Benefiting from strong demand for flat-panel televisions in China's rural market through a government subsidy scheme
, China's largest television maker by shipment
s, TCL Multimedia Technology Ltd., swung to net profit last year and reported a 69% increase in its first-quarter net profit.
受益于中国政府家电下乡计划刺激下中国农村市场对平板电视机的强劲需求，中国发货量最大的电视生产商TCL多媒体科技控股有限公司(TCL Multimedia Technology Ltd.)去年扭亏为盈，一季度净利润实现了69%的增幅。
But growth has been slowing down this year due to intensifying competition
. While first-quarter liquid-crystal-display TV shipment
s in China rose 56% from a year earlier to 1.19 million units at TCL Multimedia, it still missed its own target due to lower-than-expected market growth and its adjustment
in product mix. Foreign brands such as Samsung, Sharp and LG Electronics have been expanding into China aggressively, which has also put pressure
on the company.
About half of TCL Multimedia's revenue
still comes from producing cathode-ray tubes, but the company, which makes TVs under the TCL, ROWA, Thomson and RCA brands, is growing in flat-screen TVs. According to market research
firm Display Search, TCL Multimedia was China's third-largest LCD TV maker, behind Hisense and Skyworth, in 2009.
George Yuan, TCL Multimedia's 43-year old chief financial
officer, says he is cautious
about growth in the company's key market, China. Mr. Yuan, who was born in mainland
served as financemanager
at TCL Corp., the parent of TCL Multimedia. The parent focuses on making consumer
electronics, handsets and home appliances. It also has investments in real estate
Lorraine Luk spoke with Mr. Yuan at TCL Multimedia's headquarters
in Shenzhen recently to talk about the company's business outlook
and its strategy
in TVs. Edited excerpts:
What's your view on the outlook
for the TV market in China for the remainder
of this year?
Growth in China's TV market has more than doubled in the last two years. But we have seen the growth slowing down from the end of last year. The industry is overly optimistic about the government's subsidy program
, which has led to inventory problems. The stimulus
effect is fading as most customers in rural markets can't afford to buy more than one LCD TV set. I expect the company's gross profit margin
this year to be lower than [the 12.3%] of last year because of falling average selling prices and rising competition
What is the company's target for LCD TV shipment
s this year?
I set a conservativeshipment
target for 2010 at the end of last year. But intensifying competition
has further hurt our sales in the key China market.
We have just revised down our full-year shipment
target by one million units to 8 million-8.5 million LCD TV sets because we have cut our shipment
targets in China to 5 million-5.5 million from 6 million-6.5 million. Other markets are still on track to meet their shipment
WSJ: Which countries are driving growth for TCL Multimedia?
Mr. Yuan: There's continued replacement of bulky cathode-ray-tube TV sets in emerging markets such as India, Thailand, Mexico and Vietnam. We are also expanding into Latin America, where we have seen strong growth in markets such as Brazil and Argentina.
Do you see any slowdown in demand because of the European debt crisis
We don't see any major impact
so far because it is not a global crisis
. To Europeans, an LCD TV is a necessity. [The company aims to ship 600,000-700,000 units to Europe this year, up from 550,000 units last year.]
WSJ: How does the company plan to grow? What is your market share target globally?
We plan to focus our resources on the China market in the near term to minimizecurrency
risks. Our top priority is to become the country's largest LCD TV maker by shipment
s by 2012. After achieving a dominant
position in China, we will turn our eyes to Korean rivals, Samsung and LG Electronics. Our niche is, we know the China market well and our parent company TCL Corp. is giving us a lot in the way of vertical
integration. By placing our assembly
plants next to our parent's TV module plants, we can save packaging and transportation
costs. In the second half of this year, the products we will focus on will be light-emitting-diode back-lit TVs and Web-connected TVs as demand for these new products is rising quickly.
WSJ: Is the company interested in acquisitions or joint ventures?
We have no plans to acquire
a TV module company as the cost would be huge. What we may do is to strengthen
with our parent in the supply chain.
Many companies in China are faced with rising labor costs. How will it affect
the company's profitability?
We raised wages for our workers in China by 10%-15% early this year because of the market conditions. But it won't have much impact
on our profitability as labor costs account
for less than 5% of our total production costs.