Introduction
China remains one of the leading manufacturers of flat screen televisions in the world. The great China region is estimated to be supplying close to half of the flat screen televisions produced worldwide. The three main manufacturing hubs in this region include mainland China, Taiwan, and Hong Kong.
These three regions combined manufactured around forty million flat screen television in the year 2010. The world’s demand for flat screen televisions has been fuelled by increasing rates of urbanization. Higher GDP growth rates have also meant that consumers living in developing economies can be able to purchase flat screen televisions (Park 2006). Globally, the flat screen television industry has had mixed fortunes. The global trends vary depending on different factors.
While second and third rate economies are recording an increase in sales, the market in first rate economies has stagnated considerably. Therefore, leading flat screen television manufacturers have had to jostle for the larger market share in developing economies. In china, the flat screen television industry has been one of the fastest growing sectors of the economy over the last decade.
The specifics of this industry are explored in this report. The report covers past, current, and future performances of this industry. The report also covers all other factors that are relevant to the Chinese flat screen television industry.
Market Overview
The global flat screen market has improved by about three percent in the last four years. When it comes to the market share, developing countries account for seventy five percent of the global market. Because most developing countries have not yet ventured into manufacturing of flat screen televisions, they have had to rely on exports.
The Chinese market is buoyed by the fact that its domestic and import markets have grown uniformly. This has made the Chinese market very robust. As of 2010, the Chinese domestic market accounted for seventy four percent of flat screen televisions manufactured in China.
The value of these sales stood at ninety five percent. Improved GDP growth in China has increased the purchasing power of most consumers (National Development and Reform Commission 2011). Moreover, frequent advertising has increased awareness of the flat screen television technology therefore aggravating the switch from the older technology to the new one. All these factors are responsible for the solid market share enjoyed by the Chinese manufacturers in their region.
After recording constant growth over the last five years, the Chinese flat screen market slowed down for the first time last year. This is according to a study carried out by China’s Video Industry association. Last year the sales of these televisions hit thirty nine million. This was an annual increase of less than ten percent.
Over the previous five years the industry has always grown by more than ten percent. This year, the industry is also expected to grow by eight percent (Hao-ting 2012). Industry experts have predicted that this development is as a result of the Chinese market reaching its maturity stage. Therefore, from now on the growth is expected to be more measured and it will no longer be in leaps and bounds. For example during the first half of 2011, the industry recorded a decrease in both volumes and prices.
Drivers and Challenges
The Chinese flat screen television industry has been aided by several factors. One of the key drivers of flat screen television industry in China is the mode of advertising that has been adopted by manufacturers. Previously, the mode of advertising focused on specific brands. Nowadays, advertisement is more focused on the type of technology used to manufacture the television. This specific form of advertising has increased awareness of flat screen televisions. For instance, some flat screen televisions are advertised as suitable for sports purposes.
The other key driver is the opening up of Chinese rural markets. Due to increased globalization and industrialization in China, rural markets are now consuming flat screen televisions at a faster rate. People in rural areas are moving away from the traditional types of televisions. The reason why demand for earlier models was high was because those living in rural areas lacked adequate power supplies or television coverage. Most of rural China is now advancing and this has increased the demand for newer technologies.
China has good relations with the developing countries (Razeen 2012). This has enabled Chinese manufacturers to obtain the lucrative developing world’s market share. On the other hand, the developing countries prefer Chinese products as they are often cheaper compared to the ones manufactured in the Western countries.
The Chinese manufacturers have gone out of their way to establish more permanent links with developing countries. This has meant being involved in the distribution channels of flat screen televisions in these countries.
One of the major challenges affecting the industry in China is the pressure from the west to adopt more robust manufacturing and copyright legislations. The Chinese have been faulted for infringing international copyright laws. This has then cost the Chinese manufacturers possible European and American markets.
The other challenge is the emerging industrial powerhouses in the Asian region. These countries are targeting the same markets occupied by China. This then creates a strain on the Chinese markets and the increased competition has only resulted in losses.
Competition
China’s main competition comes not from the Western Economies but from other countries in the Asian region. Countries like Taiwan and Japan are their main competitors. This is because these countries can also be able to mass produce televisions at low costs. These countries are also more quality conscious making their brands more popular in countries with tougher industrial laws
Domestically, the Chinese market is grappling with low quality products that are brought about by weak counterfeit laws. Their manufacturing standards are also wanting. Rivalry among manufacturers in China has meant prices have gone lower.
This competition has driven down the quality of local flat screen products. These price wars are making it harder for Chinese manufacturers to compete with the quality of televisions from neighbouring markets.
Trends
Internet penetration in China has reached an all time high. Despite of the regulations that come with internet use in China, many people have embraced various internet applications that might be integrated with television technology. This has prompted the need for some of the technological revolutions that come with flat screen televisions.
The need by individuals to own the latest technology has supported China’s flat screen industry in a big way. This is because technology is changing at a very fast rate. Whether it is from LED to LCD or from intelligent to three dimensional pictures, these changes are guaranteed to keep people frequenting television stores.
Advancing technology has also affected the industry in a negative way. This is because alternatives to television are not always replacements. Almost every technology that comes up today has built-in television capabilities.
Examples of these technologies include mobile phones, I-pads, and laptops among others (Drell 2011). This means potential customers can decide to settle for alternative technology that does not include television. This trend may cancel the effects of changing flat screen technology.
Major players in the Smart TV market in China have predicted that this trend is about to take off in a major way. China is a lucrative market for smart television as it has the biggest television audience in the world (Daily Prime News 2011).
Most Chinese manufacturers are yet to adopt this form of technology. This makes partnerships like the recent one where Samsung teamed up with Google to develop a smart TV application very viable (Byung-Jin 2011). This year may see this trend take root and in the process revitalize the flat screen television industry in China.
Future predictions
This year the Chinese Flat Screen Industry is expected to grow by about eight percent. This is a remarkable growth considering the recent economic growth down turn. Rival industries like Korea, Japan and Taiwan will however continue to be major competitors to China in terms of market shares.
However the industry may rely on other factors like the increasing middle class or the high rate of rural development in the country. The industry’s stakeholders should consider raising manufacturing standards of flat screen televisions. This is because cases of televisions with faulty screens are higher in China than in any other place in the world (Fujimoto 2006).
Currently china has the biggest share of the global market at twenty percent (Grobart 2011). It is closely followed by Europe and the United States. These two markets have the ability to turn tables on China if measures to maintain this market share are not adopted.
References
Byung-Jin, G 2011, “Co-operation between giants: Collaboration with competitors for technological innovation”, Research Policy, Vol. 40 no. 5, pp. 650-663.
Daily Prime News 2011, China’s LCD TV market growth to hinge on smart models in 2012: TRI. Web.
Drell, L 2011, Current trends shaping the television industry. Web.
Fujimoto, T 2006, “Architecture-based comparative advantage in Japan and Asia,” MMRC Discussion Paper, vol. 94, pp.1-8.
Grobart, S 2011, A Bonanza in TV sales fades away. Web.
Hao-ting, Y 2012, Chinese LCD TV market expected to see 8% growth in 2012. Web.
National Development and Reform Commission 2011, Report on the implementation of the 2010 plan for national economic and social development, Xinhua News Agency, Hong Kong.
Razeen, S 2012, “The global economy in 2012”, Economic Affairs, Vol. 32 no. 1, pp. 79-81.
Park, S 2006, Korean flat panel display industry: Can it repeat the success of semi-Conductor Industry, Samsung Economic Research Institute, Seoul.