TT: What are your thoughts about Hon Hai Precision Industry Co Ltd’s (鴻海精密) sale of new 60-inch LED TVs with a price tag of NT$38,800 (US$1,300) per unit? The TV became available last month and can be bundled with an Internet TV service contract from local telecommunications operator Chughwa Telecom Co (中華電信) or cable TV operator Kbro Co (凱擘) for an extra monthly charge.
Max Yu (余泯樂): You may find Taiwanese consumers’ feedback about Hon Hai’s 60-inch TV is quite different from those in the US. [Hon Hai assembles 60-inch LED TVs for Vizio Inc.]
At first glance, Hon Hai’s TV is indeed appealing to certain customers because of its [affordable] price. However, on second thought, a 60-inch TV is too big for the homes of most Taiwanese as the living space in Taiwan is smaller than in the US.
Consumers here may turn their back on such big TVs when they find they have to pay extra for the content contract for two years, which may not be on their shopping list.
However, Hon Hai’s TVs have stirred up Taiwanese consumers’ interest in large-screen TVs and will stimulate demand for big TVs.
This trend matchs our business strategy to expand our product lines to include bigger screens.
We launched the company’s first 50-inch slim-screen TV, the first one in Taiwan, in May ahead of the 2012 Olympic Games.
We established an Internet TV service with Chunghwa Telecom an option at the time. The best sales figure we had was 600 units a month.
TT: In that case, what is your forecast for the penetration rate of TVs with screens bigger than 50 inches next year?
Yu: We think more than 50 percent of the slim-screen TVs sold next year will be sets with 37-inch screens or larger, up from 40 percent this year.
To be specific, 50-inch or larger TVs will account for 15 percent of the overall flat-panel TVs sold in Taiwan, compared with between 7 percent and 8 percent this year.
Next quarter, we plan to roll out 50-inch and 65-inch slim-screen TVs with super-high resolution on 4kx2k technology, targeting high-end consumers.
TT: Market researchers, such as DisplaySearch, are saying that TV panel prices are rising because of tight supply. Is your company feeling the pinch?
Yu: The supply of TV panels has become tight in recent months. The supply of mainstream 32-inch and 42-inch TV panels is particularly constrained. The prices have been rising lately and it is becoming harder to bargain for lower prices with panel suppliers, which makes it difficult for us to cut the retail prices of our TV sets.
Compared with our peers, we are in a better situation on this front as we have support from within the group.
We primarily purchase flat panels from Chimei Innolux Corp (奇美電子). [Nexgen and Chimei Innolux are subsidiaries of Chimei Corp (奇美實業), one of Taiwan’s biggest supplier of polyethylene.]
We produce our TV sets mostly at our factory in Greater Tainan. The factory churns out 15,000 TV sets a month.
TT: Any plans to expand to China or other markets?
Yu: Competition in China’s TV mark is fierce. [In addition to global TV brands like Samsung and LG,] there are many Chinese TV brands competing with each other. We are very cautious about expanding our TV business there.
However, we are in talks with some retail chains to sell our home appliances and LED lamps in China. We expect to pick up a retail channel partner next year.
In Japan, we are making quite good progress this year. We began selling domestic LED lamps via Japanese retailers, including Big Camera Inc, this year.
TT: Does your company have any business targets for next year?
Yu: As we phase out of traditional LCD monitor markets, this year’s revenue will slide to NT$5 billion from last year’s NT$6 billion.
We expect revenue to grow again by about 2 percent next year.
LCD TVs accounted for 70 percent of the company’s total revenue this year. We aim to sell 200,000 slim-screens TVs next year, up about 11 percent from this year’s 180,000 units. Revenue growth is slower than unit growth because of the rapid decline in the price of TVs.
TT: What are your thoughts on the overall Taiwanese slim-screen TV market?
Yu: We expect flat-panel TV sales to reach 1.2 million units this year and to grow [about 8 percent year-on-year] to about 1.3 million units next year. The growth will be mostly fueled by the first big-wave of replacement demand since the uptake of LCD TVs back four or five years ago.
Those LCD TV sets are near the end of their life cycle. In addition, people in Taiwan are now buying two or three slim-screen TVs for their homes.