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TV makers get an economics lesson

When one of the biggest Chinese makers of television sets and its distributor in the US run into financial trouble, should American consumers worry?

No, say industry experts, who note that low-priced conventional TVs 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 Apex Digital, the US consumer electronics brand, and Sichuan Changhong Electric Appliance Co (四川長虹), the large Chinese television maker that produced most of the televisions for Apex.

Last month, Changhong said Apex owed it US$467.5 million, and as a result, it would post a big loss for last year. David Ji (季龍粉), Apex's chairman, has been arrested by the Chinese authorities and 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 TVs are sold at grocery stores," said Riddhi Patel, a senior analyst for iSuppli, a research firm in El Segundo, California. "Their 20-inch TV is US$79, a ridiculously low price. The next price up is US$89 to US$100, so retailers will miss out on those consumers who wanted a US$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 Ji. Reuters, however, quoted Schoenherz as saying that Ji was returning to the US 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.

Apex, which is based in Ontario, California, 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 US$100, forcing Apex to look around for other markets.
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