‘LED panel assembly in Pakistan to be a major technology transfer’

An interview with Sunny Yang, GM TCL Pakistan

Sunny Yang is the General Manager of TCL Pakistan; a position she has held for more than 5 years. She has nearly a decade of professional experience working in the Pakistani market. Sunny has been with TCL for the entirety of her career now spanning over 13 years. Following are the edited excerpts of a conversation BR Research had with Ms. Sunny Yang at their head office in Lahore:

BR Research: What is TCL? What is its global presences, and what are its operations like in Pakistan?

Sunny Yang (SY): TCL is basically a part of a Chinese consumer electronics group, and it is now one of the largest consumer electronics companies in the world. TCL is slightly different from other consumer electronic companies in the sense that it highly specializes in LED TVs.

It was founded in 1981, and has about 85,000 employees around the world. It is operating today in every continent; we have a presence in China, South East Asia, across Europe, North America, South America, Australia and the Middle East. In the US, we reached the number 2 ranking in 2018 in terms of TV sales, which is a huge achievement for us.

TCL has been growing and building upon its capacity slowly over the years, but in the last ten odd years it has expanded rapidly across all regions globally. The growth of the brand has been particularly strong even in markets where we have newly entered. At this moment, TCL is operating in more than 160 countries with 17 brand centers and just last year, we have achieved a huge milestone in our history where we have achieved the global number 2 ranking in sales volume worldwide for the year 2018.

In Pakistan, TCL entered as a brand in 2013 as a branch office of TCL China. The brand has witnessed a lot of growth in these past 6 years, and today we are one of the top LED TV brands in Pakistan whether in terms of sales, brand value, categories of TV sold or any other metric.

BRR: So is LED TV the key revenue generating segment for TCL in Pakistan and across the globe, or are there any other consumer electronics that take up a significant share of the revenue pie?

SY: TCL is a specialist in TV and LED TV technology. A huge proportion of our R&D goes into this sector and that is why we are globally growing at the rate we are. Other than this, the TCL Group on the consumer side of the business is also heavily invested in other products like air conditioners, home appliances and recently in audio solutions as well.

BRR: In terms of market share, could you tell us where does TCL stand globally, in China, and in Pakistan?

SY: Like I just said, 2018 has been a historical year for TCL where globally we are now the ranked the number 2 brand in sales. This has only been possible due to a very good growth across the world. In China, for the last 10-12 years, TCL has always been at number 1 or 2 in terms of market share.

Globally, Samsung has been leading the market for the last decade or so. However, TCL has seen exponential growth in the last 10 years, moving up from eighth, ninth, tenth spot to second, third and fourth across all regions in terms of sales volumes. So we can comfortably say that globally TCL has emerged as a top TV seller uniformly, where some regions are slightly ahead and some new markets are quickly catching up. In Pakistan, we have been in the top three consistently in the last few years in terms of sales value, and we were one of the top two in 2018.

One of the core reasons behind TCL’s recent global ascent as a brand and a manufacturing giant is its high investment in technology. Technology plays an extremely pivotal role in the LED TV industry, where the manufacturing of an LED TV is a highly complex, high investment process, with the actual LED Panel being the most critical and expensive part in the manufacturing process. TCL owns its own panel manufacturing plant, Shenzhen China Star Opto-Electronics Technology Co. Limited (CSOT). In total there are only 7 main LED TV Panel manufacturers in the world. This ability to manufacture panels makes TCL one of only three brands worldwide (along with Samsung and LG) who are vertically integrated, which basically means having the ability to manufacture every single component of a TV in-house; allowing full control over the entire production process and providing consistent and high quality products.

This facility was launched in 2011, and a second production unit was set up in 2015 taking the cost of CSOT in excess of USD 8 billion; and a third unit is under construction, which will allow us to manufacture high end 65”, 75” and 85”. The production capacity of this facility is in excess of 20 million units annually; to put that in perspective, the entire TV market in Pakistan is just over 1 million units annually currently. Because of this high manufacturing ability many of the famous LED TV brands in the world are actually TCL’s customers in procuring panels for their own LED TV products.

BRR: Could you elaborate on how the growth in TCL as well as demand dynamics has resulted in such high growth for TCL brand in Pakistan?

SY: Pakistan’s TV market at this moment in time, has about 50 percent of the population lying in basic TVs in the price range Rs15,000-30,000. The total market of Pakistan was 700,000 in 2016, and it was 1.2 million last year – almost a 50 percent growth in total market in two years. Conversion is happening where people are moving towards better technology LED TVs; this is supported by growing per capita income, increasing consumption and televisions kind of becoming a necessity.

Pakistan is one of those countries that is still undergoing the conversion processes that other countries went through maybe 5-8 years ago. This is part of a growing economy, and it actually makes things a little simpler as we are usually mirroring other economies. In case of Pakistan, we are very closely mirroring Middle East countries with a lag of about 3 years. Their market dynamics and consumer demand trends are very closely aligned with those in Pakistan. This allows us to glimpse into the future and upcoming trends, which are coming in sizes and categories of LED TVs that TCL already has a good foothold in.

