COMMENT: When you buy a flat panel TV today, chances are that the only link with the brand on the front is the cosmetic design, the outside plastic and metal, and the occasional management processor inside the TV. A classical example is Philips which recently was forced to outsource over 70% of its TVs to Chinese manufacturers who are also making low cost LCD TVs for retail giants like Target, Wal Mart in the USA and retailers who want to stock house brands.
During the past few years, Philips have struggled to compete in the TV market despite dominating in the old CRT market. One of the reasons for this failure is that the company like Hitachi and Fujitsu are known as being “Lousy marketers” up against powerful brands like Samsung, Sharp, Toshiba and Sony. This is despite the fact that Philips was one of the first to develop flat screen TVs in the early 1990s.
Last week the company was forced to sell down their shareholding in LG.Philips with many analysts now tipping that Philips will get out of the flat screen TV market to concentrate on lighting and the medical market.
Philips announced in October last year that it would reduce its shareholding in the LG.Philips business from 33 per cent to 19.9 per cent, however it has now been reported that the company is reducing its stake further to a measly 2-3%. The reduced stake will spare Philips about $3 billion – money that will probably be used toward proceedings to streamline the company’s product offering.
Reuters recently quoted a Japanese business publication as saying Philips president, Gerard Kleisterlee, said it would sell its shares after the stock market recovers, as the panel business is not one of its core operations.
What Philips are trying to do is push up the price of their TVs in the belief that consumers will pay the extra because they are a European brand and because of the styling of a Philips TV. However for consumers this is a false economy as one is going to save a considerable amount of money by tracking down a house brand made by one of the manufacturers being used by Philips. In most cases one could save up to 50% on the price of a TV.
For example Philips have just signed a contract with Qisda, a company that use to trade as BenQ. This company makes excellent LCD TVs which are sold under various brand names including BenQ, which later this year will launch a stunning new range of LCD TVs under their own name. These TVs will come off the same production line as the Philips TVs but will cost up to 35% less than the Philips branded TVs.
Philips insiders have confirmed that Philips has signed contracts with Funai, TCL and Qisda as additional makers of their LCD TV range. Currently the company is using China based TPV Technology to make their TV screens. Unlike Sharp and Toshiba who make their own components and assemble the bulk of their LCD TVs, Philips have been forced to use manufacturers like TPV who make more LCD monitors and old technology CRT screens than LCD TVs.
The company expects to ship 14 million LCD TVs this year, with about 10-12 million units being outsourced.
TPV Technology has been the vendor’s main OEM partner, though last year reports indicated that Philips would be adding Funai, TCL and Qisda as additional LCD TV OEMs from 2008 in an effort to cut costs and allow the company to compete with the likes of Samsung, Sony and LG. In Australia Philips TVs are only stocked by limited retailers with the likes of JB Hi Fi refusing to sell their TV product range.
TPV is expecting to receive OEM orders for about five million LCD TVs from Philips this year, with Qisda and Jabil each receiving orders for over one million units, according to company insiders. Qisda reportedly landed OEM orders for 26- and 32-inch models from Philips, while Philips is the main LCD TV customer of Jabil.
Philip will outsource limited orders to Funai and TCL since the company has just started working with the companies. TCL has confirmed that it extended its cooperation with long-term partner Philips to the LCD TV segment in December 2007, and TCL expects its LCD TV production for 2008 to increase by nearly 300% on year.
TPV Technology expects to ship eight million LCD TVs this year, while Qisda aims to ship 2.5-3 million LCD TVs, according to the report. TCL expects to ship 4 million LCD TVs this year, the report added.