Business

Taiwan LCD panel maker Chimei Group is to start selling TV sets on the Chinese mainland around the end of this month in cooperation with electronics retailer Suning Appliance Co.

It’s the first time Chimei, the world’s fourth largest LCD panel manufacturer, will have sold sets outside Taiwan.

“Chimei chose Suning as its exclusive sales partner on the mainland because of its market share, fast growth and advanced retailing terminals,” said Zheng Liangbin, vice general manager of Chimei’s brand career group.

Suning has displayed Chimei’s products in more than 10 outlets in Shanghai and the number will increase to 30 by the end of this year.

Chimei plans to enlarge its production lines and sell TV sets in other cities via Suning from next year.

It also expects that the sales will be among the top 10 companies in Shanghai’s flat panel market.

The company has invested 130 billion yuan in eight panel plants in China’s mainland and 45 percent of LCD TV sets in the mainland market are using Chimei-made flat panels.

(Shanghai Daily September 26, 2008)

Chinese television and mobile phone maker, TCL Corp, said yesterday it would cut the size of a planned share placement because of a scale-back in investment in a subsidiary.

TCL would reduce the target size of the funds to be raised from a planned private placement to 1.4 billion yuan (US$205 million) from 1.7 billion yuan as its unit TCL Industries Holing (HK) Ltd no longer needed a fund injection, the company said in a statement to the Shenzhen Stock Exchange.

It is the second time the country’s biggest listed electronics maker has made reductions to the share placement proposal. In December last year, it cut the private placement from 2.3 billion to 1.7 billion yuan. The current cut is pending approval from the stock regulator and a shareholders meeting scheduled for October 10.

Under the revised plan, TCL said that it would issue additional A-shares for no more than the funds it needed, compared with the previous 200 million to 440 million shares slated to a maximum of 10 institutional investors. Chairmen Li Dongsheng would still buy 18 percent of the new shares as a strategic investor.

The lackluster market had hindered fund raising through issuing additional shares, said Shi Hong from Industrial Securities Co. TCL said it needed the proceeds to expand LCD TV production as the sales of LCD TVs for the first eight months this year more than doubled to reach 2,231,078 units.

The company would spend 742 million yuan to make LCD TVs with screens of up to 42 inches and 654 million yuan to make TVs with screen sizes between 42 inches and 56 inches.

TCL closed up 1.42 percent at 2.85 yuan yesterday against a 0.86 percent rise in the Shenzhen Composite Index.

(Shanghai Daily September 25, 2008)

Qingdao Haier Co, a unit of the Chinese company that may buy General Electric Co’s appliance arm, said yesterday that first-half profit rose 46 percent as rising incomes fueled consumer spending in the world’s most-populous country. Net income rose to 548.9 million yuan (US$80 million), or 0.41 yuan a share, from 376 million yuan, or 0.28 yuan, a year earlier, the company said in a statement to Shanghai’s stock exchange, citing Chinese accounting standards. The company said it achieved 11 percent higher in sales to total 18.5 billion yuan during the period.

(Shanghai Daily August 25, 2008)

Gome Electrical Appliances Holdings Ltd, China’s No. 2 electronics retailer by market value, said yesterday first-half profit almost tripled after it added stores.

Net income rose to 1.15 billion yuan (US$168 million) or 0.089 yuan a share, from last year’s 395 million yuan, or 0.032 yuan, Hong Kong-listed Gome said yesterday in a statement to the city’s stock exchange. Sales increased 18 percent to 24.9 billion yuan, Bloomberg News reported.

The Beijing-based retailer, with 828 stores at the end of the first half, planned to open 160 in 2008, Company President Chen Xiao said yesterday. Gome has also acquired rivals. The company has grown as consumer spending has surged in China, where retail sales rose 23 percent on the year in June, the fastest pace since at least 1999.

“There will be consolidation in consumer companies because smaller retailers can’t compete with the larger ones,” said Sophie Fan, an analyst at CSC Securities HK Ltd. “Gome will continue to buy out smaller companies as acquisitions are the quickest way to achieve growth.”

The company said it would pay an interim dividend of 8.1 Hong Kong cents (10 US cents ) a share. The China earthquake in May, flooding in June and lower-than expected temperature in the northern provinces had a negative impact on same-store sales, which rose 0.5 percent in the period.

Barring no further natural disasters, same-store sales in the second half would be higher than the first, Chen said. There have been “some increase” in sales during and in the run-up to the Beijing Olympics but they were lower than expected, he added.

The Beijing-based retailer, founded by billionaire Huang Guangyu, has earmarked at least 2 billion yuan this year for upgrading outlets and setting up new stores. Gome competes with Suning Appliance Co, China’s largest electronic retailer by market value, and Best Buy Co.

(Shanghai Daily August 13, 2008)

LCD TV sales will contribute about one-third of total TV sales in China in 2008 because of surging demand brought on by the Beijing Olympics and post-earthquake reconstruction, industry officials said yesterday.

In 2008, liquid crystal display TV sales in China will jump 70 percent to 13 million units. Total TV sales are expected to reach 38 million units with an annual growth rate of 7-8 percent, according to consulting firm AVC.

