Can bigger and bigger screens save China's TV industry?

Reporter | Jiang Ruijie

Edit | Ni Ni

The development trend of China's color TV market in recent years can be summarized in one sentence: the screen is getting bigger and bigger, but the more money is earned, the less money is made.

The average size of color TVs has grown from 44.5 inches in 2015 to 54.4 inches in 2021, but annual sales have fallen from 157.2 billion yuan to 128.9 billion yuan. When Xiaomi launched its first 55-inch LCD TV in 2015, it was priced at 4999 yuan, and now the same size product has fallen by more than two-thirds, and the lowest only sells for 1499 yuan.

Although LCD TVs are the absolute main force in the color TV market, the profits are very low. Samsung, which has won the global color TV sales champion for consecutive years, plans to stop producing LCD panels in June 2022, while veteran home appliance giant Panasonic withdrew from LCD panel production business as early as 2019.

If you turn back the time ten years, the LCD screen would not be so cheap, and even more expensive than the plasma screen with better picture quality. However, lcd screens have a natural advantage, that is, they can be cut into any size, not only as TV screens, but also as screens for laptops and mobile phones, or screens on washing machines and microwave ovens.

A wide range of application scenarios have enabled a large amount of capital to invest in the research and development of LCD screens, rapidly expanding the scale of LCD screen production, and significantly reducing unit costs through scale effects. At the same time, the plasma screen can basically only be applied to large-size scenarios, and its production scale and ability to attract investment are far inferior to the LCD screen, so only a few companies really invest in it, and the plasma screen basically withdrew from the market by 2014.

However, the "double-edged sword" of scale effect, which originally achieved lcd screens, has now dragged its pace towards higher prices.

In 2020, the average sales price per unit area of the domestic color TV market was 51.85 yuan / inch, down nearly one-third from 2015, and the average retail price of a single color TV also fell from 3363 yuan to 2717 yuan, down 19%. Everyone dares not increase the price, because once the price increases, the user will go to another home. In 2021, the average retail price will basically return to the level of 2017, but this is only the "return to the light" brought about by the rise in raw material prices. With the decline in raw material prices, price reduction promotions have become the norm again, and the revenue and profit of the head enterprises in the first quarter of this year have declined significantly from the previous quarter.

No one wants to do business with lower and lower profits, not to mention that the domestic TV market is still facing the pressure of shrinking total demand. The number of age-appropriate people who need to buy color TVs is declining, and the demand for purchases caused by real estate regulation has also been suppressed to a certain extent, which has led to domestic color TV sales from breaking through the 50 million unit mark in 2016 and then turning downward, and only selling more than 38 million units in 2021, more than 6 million units less than in 2020, which is more than 6 million units less than the outbreak of the epidemic in 2020.

To break this game, there are two main ideas. The first is still based on the original LCD panel, but through the chip design and algorithm optimization to improve the display quality and use experience, so as to sell higher prices. A typical example of this kind of thinking is Huawei's "smart screen". Huawei's "smart screen" products are divided into "standard version" and "PRO version", the former is similar to ordinary "smart TV", and the latter emphasizes the design of the underlying chip and algorithm to improve the computing performance of the TV itself, so that the TV can efficiently use its own AI to improve picture quality and sound effects. This is a bit similar to having the tv and mobile phone have the same automatic beauty function, and make this beauty function real-time.

In addition to Huawei, the old Dahaixin in the domestic color TV market is also spending efforts to develop TV chips and picture quality optimization algorithms, and ULED (Ultra-LED) technology is its representative achievement. At present, the lowest discounted price of Hisense's official 55-inch ULED TV is 3599 yuan, which is more than 60% higher than the average market price of this size, and the smart screen product "V PRO" that Hua intends to force has even crossed the 55-inch specification, directly from 65 inches to sell, with a price of 10999 yuan.

