TCL Unfazed By Critics of Plan to Ship Sub-$1,000 4K TVs

The announcement from low-priced Chinese TV manufacturer TCL last week that it’s entering the U.S. market next month with a $999 Ultra HD TV brings stark stratification to the fledgling Ultra HD market. TCL trumpeted its $999 50-inch Ultra HD TV as being $5,000 less than LG’s 55-inch product and drew the expected responses from specialty dealers who have already been priced out of the TV market by big box retailers able to buy premium products at steep discounts (CED July 26 p1). Comments from specialty retailers, who say they hope Ultra HD can bring some margin back to TVs, ran the gamut from attacks on quality to questions of performance in low-priced sets.

TCL USA President Michelle Mao responded to retailer and competitor reactions to TCL’s plans in an email in which she shored up TCL’s worldwide position in TV sales. While it hasn’t had a U.S. presence, TCL is the world’s third-largest HDTV manufacturer in terms of shipments -- a ranking corroborated by NPD DisplaySearch -- and delivered more than 13 million TVs last year, Mao told us. TCL has 70,000 employees worldwide and invests “heavily” in research with 18 R&D centers, including one in Silicon Valley, Mao said.

TCL’s launch of the sub-$1,000 Ultra HD TV, along with other competitively priced HDTVs, in the U.S. market is part of an overall strategy to be “disruptive in the industry by taking low margins to build our name in the U.S. and make the latest technology affordable for consumers,” Mao said. “This may be a threat to some that are not focused on what’s best for the consumer, but our goal will always be to offer high quality products that combine leading technology with attractive design at aggressive price points,” she said.

Seiki was the price leader for 4K Ultra HD in the U.S. when it announced a $1,499 model last spring. Following TCL’s statement, Sung Choi, vice president of marketing for Seiki, told us the company is planning an announcement for Ultra HD in advance of Black Friday and the holiday season, but the company isn’t ready to discuss details. The upcoming news for Q4 product will cover video processing, performance improvements and an announcement related to the “overall quality of products and how they're put together,” Choi said.

On perceptions that low-priced TVs translate to low-end build and performance quality, Choi disagreed that there’s a large quality gap between more expensive major brands versus Seiki. Seiki is about “providing straightforward, high-quality monitors and displays” both in 4K and HD, Choi said. “I don’t know what people are basing” negative perceptions on, he said. Many of the panels come from the same sources, he said, saying Seiki TVs deliver “visual and image quality that’s comparable to the ones from our competitors."

Seiki is able to achieve the price points it does because it owns a factory in Shenyang, China, where it has a “simple” operating model, Choi said. “We don’t do smart TV features and we don’t do 3D,” he said. Seiki TVs offer “just the essentials” for HD and Ultra HD, and don’t mix in “costly” add-ons, he said. He said Seiki has no OLED plans that he’s aware of. Seiki as a brand “is very excited to be part of new, next-generation technology coming about in TV,” Choi said. “It’s clear what our role is: to make sure customers have access to TVs at fair and affordable prices.” The factory, owned by Seiki’s TongFang Global, eliminates the “costly middleman” and “allows us to maintain a high level of quality control that meets our strict standards,” according to the TongFang Global website.

Robert Zohn, owner of the independent AV retail store Value Electronics, Scarsdale, N.Y., told us in an email that the current Seiki 50-inch Ultra HD TV, which lists for $1,499 and carries a minimum advertised price of $1,299, “has little to no impact on sales of premium brands of UHDTVs.” Zohn’s store carries the three Sony 4K TVs, and is also a dealer for Samsung, LG, and Panasonic TVs. Seiki 4K TVs “sell well in their market, which is geared mostly towards PC monitors and gamers,” Zohn said, while premium brands “are more fitting for TV viewing and larger size panels,” he said. He expects the same stratification to play out with TCL’s 4K TVs, where “another 50-inch low-priced UHD display would compete in the same customer base and have little to no effect on the premium suppliers products that are geared for TV content use."

A “significant difference” exists between many Chinese Ultra HD sets and those of leading international brands, NPD DisplaySearch analyst Paul Gray told us. The low-priced 4K sets typically have only 60Hz screens and “appear to have fairly simple video processing,” Gray said. Some can’t accept a 4K input, so they can only upscale to 4K on the display end, meaning they don’t deliver a true 4K image, he said.

Higher end sets introduced so far by global brands have “far more sophisticated video processing,” and “true 4K2K pass-through, which is not cheap,” Gray observed, saying optimal semiconductor solutions don’t yet exist. Many higher end Ultra HD sets also have “future-proofing elements” such as “HEVC video decoders, exotic scalers and expansion ports,” which make them “costly inside.” And typical of flagship products, they have high-performance audio components and use high-quality materials including aluminum and stainless steel for cabinets, he said.

Chinese TV maker Hisense, meanwhile, is currently selling Ultra HD in China and is “still deciding what position to take in the U.S. market,” Vice President of Consumer Electronics Peter Erdman told us in an email. “We definitely do not want to be positioned at the bottom,” he said. Erdman didn’t address questions about Hisense’s position in the U.S. market versus Seiki and TCL. “Our technology and [industrial design] compete with tier-one brands,” Erdman said, adding “from a recognized brand standpoint we compete with tier two and three brands.” Erdman declined to say how Hisense plans to differentiate itself but said that Chinese brands -- instead of competing among themselves -- are “competing with the broader market, and the broader market is changing."

Gray of DisplaySearch said Chinese brands have “mastered most of the technical challenges” of TV manufacturing and are now looking to grow their business beyond their domestic market. Ultra HD introductions in the U.S. are a “proof point that they are no longer laggards and are ready to challenge established brands in mainstream market segments."

For the overall Ultra HD market in 2013, DisplaySearch forecasts a million 4K sets will ship worldwide, including 600,000 in China, led primarily there by local brands. Next year it sees a four-fold increase to 4 million TVs with half shipping in China. Gray outlined differing strategies among TV makers for the China and U.S. markets. In the U.S. and elsewhere, 4K is a “top-end product, part of a whole new Ultra HD content paradigm encompassing new broadcast services and perhaps even new disk formats,” Gray said. In the China market, 4K is a “simple extra feature at a small premium with no content,” he said.