Competitive Advantage Deepens
In 2024, Chinese TV brands continued to reshape the perceptions of overseas consumers and further enhanced their global market share. According to data from Q1 to Q3 of 2024, TCL and Hisense experienced global shipment growth of 10.3% and 4.7% year-over-year, respectively, while the overall industry growth was only 2.2%. This indicates that Chinese TV brands, with their superior quality and innovation, are gradually changing the stereotypical view of Chinese home appliances among younger overseas consumers. The emergence of Mini LED backlight TVs has accelerated the iteration of TV products, breaking the “cost-performance” label and allowing them to stand out in a variety of home appliance categories.
Compared to other home appliance sectors like white goods, the net profit margin of the TV industry is relatively lower. The profit fluctuations of individual stocks in the TV sector tend to be cyclical. For example, Hisense Visual, AMTC, and TCL Electronics all experienced significant profit improvements in the first half of 2022 to 2023 and in 2024, which also boosted their stock prices. We believe the following three factors will drive the profitability of the TV sector:
- Panel Pressure Easing: It is expected that by 2025, the supply pressure of TV panels will significantly ease, and price volatility may weaken under panel manufacturers’ production control adjustments.
- Trade-in Policies Continued: Under policy guidance, the TV product structure will continue to upgrade.
- Shift to Mid-to-High-End Overseas Markets: Chinese TV brands continue to transition toward the mid-to-high-end market overseas and are expected to benefit from product structure optimization, enhancing profitability.
Looking Ahead to 2025: Market Volume, Pricing, Costs, and Expenses
Looking ahead to 2025, the TV industry is expected to face the following key trends:
- Volume: The overseas market has matured, and the 2025 market may lack the driving force from major sporting events, leading to relatively mild performance. However, Mini LED backlight TVs have shown strong competitiveness in 2024, and technological innovations in displays usually trigger changes in the competitive landscape. Chinese industry leaders with integrated supply chains and broad market coverage still have the potential to increase their market share, especially in overseas markets. Additionally, supported by domestic policies, sales in China are expected to continue to grow after September 2024, with 2025 domestic sales showing growth potential.
- Price: In overseas markets, leading Chinese TV companies are gradually optimizing their product structures, increasing average product prices. Meanwhile, the “trade-in” policy in the domestic market will push up the overall average price. The strong sales of Mini LED backlight TVs will not only help enhance brand influence but also improve profitability.
- Cost Fluctuations: Due to the dominant position of mainland panel manufacturers, the volatility of TV panel prices is expected to diminish. In addition, the increasing proportion of Mini LED backlight TVs and large-size TVs will reduce the share of panels in total costs, indirectly weakening the impact of panel costs. As end prices rise, the cost fluctuation impact on profitability is expected to be limited in 2025.
- Expense Investment: In overseas markets, leading Chinese TV companies will continue to invest heavily in brand building and channel expansion, with relatively active sales expenses. At the same time, some companies in the domestic market will continue to focus on reducing costs and improving efficiency, which may result in more positive profitability for high-quality enterprises.
Looking to the Overseas TV Market in 2024
At the end of 2023, expectations for the overseas TV market in 2024 were relatively optimistic, with a focus on the demand generated by major sporting events. According to data from AVC Revo, the global TV shipment volume from Q1 to Q3 2024 increased by 2.2% year-over-year, and the market is expected to show a recovery for the full year. At the same time, overseas inflation remains high, but Chinese TV brands continue to maintain strong competitiveness. The market share is on the rise, and the direct export volume of Chinese TVs has noticeably recovered. Data from the General Administration of Customs shows that from January to December 2024, China’s TV product export value increased by 11.8% year-over-year, with volume up by 10.9% and price up by 0.8%. Chinese companies, through their footholds in Latin America, Eastern Europe, and other regions, continue to deepen their presence in overseas markets and drive growth. Both overseas Chinese brand market share and OEM share have strengthened.
In the domestic market, TV sales in early 2024 were influenced by low expectations for real estate sales and domestic economic growth, alongside consumer segmentation. However, with the “trade-in” policy and wider adoption of Mini LED backlight TVs, sales significantly improved after September 2024. Actual performance closely followed expectations, with the “trade-in” policy becoming the biggest variable. Data from AVC Cloud Network shows that from September to December 2024, online and offline KA TV retail sales grew by 20% and 30.5% year-over-year, respectively. This retail recovery gradually translated to company shipments, with sales volumes returning to positive growth by October 2024 (data from Industrial Online).
Impact of Panel Price Fluctuations on Gross Margin
The impact of LCD TV panel price fluctuations on TV business gross margins remains significant. In 2024, panel prices are expected to increase substantially, with panel prices in H1 2024 rising by 20% year-over-year (for 32”, 43”, and 55” sizes). However, looking at shipment prices, the average shipment price of TCL Electronics TVs increased by 12.7% year-over-year, and Hisense Visual‘s inland shipment price increased by 14.6%. Considering that panel prices decreased year-over-year in Q3 2024 and remained relatively stable in Q4, along with the consumption of high-priced inventories and the structural upgrades driven by trade-in and replacement policies, we believe TV company gross margins will gradually rebound.
If we look back to early 2024, based on domestic sales expectations and the panel price fluctuation trend, the market was unlikely to assign high valuations to individual TV sector stocks. However, looking back at 2024, TCL Electronics remained relatively stable in terms of price-to-earnings ratio, mainly driven by profit growth, while Sichuan Changhong attracted market funds, leading to a significant rise in its price-to-earnings ratio.
Conclusion
With the help of Mini LED backlight technology, Chinese TV brands are achieving significant growth in the global market, constantly improving profitability, product structure optimization, and brand influence. Looking ahead to 2025, with continued technological advancements and policy support, Chinese TV brands will remain highly competitive in the global TV market.
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