China's LCD TV Market Growth to Hinge on Smart Models in 2012: TRI

LCD TV sales in China have grown steadily this year, and are forecast to chalk up an increase of 13.5% for 2011 as a whole. Analysts at the Shanghai branch of Taiwan's Topology Research Institute (TRI) point out, however, that the 2011 growth figure is far less than the 98.4% growth recorded in 2009 and the 43.9% seen in 2010. The analysts explain that the market has become saturated and predict a growth of only 12% in 2012, to 42.56 million units—and caution that even that growth will depend on the popularity of smart models.

Higher-end Models to Lead Growth
Suppliers in the saturated market are likely to try to boost sales by launching higher-end models, indicated the TRI analysts. They predicted that LED-backlit models in China will reach a penetration rate of 68% in 2012 and that the penetration rate of 3D models will climb to 23%, indicating that high-end models will lead market growth in the short term.

TRI is especially optimistic about the popularity of smart TVs based on information technology (IT) and integrating cloud computing and application software. The market research firm believes that smart TVs will score a penetration rate of 20% in the Chinese LCD TV market in 2012, even though such products were introduced there only this year.

Robust Countryside Demand
Although the Chinese government's 4-year plan for subsidizing the purchase of household electronics by rural consumers will end in 2012, demand for new LCD TVs in small cities and rural areas will remain robust, the TRI said, since most families in those areas still use CRT (cathode ray tube) TVs.

The TRI predicted that over a half of all conventional LCD TV sales will be in smaller cities and the countryside in the years to come, while LED-backlit and 3D models will start being accepted by consumers in small cities as prices come down. Smart TVs, the TRI believes, will be targeted at niche markets in larger cities.

Chinese Brands to Keep Growing Globally
Taking advantage of the government's white goods promotion project and launching new products to fuel sales, Chinese LCD TV brands have together captured over 70% of the local market. This dominance at home will help them to keep growing globally, indicated TRI.

Two major Chinese brands, namely Hisense and TCL, both of which squeezed into the top-10 list of the global market research company WitsView in the second quarter of this year, are likely to see their global shipments exceed 10 million units each in 2012, predicts the TRI. Their global success will help them speed up the promotion of smart TVs at home in the future.

Smart TV Market Set to Take Off
The TRI believes that demand for smart TVs in China is likely to surge in the near future for a variety of other reasons as well, including the increasing development of smart devices and application software, continuous upgrades of technical specifications for TVs, and the explosive growth of China's middle-class population. TRI forecasts smart TV sales in China of 8.5 million units in 2012.

The growing popularity of smart TVs will benefit downstream suppliers of application software and service platforms, stressed the TRI, which urges hardware and software suppliers to work closely with each others on the provision and creation of content so as put themselves in a more competitive position. For instance, the market research firm noted, as smart TVs with social media and voice recognition functions are very likely to become mainstream products starting in 2012, consumers will need increasing numbers of smart TV-enabled games and educational digital content.

Despite its optimism about market prospects for smart TVs, the TRI admitted that these products are still in the stage of development and will need time for further improvement, so that suppliers will have to work harder to figure out solutions to the problems currently confronting them. These problems include the lack of a clear definition of “smart TV,” the need for technical standards, the need for more suitable operating systems and chipsets, and uncertainty about the architecture of enabling software.

Keys to Success
Real-world feedback from consumers polled in surveys, according to the TRI, indicates that the success of smart TVs will hinge on several factors, including plenty of smart applications, good user experiences, a complete hardware foundation, easy operation, and integrated cloud services.

The TRI is especially concerned about the importance of cloud services, saying that players in the field cannot compete on the basis of hardware quality alone; they also need the integration of software, digital content, and services, which calls for use of cloud computing technology. This means that the development of smart TVs will gradually move toward the “cloud TV.” The better suppliers are able to turn their smart TVs into cloud TVs, according to the TRI, the more likely they will be to succeed in this emerging segment.

In light of the shared language and culture between China and Taiwan, the TRI feels that China's lucrative market for smart TVs will be accessible to Taiwanese ICT (information and communications technology) hardware manufacturers, especially those that have ventured into the development of cloud computing and that are already operating there.

In addition to manufacturing hardware, the TRI stressed, Taiwanese companies should come up with new software, digital content, and services business models in cooperation with Chinese TV makers, with educational and medical care services based on cloud technology being the most promising segments. (SC, Nov. 2011)

Imports of Machinery into Taiwan by Origin (Jan.-Aug., 2011) Unit: US$1,000
Rank	Country	Jan.-Aug., 2010	Jan.-Aug., 2011	Annual Change (%)
1	Japan	6,842,267	6,464,874	-5.5
2	U.S.A.	3,742,051	3,535,403	-5.5
3	China + Hong Kong	1,542,120	1,744,279	13.1
4	Germany	1,191,847	1,605,128	34.7
5	Korea	575,512	490,108	-14.8
6	Switzerland	229,528	394,280	71.8
7	Italy	223,035	366,067	64.1
8	United Kingdom	162,962	219,713	34.8
9	France	71,085	107,642	51.4
	Others	2,400,808	3,296,608	37.3
	Total	16,981,215	18,224,102	7.3
Source: Taiwan Association of Machinery Industry