How does all this translate into brand value in Pakistan? Because TCL has a very strong focus on technology and R&D, our smart TVs, smart systems, and our 4K TVs are of a very high quality in terms of features they offer at the price they’re offered at. Our complete focus is on slightly higher end models that include smart and 4K UHD TVs, starting from you can say, 32” smart and above in Pakistan.

In these categories, TCL has a particularly strong foothold as it has been ranked the number one smart TV and number two 4K UHD TV brand in terms of sales volume in Pakistan consistently over the past 2 years. Consumers recognise the quality of our products and have appreciated the features and technology that we have incorporated in them which has allowed us to reach this point.

BRR: Can you share some growth figures for this market?

SY: So while the conversion is happening at an exponential rate and the acceptability of smart features is on the rise, the prices for LED TVs are also coming down. Both these factors are contributing to the growth of LED TVs in Pakistan. As I mentioned earlier, since 2016, there has been a 50 percent growth in the market; and we are expecting a similar market growth rate if not more in the next 2-3 years. TCL’s growth rate has been in excess of 100 percent over the same period, which means that we are almost doubling the industry average in terms of sales volumes as well as value.

As we were talking about conversion to smarter and bigger LED TVs, let me tell you that out of this 50 percent increase in the last couple of years, the growth for smart TVs has been more than 300 percent. You could segment the market into basic, smart and 4K televisions where the share of the basic is falling and smart and 4K features are gaining dominance exponentially. This is what is also happening globally.

BRR: Who do you consider your competition in Pakistan?

SY: From a brand perspective, there are three categories for LEDs: Category A has your premium global brands. Category B consists of mainly Chinese and local brands and Category C consists of the refurbished or even fake TVs, which might imitate some brand or might not have any brand names. Two to three years ago we blended well in Category B; but since we have been completely focused on higher end models like smart TVs and 4K TVs, the growth that we have witnessed has seen us close the gap significantly with the premium category because of the quality of product that we are offering. We have a 40 percent plus market share in smart TVs in Pakistan.

In UHD televisions, Samsung has been the number one ranked brand, while we have reached the second spot in Pakistan in the last two years and we are closing the gap every year. So now, we are the comfortably the second ranked seller of 4K TVs in Pakistan.

How we assess brand value is that all this is not the result of some big price gaps or discounts. In fact, our price gap with the premium brands has reduced drastically over the same period where the difference between two similar top end models is very minimal at this point.

These results and the changed market dynamics in terms of consumers purchasing TCL shows our growth journey and our brand value has steadily increased and helped bring our brand close to Category A.

BRR: But yours advertising and marketing does not seem as aggressive as some of the other brands in category B. What do you have to say about that?

SY: True. TCL’s 5-year strategy from 2014-2018 was to fully activate its market capability. That included working on our partnerships, products strength, network strength, BTL level execution in terms of product availability, product display, staff trainings, and market promotions to garner sales growth. One of the key factors for sales in this region is what the salesman or the dealer recommends. We have worked very hard with all our partnerships and today all the top dealers across the cities in Pakistan are also working as top dealers for TCL. We have invested a lot of time in establishing these relationships. TCL has adopted a BTL focused model largely in these five years for its product availability and conversion.

With that base set, for the past two years we were purely focused on digital marketing. Our entire base of advertising is completely digital. We are very active on social media; we drive a lot of traffic to our website where we have approximately 3K customers on average on our site every day. And we are moving aggressively with this digital activation as this in fact represents our core target market in terms of consumer choices, habits and preference.

And now, we are also opening to other avenues like ATL. Globally, we are a brand aligned with sports marketing where you will see that the football icon Neymar Jr. is our global sports ambassador. In Pakistan, we are one of the major partners of Peshawar Zalmi cricket team as well.

BRR: What are you plans for Pakistan in the next five years? Any plans to bring manufacturing here? Also, do you plan to go into other consumer electronics as aggressively as you have captured the TV market?

SY: TCL is increasing its investment in Pakistan. We are increasing our operational capabilities, warehousing, and now we are investing in our plant, It’s a big thing for our branch where we will bring part of the panel assembly functions here. This would be a major technology transfer, and will be yet another competitive edge for TCL.

We are predominantly focused on televisions as we want to be the number one brand in Pakistan in terms of total sales volumes and value; we want to consolidate the growth in smart TVs; and we want to be at the top for 4K TVs in the next five years. As for other electronics, we are launching air-conditioners in June this year; we will be officially brining in TCL air-conditioners in Pakistan, while in July we will be launching our sound bars as well to complement our televisions.

BRR: How much is smuggling and the grey market affecting the industry?

SY: This smuggling factor was the biggest factor that destroyed the industry in the 90s and the 2000s as well. It completely decimated the brands and local competition. And there was no way a local, Chinese or even the premium brand could survive. This baggage was a huge factor even in the decision making for us for the first four years of our operations where we had to take into account the pricing of the baggage in our costs. It was rampant, and it was really hurting the industry including the premium brands and the Chinese brands. In the early 2000s, many companies pulled out of Pakistan because of this issue. However, after 2016, credit goes to the government for initiating a really big crackdown; and today the percentage of that smuggling baggage has significantly come down. Now, it is not a major factor in the industry anymore. It is there, but its dominance has reduced to a major extent. For the industry, that is very good news.