Recently, the "2017 China TV Market Semi-annual Summary Report," part of the CRC 2017 color TV industry research, came out during the first half of the year. The report reveals that in the first half of 2017, China’s domestic color TV retail volume was 21.81 million units, a year-on-year decrease of 7.3%, while retail sales reached 74 billion yuan, representing a year-on-year increase of 4.3%. Weng Zhenhua, General Manager of AVC's Black Power Division, highlighted that the operating pressure in China's color TV market during the first half of 2017 was primarily manifested in four key areas:
1) The prolonged price hike in upstream panels. Starting from April 2016, the rising cost of panels became the most pressing concern for the color TV industry. This price increase lasted until May 2017, making it the longest such period in panel history. The most affected panel sizes were smaller ones, particularly 40-inch and 43-inch models. In June 2017, the average sales price of both 40-inch and 43-inch Full HD TVs increased by 20% and 18%, respectively.
2) Operating under low profits is challenging. In the first half of 2017, the profit margin for the color TV industry is expected to be less than 1%. This low-profit environment made it more difficult for TV companies to operate. During this period, major color TV companies faced continuous financial pressures and staff changes. Strategies like cost-cutting and reducing front-line activities were implemented to cope with these challenges.
3) The diminishing Internet dividend. By the end of 2017, the penetration rate of Chinese Internet users reached 53.2% in the first half of the year, up by 2.9% year-on-year, while the total number of Internet users had stabilized. In the first half of 2017, the average weekly Internet usage time was 26.4 hours, a slight decrease of 0.1 hours compared to the previous year. User engagement with the Internet has plateaued. In the first half of 2017, the retail volume of online color TVs was 7.68 million units, accounting for 35% of the market, a decrease of 1 percentage point from the previous year.
4) The price war resulted in "bitter fruits." In 2016, the color TV industry conducted 18 promotional campaigns of varying scales, a sixfold increase from 2015. Low prices, used as a promotional tool, particularly for high-end products, successfully instilled in consumers the idea that "you can get a higher quality product at a lower price," lowering consumer price expectations.
Despite these challenges, Weng Zhenhua noted some bright spots, such as:
1) The resurgence of foreign brands. According to AVC data, the market share of domestic traditional brands in the first half of 2017 was 69.1%, down by 0.3% from the previous year. The market share of Internet brands was 12.0%, a decrease of 4.0 percentage points from the previous year, while the retail market share of foreign brands was 18.9%, up by 4.3% from the previous year. Among them, Sharp stood out significantly. According to AVC's omnichannel data, Sharp's retail volume in the first half of 2017 was 1.26 million units, a year-on-year increase of 93.5%.
2) Rapid development of display technologies such as OLEDs, quantum dots, and laser TVs. In the first half of 2017, the market penetration rate of OLED TVs was 0.2%, up by 0.1% year-on-year. The OLED market in China now includes six brands, including foreign brands like LG, Sony, and Philips, alongside domestic leading brands Skyworth, Konka, and Changhong. In the first half of 2017, the penetration rate of the home laser projector market was 0.1%, up by 0.07 percentage points from the previous year. Hisense actively expanded its presence in the home laser projection market, and the entry of brands like Ailuowei, Kansang, and Xiaomi further boosted industry attention. According to Ovid Cloud Network (AVC) monitoring data, the penetration rate of quantum dot TVs in the first half of 2017 was 1.7%, up by 0.7% from the previous year. Samsung, Hisense, TCL, and Letv are leading the way in quantum dot technology.
3) Transitioning from smart to artificial intelligence. In the first half of 2017, the penetration rate of smart TVs reached 85%. Functionally, they provide basic capabilities for large-screen operations, enhancing user stickiness. The average daily operating rate in June was 44%, with an average daily usage time of 5.1 hours per terminal. Applications such as video streaming, gaming, education, and shopping are becoming more abundant. For example, Galaxy Kiwi, a video application software integrating IGI's full copyright content, and Dream Football Manager, a game application, are notable innovations. 2017 also marked the beginning of artificial intelligence TVs, with many brands launching AI TVs in the first half of the year.
4) "Form and image" products continue to grow, reflecting the theme of consumption upgrading in the Chinese TV market. Despite the overall market size showing a downward trend, consumer demand for high-end differentiated TV products remains strong.
5) Continued size growth remains the main theme for upgrades. According to Ovid data, from the perspective of the size of China's retail market in the first half of 2017, the share of 55-inch TVs grew the fastest, increasing by 7 percentage points over the previous year, reaching 28.8%. Sizes of 65 inches and above have become a major battleground for brand operators. In the first half of this year, 93 new online and offline models were introduced, an increase of 38 and 13 compared to the previous year. The market share reached 5.7%, up by 1.7 percentage points.
Looking ahead to the color TV market trends in the second half of 2017, Weng Zhenhua believes that panel price increases will be contained, and are expected to start declining in the fourth quarter. The reduction in panel prices will alleviate some of the cost pressures on manufacturers, providing space for end-of-year promotions in the fourth quarter. AVC forecasts that the size of the Chinese color TV market will reach 15.01 million units in the fourth quarter, a 2.7% decline. The third quarter of 2016 was a peak period for daily sales promotions by color TV brands. This year, Internet brands struggled to meet the challenge. The market size of color TVs is expected to be 11.11 million units in the third quarter, a year-on-year decrease of 7.0%. Overall, China's color TV market is expected to perform better in the second half of the year compared to the first half, with a market size of 26.12 million units, down 4.6% year-on-year. In 2017, the total color TV market is expected to reach 47.92 million units, down 5.8% year-on-year.
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