Visitors examine Hisence TVs at the CES in Las Vegas, the United States. XINHUA
Sector hit by rising costs of raw materials which have been passed on in prices
China's television industry has seen a downturn in the first quarter, with major TV manufacturers witnessing a drop in net profits and sales affected by the rising price of raw materials.
Sichuan Changhong Electronic Co Ltd said its revenue was 16.63 billion yuan (.41 billion) in the first three months, up 7.93 percent year-on-year, but net profit plunged 84.75 percent to 32.98 million yuan in the quarter, marking the biggest earnings fall among the companies that released financial reports.
Qingdao-based Hisense Group posted a revenue and profit decline in the first quarter. Its revenue dropped 5.98 percent to 6.7 billion yuan, while net profit slipped to 269 million yuan, down 49.53 percent compared with same period last year.
Hisense blamed the rise in the costs of raw materials and shrinking production for the decline.
Another home appliance manufacturer Shenzhen-based Konka Group Co Ltd said its gross margins from TVs and white goods, which include air conditioners and refrigerators, witnessed a decline in the first quarter due to the price rises of raw materials.
In March, the TV sales of Skyworth Group Co Ltd in the Chinese market dropped 25 percent year-on-year. TCL Corp said sales of LCD TVs fell 7.7 percent to 2.22 million units in the first quarter.
Statistics from Sigmaintell Consulting Co Ltd, an industry consultancy, showed shipments of TVs in the Chinese market reached 11.69 million units in the first three months, down 14 percent year-on-year.
Six major Chinese TV manufacturers－including Hisense, Skyworth and TCL－sold 8.16 million units from January to March, accounting for a 70 percent market share, according to Sigmaintell.
Analysts said the price rises of TV panels drive the growth of overall TV prices, which causes a decrease of consumers' purchasing intentions.
Liu Buchen, an independent researcher in the home appliances sector, said the price rise of panels had continued for nearly three quarters.
"In the past, the price of panels often rose 10 percent, but the price grew 40 to 50 percent this time," Liu said.
Panels account for more than 50 percent of TV costs, Liu explained. "The increase in TV prices lagged for several months, causing major TV brands to suffer a loss."
Moreover, internet television companies, such as LeTV Holdings Co Ltd and Xiaomi Corp, are facing more pressure. Sun Taitong, an analyst from industry watcher China Market Monitor, said the internet TV brands grew rapidly last year, but their sales had a downturn in the first quarter.
Chinese TV manufacturers have entered into a period of adjustment. Konka hired new senior management personnel. Skyworth Digital appointed Liu Tangzhi as its CEO.
TCL, meanwhile, started to reorganize its panel business and initiate new overseas M&As.