to data from Lottu Technology, despite a year-on-year decline in the overall brand performance of the Chinese television market, Hisense, Xiaomi, TCL, and Skyworth still captured the top four slots, collectively holding a market share of up to 79.0%.

Among these domestic brands, Hisense ranked first in shipment volume for the Chinese television market in 2023 with a market share of 23%; closely following, Xiaomi shipped over 7.7 million units (including Redmi) in 2023, accounting for 21.2% of the market.

Even in the first half of this year, the competitive landscape in the market has not changed significantly, with brands like Hisense and Xiaomi remaining prominent while traditional foreign brands have virtually vanished.

In another dimension, the high-end market long dominated by traditional foreign brands has begun to show signs of loosening.

Although the Chinese color TV market has generally shown weakness in recent years, under the trend where consumers emphasize quality of life, larger and high-end TV products have become the main demand in the market, prompting more domestic brands to step up their efforts.

Omdia predicts that panel manufacturers plan to ship 7.8 million panels of 80 inches or larger in 2024, representing a 35% increase from last year.

In 2024, it is expected that display panels larger than 80 inches will occupy approximately 7% of the total display panel market area, with this ratio projected to grow to 11% by 2030.

Looking back at the downstream television market, in the first quarter of 2024, despite a 0.8% decline in the total global television market shipments, the market for large screen televisions, such as 85-inch and 100-inch models, has experienced rapid growth, driving a shift in product structure. Notably, sales of 100-inch large screen televisions in the domestic market increased by over 300% year-on-year in the first quarter.

Financial reports from companies also reflect the trend of “high-end and large screen.”

For example, according to Hisense Visual (600060.SH) 2023 annual report, the sales volume of televisions of 100 inches and above in Mainland China increased by 266.34% year-on-year, with sales revenue rising by 175.96%.

In fact, the panel industry, after undergoing two to three years of cyclical fluctuations and adjustments, has continually pressed for the clear-out of outdated production capacity, impacting the downstream television industry while leading to a reshaping of the global supply chain and the exit of Japanese and Korean enterprises.

Another example is the continued strong performance of leading panel companies this year.

BOE Technology Group (000725.SZ) reported that its revenue for the first three quarters of this year reached 143.732 billion yuan, marking a 13.61% year-on-year increase, with net profit attributable to shareholders amounting to 3.3 billion yuan, an increase of 223.8% year-on-year; in the third quarter alone, revenue reached 50.345 billion yuan, a year-on-year growth of 8.65%, and net profit attributable to shareholders was 1.026 billion yuan, rising by 258.21% year-on-year.

TCL Technology (000100.SZ) reported that benefiting from the shift towards larger television panels and other product structure adjustments, TCL Huaxing achieved a revenue of 76.956 billion yuan in the first three quarters of 2024, a year-on-year increase of 25.74%, with net profit improving by 6.067 billion yuan to reach 4.443 billion yuan.

In this new cycle, this round of panel industry opening has ushered in a “new era” for Chinese television brands.

While reports indicate that sales of overseas television brands such as Sony, Samsung, LG, and Sharp have also risen during the promotional periods, their market share has markedly declined, now below 5%, marking the most challenging month for foreign television brands in terms of sales.

Overall, under various influences, the Chinese television market has temporarily emerged from its decline and has returned to a growth phase, likely to continue this upward trajectory for the foreseeable future.

2. Rekindling Youth's Love for Television

Chinese television brands are nearing a level of dominance that seems unprecedented.

According to data from Lottu Technology, in the third quarter of 2024, the top eight brands in the Chinese television market—Hisense, Xiaomi, TCL, Skyworth, Changhong, Konka, Huawei, and Haier, along with its sub-brands—had a total shipment volume of 7.8 million units, collectively accounting for 96.1% of the overall market share.

The well-known foreign brands—Sony, Samsung, Sharp, and Philips—have faced considerable challenges, with their total shipment volume less than any one of the top eight domestic brands and their market share falling below 5%.

This was unimaginable over two decades ago.

Why have Chinese television brands “turned the tide”? This transformation embodies a confluence of technological advancements and evolving consumer trends.

From a technological perspective, this year's most popular televisions on Double 11 were undoubtedly Mini LED televisions, a technology that is currently developing at a rapid pace and is highly praised by various television brands.

As an improved LED backlight technology, Mini LED harnesses the advantages of both LCD and OLED, offering higher brightness and finer local contrast compared to traditional LCDs, enabling a more authentic visual experience.

Of course, a good Mini LED television's performance also significantly relies on the manufacturers' “calibration,” with brands like TCL and Hisense employing their unique methods to design Mini LED backlights.

For instance, TCL has developed a display technology called QD-Mini LED, where each light-emitting diode chip has independent LED chip control, allowing for true hardware light control, preventing light leakage, and enhancing dynamic contrast. Similarly, the integration of numerous light-emitting diode chips with quantum dot technology further enhances brightness and color gamut performance.