Doing chips and algorithms, playing with the LCD screen, this is just one of the options. There is also a way of thinking, is to simply skip the LCD screen, the development of new screen manufacturing process, OLED (Organic LED) is a typical representative of it.

The biggest difference between OLED screen and LCD screen is that it is a self-illuminating screen, while the LCD screen is not. The LCD screen itself does not emit light, you need to adjust the state of the liquid crystal through the current to set the color and shade of the presentation, and then hit the LED light source on the LIQUID crystal, we can see the color graphics, and OLED technology is to try to make the LED light source itself can change color, so that there is no need to add an additional layer of LIQUID crystal panel. Therefore, the TV using OLED can be made thinner and lighter, and there is less than a layer of barrier, and the brightness of the picture and the fluency of the action can be further improved.

At present, OLED screen has been promoted and applied on mainstream mobile phones, but it is not used much in color TV manufacturing, and the main difficulty is that the yield rate of large-size OLED manufacturing is low and the cost remains high. However, unlike the plasma technology of that year, OLED technology has a wider application scenario, and major mainstream TV companies regard OLED screens as a development focus. For example, Samsung's QLED (Quantum Dots LED) technology developed based on the OLED principle has some performance better than ordinary OLED.

The reason why the aforementioned Huawei "V PRO" can sell more than 10,000 yuan is also very much related to its QLED screen. Although the price of OLED TVs of the same size is now almost 3 times that of ordinary LCD TVs, but in the future, with the maturity of the process, the cost of OLED is expected to continue to decline, but once the price drops to a certain extent, the profits encountered by today's LCD screens are getting thinner and thinner, and it is difficult to guarantee that it will not be repeated again.

In fact, watching TV at home does not necessarily have to have a physical display, a white wall itself is a screen, as long as you have a suitable projector. While the color TV market continues to decline, the projector market is developing rapidly. Domestic projector sales in 2021 were 4.7 million units, almost double that of 2016.

Most mainstream projectors use DLP (Digital Light Processing) display technology, which is also the technology used by projectors in movie theaters. But the experience of the early projectors was terrible: manual focus was required for each use, and could only be used to deliver pictures, and if you wanted to watch movies, you had to connect a speaker. Because most projectors are used in commercial scenes, this is not a big deal, and the main consideration of commercial scenes is whether it is bright enough and durable enough.

However, with the development of the mobile Internet, some people have begun to consider the projector as a smart tablet-like home device to use. In 2013, the future projector leader Jimi began to develop the first generation of home projection product Z1, which is about the same time as the Xiaomi TV 2, both equipped with the fourth generation of Android system. With the gradual solution of problems such as autofocus algorithms, embedded speakers, and optimized heat dissipation, sales of home projectors have risen from less than 100,000 units in 2012 to 3.48 million units in 2021.

A router-sized DLP projector can usually put 100-inch size pictures (2.2 meters * 1.2 meters), but does not require a special TV cabinet, does not need to drill holes in the wall, and can be taken away at any time, and the entry-level price can be as low as two or three thousand yuan, which is cheaper than a 65-inch color TV.

Compared with TVs, these advantages of the current projectors are enough to ensure sales, so the price war between major projector manufacturers is far less intense than that of the color TV industry, and the profit of the projector is obviously more than that of the color TV. Taking Jimi as an example, the gross profit in 2021 is close to 36%, while the gross profit of the TV departments of major manufacturers such as Hisense and TCL is only about 16% for a long time.

From the perspective of the entire TV industry chain, the profits of TV manufacturers in the downstream are also the lowest. The profitability of display panel manufacturers in the midstream is a little stronger, and the gross profit of panel companies such as BOE can reach more than 20%. The most profitable upstream industries are rarely involved in Chinese companies, and the work of providing semiconductor raw materials and production equipment for the middle and lower reaches is mainly done by American and Japanese companies, and their gross profits are usually more than 40%.

Whether it is to march upstream of the industrial chain or expand other non-liquid crystal display markets, one thing is clear: it is difficult to go far only to do LCD TVs.

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