Opportunities Come for Chinese Flat Panel TV Expansion

Chinese flat panel TV producers are expected to enlarge their shares of the domestic market, as their foreign peers are troubled, according to analysts.

In the fiscal year ending March 2009, the eight Japanese electrical and electronic appliance giants are expected to suffer a total loss of JPY 2 trillion, including Hitachi, Ltd. (TYO: 6501), Panasonic Corporation (TYO: 6752), Sony Corporation (NYSE: SNE | Quote | Chart | News | PowerRating) and Toshiba Corporation (TYO: 6502).

A Panasonic China executive attributed their losses partly to the production of flat panel TVs' key components, as the producers of panels, chips and crystal element are more vulnerable to changes in the market than terminal producers.

In 2008, a financial storm forced the world's many flat panel manufacturers to reduce their orders for the key components, especially the components produced by the Japanese mammoths, which, however, cannot cut their production immediately.

Such a shock seemingly caused the Japanese companies hard to hold up their expansion in the Chinese flat panel TV market at the expense of profits.

During the 2009 Spring Festival vacation days ago, the minimum prices of 32-inch Chinese branded LCD TVs were between CNY 2,300 and CNY 2,400 apiece at the stores of Suning Appliance Co., Ltd. (SZSE: 002024) and Gome Electrical Appliances Holdings Ltd. (SEHK: 0493), the two biggest home appliance retailers in China. By comparison, the lowest prices of foreign-branded 32-inch LCD TVs were between CNY 3,690 and CNY 4,000.

In November and December 2008, 66% and 69% of the flat panel TVs sold in China were with Chinese brands, compared to 42% and 51% in May and August, according to GfK SE, the market research provider.

In 2009, many Chinese flat panel TV manufacturers will participate in a promotional campaign initiated by the Chinese central government in the Chinese rural areas. On the other hand, few of their foreign peers has won the bid to join the campaign.

However, analysts warn the domestic manufacturers that the key technologies of flat panel TVs are still controlled by foreign competitors, which have snatched huge profits from them through the sale of expensive components. Besides, the other flat panel markets over the world are dominated by those US, European and Japanese companies.

In addition, Japanese flat panel TV makers are anticipated to pay more attention to the Chinese market, when their orders from the US and Europe plunges, said Lu Renbo, vice secretary-general of the China Electronic Chamber of Commerce.

(USD 1 = JPY 90.34 = CNY 6.83)