Likewise, based on Hisense's ULED X technology platform, the E8 series features the Hi-Light optical system, Xin Xin X image processing technology, and Obsidian Professional display technology to achieve comprehensive optimization in terms of contrast, clarity, color, and fluidity.

In the fierce competition between China and South Korea in the display field, Chinese television manufacturers have surged ahead due to their technological revolutions. The latest results show that in the second quarter of 2024, shipments and revenues of Chinese Mini LED televisions achieved breakthrough growth, with total shipments rising 68% year-on-year and revenues increasing 60% year-on-year, marking the first time they have surpassed high-end OLED televisions that have long held a leading position.

In addition to performance upgrades among these domestic television brands, a more relatable approach to engage the younger generation of consumers is through “gaming marketing.”

The concept of “gaming televisions” emerged in 2018, featuring high refresh rates of 120Hz or higher and low latency as selling points. Players using televisions for gaming reportedly experience smoother visuals and enhanced real-time feelings.

In recent years, many television brands have targeted niche gaming audiences, launching relevant products. For instance, Hisense has integrated a dedicated “game mode” into its newly launched product series and introduced AI image quality adjustment features, branding itself as a “gaming companion.” Similarly, brands like Skyworth and Xiaomi have also introduced relevant functionalities aimed at China's nearly 700 million gaming population.

Earlier this year, the immense popularity of the domestic AAA game “Black Myth: Wukong” triggered a wave of television upgrades, with numerous consumers spending thousands of yuan on new televisions just to experience the game.

The new generation is highly individualistic; they are gamers, image geeks, and social enthusiasts in their living rooms... To them, television no longer merely serves as a window for receiving external information; it has become a new social tool for youth, with high-performance large-screen televisions often representing their aspirations for an ideal life.

It can be said that for the new generation of young people, the choices available in acquiring a television can even outweigh the diversity of selecting a drink in a bubble tea shop.

3. The Next Decade: AI Television Explosion

According to the "2024 Double 11 Consumer Insight Report" released by the China International Electronic Commerce Center Research Institute and CSPRC Institute, this year's Double 11 shows that consumers place high importance on “smart” features, with AI becoming a crucial factor in purchasing home appliances.

Data from platforms indicates that during Double 11, both AI televisions, AI computers, and AI smartphones saw transaction values increase by over 100% year-on-year. “Upgrading” has become a significant trend in home appliance consumer habits, and AI has opened new realms of imagination for the television industry.

For users, good picture quality is the primary criterion in choosing a television. An excellent television not only needs to be larger but also must have outstanding picture quality to allow for a truly immersive audio-visual experience.

However, achieving larger televisions while enhancing picture quality is a challenging task, exceeding many people's expectations.

For manufacturers, upgrading picture quality is a comprehensive test of the TV’s image processing capabilities. Only through a “trinity” collaboration of good screens, good chips, and good backlights can truly excellent picture quality be achieved.

Over the past few years, leading manufacturers have been intensely competitive, ranging from traditional LCD to OLED and Mini LED, from hardware and software to algorithms, and from independent picture quality chips to AI models; numerous innovations have emerged merely to fine-tune picture quality to the best standards.

Since the popularity of AI models began last year, the television industry has consistently kept pace with this trend.

To date, mainstream television manufacturers have made relevant strides, with many new products launched this year, such as Hisense's Xinghai model, Changhong's Yunfan AI model, TCL's Universal AI model, and Konka's AI ERA human awareness model. Furthermore, companies like Hisense and Samsung have introduced dedicated AI chips.

For example, the Hisense U8N, equipped with Hisense's self-developed Xinghai AI model, has achieved industry-leading capabilities in aspects of language understanding, text creation, natural conversation, image creation, object recognition, and scene quality. It even secured the top position on the C-Eval evaluation leaderboard on September 20 as the “most powerful model.”

In addition, Samsung's newly released television products this year are equipped with the latest generation of AI chips, with the NQ8 AI Gen3 chip being the latest and most innovative television chip from Samsung, continually optimizing algorithms to drive television hardware and unleash picture quality potential.

However, the actual application of AI in television is currently focused mainly on areas like smart interactions, personalized recommendations, picture quality enhancement, and innovative applications. Due to limitations in hardware capabilities and AI technology, the vast majority of current television AI remains in a primitive exploratory phase.

Yet we can observe that in recent years, virtually every top-end model praised by users is equipped with significant AI capabilities, whether in terms of AI sound and picture optimization or AI interactive experiences, consistently making progress.

Under this new wave of AI technological revolution, while countless potentials lie ahead, the ultimate application point of AI must still revolve around perceptible user experiences. Looking to the future, AI will undoubtedly again transform and revolutionize the interaction experience between humans and televisions.