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Price Wars a Turn-off for TV Chiefs
The decision of major domestic colour picture tube (CPT) makers to freeze production will not rescue the industry from its current dire straits, industrial experts have warned.
Four of the eight major CPT manufacturers revealed last Friday that they have suspended production between May 1 and 30 June.
The alliance includes Shanghai Novel CPT Corporation Ltd, Nanjing-based Huafei Colour Display System Company, Beijing Matsushita Colour Kinescope Company and Shenzhen Saige-Hitachi Colour Display Components Company.
The four companies said their suspension of production aims to stop the continuous price dropping of TV sets which has plagued the CPT industry with meagre profits and surplus production.
Zhou Jiachun, president of Shanghai Novel CPT Corporation Ltd, said the sales of CPT is sluggish, leading to a large inventory for his company.
Tube manufacturers have been under tremendous pressure to drop their prices to TV manufacturers, who are waging a price war of their own, he said.
In April, the domestic TV makers again launched a drastic price dive, slashing prices by an average 20 per cent.
"Those razor-thin profit margins are in danger of shrinking further because of the lasting price war. It is the last ditch effort to stop the industry-wide price war of TV sets that has gouged our profits,'' Zhou said.
Zhan Zongqing, chairman of Guangdong Fortune Scientific and Technological Co Ltd, a major CPT maker which has not stopped production, said his company is scrutinizing the TV market before making a decision on whether to halt production or not.
Last year, the country produced 38 million units of colour TV sets -- a decrease of 2.8 per cent -- while the number of CPTs surged by 16 per cent.
Currently, a 29-inch CPT typically costs less than 1,100 yuan (US$130), a drop of 400 yuan (US$48) over the same period last year.
However, domestic TV makers say it is impossible to stop the price cutting of the TV industry by CPT's suspension of production.
Liu Hai, marketing manager with the Changhong Group, one of the TV giants, said the domestic market for TV sets is suffering a larger surplus supply than the CPT itself and is experiencing fierce competition through price wars.
Zhang Liqun, an expert from the Development and Research Centre under the State Council, said although suffering hardship, the domestic CPT makers should not halt development and manufacture of the new model picture tubes as that would have a negative effect on companies' future development.
He said China's domestic TV tube market is plagued by two major problems: oversupply and small, low-grade products.
Colour tube production capacity has topped 40 million a year while demand only stands at 28 million.
Meanwhile, the eight major tube producers make products that are similar in both design and quality because of their relative inability to produce high-end products.
As a result, local TV makers have to rely on imports to fulfil consumer demand.
This is the third year in succession that the eight major CPT makers have formed an alliance to freeze production.
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