Seven months ago, I reported on fifth wave of regional TV manufacturing dominance, the first wave from the U.S., the second from Japan, the third from Europe, the fourth from Korea and, now, the fifth, potentially from China.
At least one Chinese TV vendor, Hisense, seems poised to try and make me look prescient.
As I pound this blog out, I am sitting in a hotel room in Qingdao, China. A port city located on China’s east coast across the Yellow Sea from Korea, Qingdao is most famously known as the home of Tsingtao beer and, more relatively recently, the home of China’s number one TV brand, Hisense. I am in Qingdao on Hisense’s yuan (aka renminbi) with a small group of North American journalists. Hisense’s purpose: to impress on us the seriousness of its expansion to the western hemisphere.
At least that perceptional mission has been accomplished.
And Hisense should be taken seriously. It is a giant company by any standards—$17 US billion in annual revenue in 2015, with large shares and footholds in both B2C and B2B markets.
Aside from being the number one TV brand here, the company is big in mobile phones and appliances on the consumer side locally, as well as real estate, medical displays and infrastructure technology.
But 80 percent of Hisense’s business comes from China, and continued growth here is difficult. Only $3 US billion of its revenue comes from its overseas operations—and less than half of that is from its own brand—with growth projected at 10-15 percent a year outside of China. “We have to become a global company to survive,” Dr. Lan Lin, Hisense’s EVP and head of Hisense International, told us.
Hisense’s five-year revenue target: an even 50/50 domestic/international revenue stream.
In History’s Footsteps
To achieve these global goals, Hisense seems to be following the LG playbook: buy a respected U.S. brand used to leverage dealer space and build brand recognition.
But this analogy could be misleading.
Currently, Hisense pegs its TV market share in the U.S. at just 2.8 percent, 5 percent if you include its acquisition of the Sharp brand last year. But Hisense didn’t buy Sharp for its brand recognition, although that will come in handy when finessing recalcitrant retailers. It bought Sharp for its Mexican TV factory. Having this relatively local plant drastically lowers the cost of delivering TVs to the North American—and even European—market.
Second, Hisense wants to make it clear that it’s no longer approaching the North American market as an entry-level brand and it will not simply slap together a cheap set using off-the-shelf components to come in as a bargain alternative and survive via volume.
While Hisense sources its glass—largely from AUO in Taiwan, Samsung and, for 60-inch sets and larger, Sharp (which retained its numerous glass fab plants)—it designs and fabricates its own components, modules and BLUs (backlight units), as well as designing its own smart TV interface.
And while its Chinese competitors are creating premium lines by buying OLED glass from LG, Hisense is employing its proprietary ULED LCD technology to create a singular higher-quality brand message. Also due next year will be its H10-series quantum dot (QLED) variations.
Bottom line: Hisense intends on establishing a high-value brand reputation from the start, rather than building to it slowly as did the Japanese, select Korean and fellow Chinese brands before and with them.
And to try and overcome its lack of name recognition, Hisense also is attempting to establish a high customer service reputation. Its 4K TVs carry a four-year warranty vs. the usual one, it has constructed a network of North American third-party service centers, and has established its own U.S./Canadian and Mexican customer call centers in Atlanta and Mexico City, respectively.
Can Hisense be successful in its western hemisphere endeavors? Based on its success in South Africa and Australia, markets where the company started from zero to become one of the top TV sellers in both, the company is filled with confidence—but admits North America is a different animal.
Even with 4K, the North American and European TV markets are saturated with well-respected, well-established and highly-recognized name brands that Hisense will need to climb over.
It looks like Hisense is now ready to pivot from the low-cost low-margin strategy to one that will put it in direct competition with the premium brands. It will just be a matter of time before we know if the pivot will take foothold on retail shelves and in consumer mind share.