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Color TV makers ink M&A deals in overseas market

China Economic Net

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By Zhou Lei

"The short-term strategic goals of Hisense are to be a major color TV brand in the world and comfortable perch at top three. This requires of synchronous promotion of technology, productivity, market and other aspects, of course merger and acquisition are included," as explained by the Vice President of Hisense Lin Lan why they took over the business of Sharp in America on August 4.

At the end of July, Hisense Group and Japanese Sharp Corporation announced that Hisense would spend USD 23.70 million to acquire all equities and assets of Sharp Plant in Mexico and obtain the right to use the TV brand of Sharp in Americas.

It is introduced that markets in North America, Europe, Australia and other developed areas are the breakpoint of Hisense internationalization strategy. In the USA, TVs of Hisense brand have already made its way to Wal-Mart, Best Buy, Costco and other main channels, developing towards middle and high-end market with good momentum. In terms of supply stock of TV brand in America market, Sharp is superior to Hisense. For Hisense now developing and expanding overseas businesses, the acquisition of Sharp plant in Mexico not only is beneficial to solving the productivity bottleneck in America, but can help Hisense get more channel resources under the authorization of Sharp brand, thus growing up quickly in America market and enhancing the bargaining power of Hisense in aspects of channel and scale.

"In the future, Hisense businesses in America will increase by USD 2 billion revenues," said Lin Lan. After taking over, Hisense and Sharp, these two brands shall operate independently and separately. Now, it is urgent to lift efficiency and revive Sharp's market performance in America, North America in particular.

In a bid to enter European market, another domestic color TV giant-Skyworth also sets about carrying out overseas merger and acquisition. In the first half of this year, Skyworth successfully acquired assets related to the TV business of German TV manufacturer-Metz and Metz brand with its own funds.

Metz is a company mainly specialized in high-end TV manufacturing. Metz TV is sold in 18 countries and districts on a global scale with average retail price of EUR 1300, which is called as the "luxury TV" by the industry. After taking over Metz Company officially, Skyworth keeps the Metz operation center in Zirndorf, Bavaria, Germany as the bridgehead of marching into European market and tries to carry over the existing Metz R&D and manufacturing system to Skyworth in an effective way.

It is widely believed by insiders that in the face of a slow and even negative growth in domestic color TV market, it is a general tendency for color TV enterprises to explore the global market. And the merger and acquisition in succession carried out in European and American markets indicates that the internationalization development of domestic color TV industry has been unceasingly accelerated and upgraded, moving towards the goal of becoming global color TV giants.

Data show that the export volume of six major domestic color TV enterprises increased by 27 percent on a year-on-year basis in 2014. Therein, the export volume of self-owned brands increased by 37 percent on a year-on-year basis. In 2015, self-owned brand TVs are expected to break through 11 million sets.

The Vice General Manager of Qingdao Hisense International Marketing Co., Ltd., Fang Xueyu said that different from general OEM mode of enterprises, Hisense had been sticking to promoting self-owned brand in recent years, making its way to mainstream channels depending on the high-quality and middle-price strategy and strive to enhance brand recognition in mainstream markets. According to data, the export volume of Hisense Group in 2014 reached USD 2.6 billion, and that of products with Hisense brand made up more than 50 percent. In Europe, the sales revenue of Hisense grows sevenfold in three years; in Australia market, Hisense TV ranks second, second in South Africa and third in Mexico in terms of sales revenue.

The President of Skyworth Group Yang Dongwen also said that Skyworth was seeking product globalization and brand internationalization at the same time, in order to quickly realize the scale operation of overseas markets by building powerful supply chain in overseas. From 2010 to 2014, Skyworth founded 9 branches in Southeast Asia, Australia, South Africa and other countries and districts to expand its brand businesses.

"In terms of long-term tendency, the export potential of color TV is still promising", said Peng Jianfeng, the Deputy Secretary General of China Video Industry Association. Economic recovery of Europe and America, emerging markets at the peak of CRT replacement, plenty of market space being released with the market share decline of Japanese color TV and export competitiveness being enhanced due to localization of panel, all of these create conditions for Chinese color TV going abroad.

Obviously, it would be an easy way for Chinese color TV enterprises losing no time in merging and acquiring international brands and businesses, so as to quickly scale up and upgrade product quality in international market, but the subsequent combination and reorganization is still a big challenge that needs enterprises to tackle and overcome.