Accelerating Industrial Structure Adjustments Skyworth Discontinues Ordinary LCD TVs

Sun Dongwen, president of Skyworth Group, told reporters that Skyworth is the first TV company in the industry to complete a complete CCFL cut.

Recently, household appliances companies have taken a series of actions in response to energy-saving subsidies.

"In the subsidy products for energy-saving benefits, the share of Skyworth's LED products will increase from the current 80% to 100%." ​​Yang Dongwen, president of Skyworth Group, told the "Securities Daily" reporter that Skyworth has completed the clean-up of CCFL inventory and has completely suspended production. The first TV company in the industry to complete this work earlier.

Skyworth Completely Discontinued CCFL

At the end of June, Skyworth Digital released its annual report for the fiscal year 2011-2012. Sales revenue reached HK$281.37 billion, a year-on-year increase of 15.6%, gross profit margin rose 2 points to 21.2%, and net profit rose 6.6% to HK$1.252 billion.

The rapid growth in the sales volume of high-end products has allowed Skyworth's gross profit margin for fiscal year 2011 to increase by 21.2% from 19.2% in the previous year. During the reporting period, the company sold 9.25 million TV sets, exceeding the planned 9 million. In 2012, Skyworth raised its shipment target for the new fiscal year to 10 million units. In order to maintain the highest gross profit margin, Skyworth has completely shut down the production of CCFL LCD TVs after completing the inventory clean-up of CCFL LCD TVs in May this year.

According to the data, CCFL, which is a cold cathode fluorescent lamp, is widely used in displays, lighting and other fields. Because the backlight LED has more energy-saving advantages, in recent years, global household appliance manufacturers are cleaning up inventory of ordinary LCD TVs (CCFL-backlit LCD TVs). Earlier this year, Samsung said it would stop developing and producing CCFL LCD TVs.

Yang Dongwen, president of Skyworth Group, told reporters that "in the two months since the start of the new fiscal year, the company has completed the clean-up of its CCFL inventory and stopped production."

Increase turnover and reduce costs

According to the Skyworth Digital Annual Report, sales expenses including brand promotion and marketing and marketing-related work increased by 32.1% year-on-year to HK$3.771 billion in 2011, while administrative expenses increased by 30.2% to HK$906 million, including R&D expenses and technology Consultation expenses increased by 48% and 43.9% respectively.

Operating costs have risen sharply. Skyworth faced some cost pressure last year.

"Chongwei further reduced costs by continuously improving the efficiency of the supply chain. Inventories of Skyworth's raw materials and inventory of finished products in FY11 were 16 days and 30 days, respectively. The Group strictly controls inventory and speeds product switching." Yang Dongwen told reporters that in the past year, Skyworth continued to expand its mainstream and emerging sales channels, cooperated with technology upgrades to enhance product switching efficiency, catered to different consumer models in the market, and invested a large amount of funds in R&D and design of new products to accelerate new product launch speeds. Improving product competitive advantage, led by the high-end, high value-added and high-margin product portfolio, this led to an increase in overall gross profit margin.

He said that Skyworth continued to focus on LED LCDs, smart TVs, and non-flash 3D TVs in FY2012.

Powering overseas markets

From a global point of view, Sony, Sharp and others have outsourced more flat-panel TV production in order to reduce costs. Although home-made home appliance manufacturers are facing cost pressures, Japanese companies have set an opportunity to withdraw, with the improvement of domestic color TV manufacturing capabilities and supply chain capabilities. Overseas expansion space is being enlarged.

Due to overly cautious strategies and multiple personnel adjustments in overseas operations, Skyworth’s scale of sales in overseas markets has been stagnant for many years.

The annual report of Skyworth Digital shows that its overseas sales of color TV products reached HK$1,619 million, up 52.7% year-on-year, of which flat-panel TV shipments increased sharply by 125.5%, which increased overall sales in overseas markets by 39.4% to 2.23 million. Taiwan, exceeding the expected target of 230,000 units.

Compared with its overseas counterparts such as TCL and Hisense, Skyworth’s overseas sales revenue still has a certain gap. In 2011, Skyworth overseas flat panel sales accounted for more than 50%, and overseas businesses achieved losses.

Yang Dongwen told the reporter: “Under the influence of a series of uncertainties such as the appreciation of the renminbi, the European and US sovereign debt crisis, Skyworth’s profits with relatively low overseas sales have been minimally affected by overseas. However, Skyworth’s next expansion focuses on overseas markets. In addition to the original OEM and ODM business, Skyworth still needs to make breakthroughs in its own brand area.”

He believes that due to the appreciation of the yen and the financial crisis, Japanese brands such as Sony, Sharp, and Panasonic have a sharp decline in sales in overseas markets, especially in emerging markets, and their shares are mostly shared by Korean and Chinese brands. It is also the best time to force overseas markets.