[opendtv] News: No End in Sight to Supply of Cheap TV's
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Tue, 4 Jan 2005 07:15:55 -0500
The following NYTimes article has an interesting conclusion
regarding small TV displays and HDTV...
>This digital tuner, mainly meant for high-definition televisions,
>will add several hundred dollars in cost, at least at first, to sets
>so small that they cannot display high- definition signals
>effectively. Still, manufacturers like TCL are expecting a new
>market to emerge in small digital sets.
>
>"We're expanding our effort in inexpensive small-screen standard-
>definition digital TV's," Mr. Arland said.
Regards
Craig
http://www.nytimes.com/2005/01/04/business/worldbusiness/04tele.html?oref=login&th
January 4, 2005
No End in Sight to Supply of Cheap TV's
By SAUL HANSELL and ERIC A. TAUB
hen one of the biggest Chinese makers of television sets and its
distributor in the United States run into financial trouble, should
American consumers worry?
No, say industry experts, who note that low-priced conventional TV's
are now such generic commodities that the market is not much affected
when any single manufacturer stumbles.
Conventional cathode-ray tube televisions, which are increasingly
produced by low-cost makers in China and elsewhere, are now so
inexpensive that few companies can build a stable business around
selling them, yet many companies are still supplying the market with
cheap sets, analysts said.
This dynamic has been highlighted by the story of Apex Digital, the
American consumer electronics brand, and the Sichuan Changhong
Electric Appliance Company, the large Chinese television maker that
produced most of the televisions for Apex.
Last month, Changhong said Apex owed it $467.5 million, and as a
result, it would post a big loss for 2004. David Ji, Apex's chairman,
has been arrested by Chinese authorities and has been charged with
fraud. While the substance of the dispute remains unclear, it shows
how difficult the electronics business can be.
Apex, which has sold inexpensive sets through Wal-Mart, Circuit
City, and other retail outlets, largely pulled out of the low-end
television business in the middle of last year, industry executives
say. While Apex's troubles may be substantial, the effect on
consumers is likely to be modest, and only at the very lowest end of
the TV market.
"Apex TV's are sold at grocery stores," said Riddhi Patel, a senior
analyst for iSuppli, a research firm in El Segundo, Calif. "Their
20-inch TV is $79, a ridiculously low price. The next price up is
$89-$100, so retailers will miss out on those consumers who wanted a
$79 TV."
Marietta Schoenherz, the director of public relations at Apex,
declined to say if the company was still in the tube television
business or to comment on the status of Mr. Ji. Reuters, however,
quoted Ms. Schoenherz as saying that Mr. Ji was returning to the
United States this week to attend a trade show.
She said the company was in negotiations with Changhong. "We have a
business dispute that is being addressed," she said, declining to
elaborate. Changhong says its last shipments to Apex were in April
2004.
Apex, which is based in Ontario, Calif., came to prominence several
years ago, by using Chinese manufacturing to make DVD players that
were far cheaper than Japanese and Korean-made machines. But as
others started making DVD players in China, the prices for the
devices fell far below $100, forcing Apex to look around for other
markets. Two years ago, Apex entered the American television market
with sets made by Changhong, one of the largest makers of TV's for
China's domestic market.
But the television market has been fiercely competitive, and Apex's
strategy of making TV's in China has been a disadvantage. Most tube
televisions for the North American market are now made in Mexico
because of the cost of shipping.
Moreover, last April, the Commerce Department imposed a tariff of
24.48 percent on sets made by Changhong and imported into the United
States, accusing the Chinese company of selling goods below cost, a
practice known as dumping. Other Chinese TV makers also have to pay
tariffs of 4 percent to 78 percent.
Nancy Dang, an analyst with iSuppli in Shanghai, noted that
Changhong exported about two million sets in 2004, the same as in
2003. She added that the company intended to overcome the high
tariffs imposed on it by the Commerce Department by shipping
televisions to the United States via Turkey, where they will be
assembled. Other Chinese manufacturers like Konka and Skyworth, she
said, may set up plants in Mexico.
The imposition of the tariffs appears to have caused Apex to pull out
of the conventional TV market.
"Apex has caused the collapse in television prices," said Don Benji,
president of Benji-26, a Los Angeles electronics distributor.
Mr. Benji added that prices had not risen, even as Apex pulled back,
largely because consumers are increasingly buying flat-screen
televisions rather than tube models.
"The supply is good, but the demand is not there for tube sets," he said.
TCL, the other large Chinese maker, has not had problems in the
United States. It formed a joint venture with the television business
of Thomson, which sells TV's under the RCA brand. But most of its
sets are made in Mexico and Thailand and not subject to the tariff.
"Less than 10 percent of our TV's come from China," said Dave
Arland, a spokesman for TCL-Thomson Electronics. "Anything larger
than 27 inches is counterintuitive to make in China due to shipping
costs."
Apex, too, has tried to move to higher-price products, like L.C.D.
televisions, portable video players, and DVD recorders. But it has
yet to make a significant mark in these markets.
Retailers are hardly mourning Apex's troubles. While many carried its
products, many also saw the company as the symbol of how products
with extremely low prices can lead to a sharp decline in prices and
profit margins.
Sears, for example, has sold Apex televisions to help it appear to
compete with discounters like Wal-Mart, but it mainly hopes to
persuade customers to buy more expensive models when they arrive at
the store, said Lauren Jiles-Johnson, a Sears spokeswoman.
"Any retailer without a low price point in their newspaper ad creates
the perception that your merchandise is overpriced," she said.
Best Buy, meanwhile, severed its relationship with Apex about a year
ago and now buys its low-end televisions directly and sells them
under a house brand, Impulse, a spokeswoman said. She declined to say
where those sets were made.
The low end of the television market will be shaken again as the
government phases in a requirement that all new sets have tuners that
can receive digital broadcasts. All sets over 13 inches will need
digital tuners by 2007. This digital tuner, mainly meant for
high-definition televisions, will add several hundred dollars in
cost, at least at first, to sets so small that they cannot display
high- definition signals effectively. Still, manufacturers like TCL
are expecting a new market to emerge in small digital sets.
"We're expanding our effort in inexpensive small-screen standard-
definition digital TV's," Mr. Arland said. Still, he said, "we do not
want to be the cheapest guy to bring digital TV to mass-market
America."
Christopher Buckley contributed reporting from Beijing for this article.
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