By Nick Jiang
DisplaySearch

The LCD market seems poised to overcome the downturn in growth by focusing on China, which has emerged as the world’s largest consumer electronics market. Chinese electronics brands are now ranking second behind top-tier global brands, thanks to their enormous consumer market at home. However, there are still difficulties in generating new demand and spurring development. To succeed on a global scale, Chinese brands need to make the most of their edge, government support and chances for foreign mergers and acquisitions.

Recently, One Belt and One Road (OBOR) and Internet Plus have been discussed as development strategies in China. OBOR, which aims to revive the ancient trade route connecting Asia, Europe and Africa, is an approach to stimulate demand in overseas markets and solve over-capacity at home. Internet Plus is an action program to spur economic growth by integrating internet technologies with other businesses and manufacturing. It is complementary to the OBOR policy, aiming to optimize available resources through the internet and mobile networks. In particular, the OBOR plan could boost Chinese producers, including TV makers, if it is implemented successfully.

The following is the best-case scenario for implementing the OBOR plan:

• The Chinese government will increase joint ventures and investments with various companies and governments of other countries. The overseas capital will help upgrade living standards of the local areas and enhance purchasing power.
• With greater purchasing power, consumer spending will increase. Trade and distribution will also pick up.
• Increased trade and distribution will translate into better business opportunities. For example, the ongoing free trade agreement (FTA) negotiations between the Chinese and South Korean governments, which include the tariff partnership, could lead to a cut in tariff barriers or tariff elimination between the countries.
• Increased business activities between China and other countries will also lead to greater financial transactions. Chinese brands lose money in overseas trade due to transactions done in U.S. dollars, so there could be more demand for transactions in the Chinese currency.

This scenario suggests that India could be a big opportunity for Chinese brands. Chinese brands have a hard time making inroads into the Indian market, another potentially colossal consumer market due to its huge population. According to an IHS forecast, Indians will purchase about 13 million TV sets in 2015. Of them, 12 million will be LCD TVs. South Korean brands like LG Electronics and Samsung Electronics dominate the Indian market now, partly because they run factories in India. Contrary to South Korean counterparts, Chinese brands without factories in India are not as price competitive there, meaning that high tariffs are levied on their products.

Nevertheless, a successful implementation of the OBOR initiative would provide ample opportunities for Chinese TV brands in the Indian market, allowing them to benefit in several ways:

• Tariffs can be reduced by an agreement between China and India.
• The Chinese and Indian governments could perform joint railway construction.
• China will be able to build global logistics companies that could deliver worldwide, using and connecting all possible routes including air, ocean, road1 and rail.
• A stronger yuan could allow Chinese TV or panel makers to build factories abroad.

These factors would help bolster Chinese TV brands and make them formidable rivals in India and other emerging areas. According to an IHS survey, more than 50 percent of TVs in emerging economies were CRT-based as of 2013. Chinese brands should target these areas. Japanese and South Korean brands are strong in both emerging and advanced markets, but Chinese brands can bridge over this barrier. For example, Chinese electronics group Skyworth Digital Holdings Ltd. recently acquired the TV division of Metz-Werke GmbH Co. KG, the German high-end TV brand. The acquisition attests to China’s power to purchase global brands. Chinese companies lack brand power and retail and management in overseas markets, so mergers and acquisitions would be the best way for them to go global. The OBOR initiative could contribute to the Chinese TV industry and its expansion into overseas markets.

This blog was reprinted with permission from DisplaySearch and originally appeared here.