“The Olympic event is a direct catalyst for the flat panel display TV in China as people pursue the new-technology TVs to see the big event held in their hometown,” said iSuppli, a United States-based IT consulting firm.

For a better viewing performance, many consumers are choosing the Full HD (high-definition) TV, which has an image quality five times higher than DVD. In the second half, Full HD TV sales will surpass 50 percent of flat panel display TV sales for the first time, according to Suning, the country’s second biggest electronics chain retailer. In the first six months, the HD portion was 35 to 40 percent.

China broadcasts HD TV signals, which allows users to receive them through antennas or cables.

People can receive CCTV’s free HD Olympics Live programs by wireless if they have Full HD TVs and specialized HD set-top-boxes.

Globally, 73 percent of LCD TVs larger than 40-inch will feature Full HD panels by the end of second quarter, compared with 64 percent a quarter ago. Full HD has also started to become popular in 32-inch LCD TV models, said DisplaySearch, a US-based IT consulting firm.

The traditional CRT (cathode ray tube) TVs, available for a comparatively low price, also remain popular in China.

(Shanghai Daily August 13, 2008)

For Wei Yinlong, it’s never too late to learn new things.

That’s why the 66-year-old Shanghainese, a frequent blogger, recently decided to add a new gadget to his daily life: a Hisense high-definition TV.

“This is much more than a regular television. Every channel is so clear, and it can act as a computer monitor. More importantly, I will be able to watch the Olympic Games with a higher-quality TV in August,” Wei wrote in his personal blog at eastday.com.

As the Beijing Games approaches, more HD TVs are being sold in China compared with previous years.

“Our sales of HD TVs have gone up 30 percent from a month ago, and almost 80 percent of our customers told us they are doing it for the Beijing Games,” said Xie Ming, a saleswoman with Sumsung TV at an outlet of home appliance retail giant Suning in Pudong.

In the run-up to the Games, HD TV is turning out to be one of the hottest items in Shanghai’s major appliance outlets. According to Linda Jin, with market research organization GfK China, weekly sales of HD TVs have jumped 10 percent in July from two months ago in Shanghai.

Yongle, another major home appliance retailer, registered a 268 percent sales increase of HD TVs in Shanghai this year from 2007. Among the best-selling products, HD TVs sized between 40 inches and 46 inches are the star performers.

Another recent survey conducted by Shanghai Commercial Trade Association of Household Electric & Electronic Appliances shows 36.6 percent of the respondents say they will update their television to HD soon.

“Traditionally, June and July are the low season for television sales, but this year we haven’t seen any sales decline. The Games has been driving HD TV sales over the past few months,” said Jiang Wei, a salesman with domestic brand Changhong at Suning.

Currently, there are three HD channels in Shanghai: CHC (HD movie channel), Xinshijue HD and CCTV-HD. During the Olympic Games, CCTV-HD will become an HD Olympic channel with live broadcasts of the events. After the Games, the channel will turn into a news channel.

Ye Ping, director of industry analysis and retail customs research division in GfK China, said there are three types of TVs on the market: Cathode Ray Tube (CRT), Liquid Crystal Display (LCD) and Plasma TV. The traditional CRT takes up more than 70 percent of the market share.

“More than 90 percent of the LCD and Plasma TVs in the market are HD,” Ye said.

In stark contrast to the hot sales of HD TVs, sales of the CRT variety are on the wane. Experts predict CRT TVs will be gradually phased out.

By the end of 2007, more than 300,000 households in Shanghai had installed digital cable TV equipment. If only a fraction of these families decide to go HD, it will mean huge gains for HD manufacturers.

The growing popularity of HD TV is not restricted to Shanghai. In the first half of this year, HD TV sales across China rose remarkably.

(China Daily August 7, 2008)

Gome Electrical Appliances Holdings Ltd seems to be the final winner of a 9.02-percent stake in Sanlian Commercial Co, reinforcing its domination of the company.

Beijing Zhan Sheng Investment Co bought 22.76 million shares in Sanlian at 5.94 yuan (87 US cents) apiece in an auction on Tuesday to become Sanlian’s second-largest shareholder after Gome.

Sanlian Group, the former second-largest shareholder of Sanlian Commercial, has offered five auctions for the 9.02-percent stake.

Although Gome’s spokesman He Yangqing said Zhan Sheng is an independent company and Gome has no connection with the 9.02-percent stake, Gome is still widely seen as the real owner based on the previous closeness of the two companies.

Last year, Gome financed Zhan Sheng’s 3.6-billion-yuan acquisition of Beijing Dazhong Electronics Ltd, with an option to buy Dazhong later for itself. Acquiring existing appliance retailers through a third party has been one of Gome’s strategies for grabbing the lion’s share of China’s market.

In February, Shandong Longjidao Construction Co bought a 10.7-percent stake in Sanlian for 541 million yuan to become the largest shareholder, and Gome acquired all of Longjidao several days later to become the real owner of the Sanlian stake.

“We will audit Sanlian Commercial’s assets after forming a new board of directors since the ownership of stakes is clear now,” Gome’s He told Shanghai Daily.

He said a listed company should be responsible for the completeness of its assets, including brand and logistics, so they will be called to account if an audit uncovers problems.

Gome has complained before that Sanlian only owns the rights to use the brand of franchised stores, but doesn’t have other quality assets in areas like procurement and after-sales service.

Sanlian was suspended from trading pending an announcement and closed at 9.25 yuan a share on Monday.

(Shanghai Daily July 31, 2008)

Suning Appliance Co plans to give senior executives share incentives.

The Nanjing-based appliance retailer will grant 43.76 million stock options, accounting for 2.93 percent of its total shares, to directors, excluding outside directors and independent directors, middle-level and senior executives and key staff, it said in a statement to the Shenzhen Stock Exchange yesterday.

A total of 40.76 million options will enable the holders to buy shares at an exercise price of 58 yuan, a 26-percent gain on yesterday’s close, while the remainder, for special staff nominated by the chairman, will be priced when granted, according to the draft.

“The scheme is to improve the company’s executive incentive review system and encourage executives to develop with the company to secure a long-lasting and stable growth,” Suning said.

The incentive scheme will be valid for five years but it still needs approval from a shareholders’ meeting and the country’s securities regulator.

The plan could help Suning stabilize its management group, save labor costs and raise its value with a clear expectation of business growth, Shenyin Wanguo Securities Co said in a report.

“The scheme is positive news for Suning as the exercise price will enhance investors’ confidence in the company’s development,” according to Haitong Securities Co.

The two stock houses both suggested investors buy the company’s shares. Suning rose 1.79 percent to close at 46.11 yuan yesterday.

(Shanghai Daily July 30, 2008)

Domestic air conditioner producers are taking a further hit this summer by rising material costs, bloated inventory and declining sales both at home and abroad, according to industry analysts.

Shi Hong, an analyst on home electrical appliances at Industrial Securities in Shanghai, told China Daily that profits of most air conditioner manufacturers are expected to drop again this summer largely because of dwindling sales as potential buyers are balking at the idea of buying them because of rising energy costs.

The sluggish property market has also contributed to the decline in sales because fewer new homes need to be fitted, Shi and other analysts said.

Exports of air conditioners, accounting for more than half of the industry’s total sales, has also been dragged down by the persistent appreciation of the renminbi against the US dollar and other major currencies. These problems have been aggravated by surging material costs.

“The surging prices of basic materials in producing air conditioners, such as steel and petrochemical products, have hit manufacturers,” Shi said.

Analysts said the continuous renminbi appreciation has stripped national air conditioner makers of their competitiveness against Japanese and South Korean brands in many overseas markets.

Latest industry figures show sales of Chinese air conditioning products in May totaled 7.92 million units, down 10.9 percent from the same month in the previous year. Of these, 3.13 million units were sold in the domestic market, down 32 percent from the previous year.

Although exported air conditioning products from China increased 13 percent in May to 4.79 million units, the growth rate dropped 7 percentage points compared with last May’s 20 percent.

Meanwhile, the inventory of air conditioners rose 4 percent to 10.75 million units by the end of May.

Although June’s sales figure is yet to be published, analysts predict it won’t significantly increase from May.

“I don’t expect any pleasant surprises in terms of higher sales in June,” said Shi.

Industry analysts said as long as manufacturing costs keep rising and sales fail to rebound, air conditioner makers will continue to suffer shrinking profits in the next two months, after which the annual peak sales season ends.

Apart from material costs, according to industry experts and analysts, air conditioner makers should also control the expenses related with sales and company operation, which usually account for 70 percent of the gross profit margin.

For example, Gree and Midea, the nation’s two largest air conditioner makers in terms of sales, posted a gross profit margin of 18 percent and 18.6 percent respectively in 2007. But after weeding out their expenses on product sales and company operation, they posted a net profit margin of 3.39 percent and 3 percent respectively.

(China Daily July 16, 2008)

Guangdong Midea Electric Appliances Co Ltd will invest in a 200-million-yuan (US$29.41 million) joint venture with Carrier Corp of the United States to produce air conditioners in Foshan in Guangdong Province.

Midea, the country’s second-largest listed household goods maker, will hold a 60-percent stake in the venture and Carrier Corp, a unit of United Technologies Corp, will take the balance, the Chinese company said in a statement to the Shenzhen Stock Exchange yesterday.

The venture, which is set to start operations at the end of this year, will rent Midea’s plants to research, develop, assemble and manufacture residential and light commercial air conditioning products. The project is still awaiting regulatory approval.

“The new venture will make use of our advantages in supply chain, management and production system and Carrier’s competitive edge in branding,” the statement said. The cooperation will also help enhance Midea’s experience in brand building, technology and management, it said.

“Our new JV aims to be a stable, long-term platform of capital, product, technical and brand cooperation and alliance between Midea and Carrier,” said a Midea spokesman.

Midea has tied up with Toshiba Carrier Corp to also make air conditioners.

(Shanghai Daily July 3, 2008)