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TCL Chairman Looks To Build His Brand

1/10/2012 12:01:00 AM Eastern
NEW YORK — On a recent tour of major North American cities to meet with partners, business and political leaders, and fellow Chinese entrepreneurs, TCL chairman and CEO Li Dongsheng said he expects to soon build TCL into a prominent TV and cellphone player in North America.

Li, who made an entry into the U.S. market several years ago by licensing the RCA brand for television products, said he realized that to be successful globally the company will need to build and promote the TCL brand with an appeal to younger audiences.

TWICE recently caught up with Li on a recent New York City visit to get a look at the company’s next chapter:

TWICE: Why did you decide to give up the RCA brand here?

Li: Our initial agreement with Thomson to license the RCA brand was for five years. There was a longterm vision to develop the TCL brand in the world. We used the [RCA] acquisition to introduce TCL globally and to implement a dual-brand strategy in a transitional approach. Essentially, we used RCA to get to know the local channels and markets.

TWICE: Do you see this year as a critical time to build your market presence?

Li: Yes. The timing for a structural change in the industry is very clear. The Japanese camp and European brands right now are experiencing difficult times. On the other hand, the Korean brands and the Chinese brands are broadly increasing their businesses. Of course, in the TV industry the shift from CRT to flatpanel technologies and people upgrading their TVs is creating opportunities for Chinese manufacturers in this brand reshuffling. A couple of years ago TCL invested close to $4 billion to set up an 8.5 generation LCD panel factory, and that was a big step we took to make our mark on the industry.

TWICE: You recently established your 8.5 Gen LCD plant, but that technology has been around a while. Are you concerned that new technologies like OLED will quickly displace LCD?

Li: The timing for a Chinese company to make such an investment was not late. We were one of the first Chinese companies to make such an investment. The demand in the Chinese market alone is still huge. Of course, we also pay close attention to next-generation display technologies, and some of the technology in LCD is also used in OLED, so starting with LCD is a good foundation for our involvement in future technologies. But for the next eight to 10 years at least, LCD will play an important role in the global market.

TWICE: In addition to TV, you are also looking to build a market for your mobile phones here. Which of the two do you see giving you the most opportunity in the U.S.?

Li: We see both of these areas being very important to us in the North American market. The businesses are established as two separate legal entities in North America, and we believe there will be more synergy created between them as we go along with links between smartphones, tablets and connected TVs.

TWICE: Do you have any specific market share goals for either category?

Li: In TV we are looking to capture 10 percent of the market [unit volume]. That is a must in order to achieve the necessary economies of scale. I think we can achieve this within three years, but our local sales and marketing team believes that is a very aggressive number. I will be meeting with them on the West Coast soon.

Our mobile phone business is a little bit different. We have been running a very successful operation in Latin America, but we just started in North America and due to the local economy our pace is a little bit slower than we would like. Our branding strategy there is also different. We have 20 year rights to the Acatel brand, which is very important in the mobile phone market because it is very well known by global operators who play an important distribution role in that industry. So that is why we have been very successful in Latin America and Europe.

In North America we are internally engaged in developing a clear brand strategy. We are trying to create an edge in a market that doesn’t have a lot of brands today, and we are looking at the best timing to promote the TCL brand for smartphones in North America.

TWICE: Why have Chinese companies collectively shied away from aggressively advertising and promoting brand awareness in North America?

Li: That is a question mark for me as well. In China the investments in brand building are very large. Also, we have a larger percentage of marketing investment in developed countries in Europe. The dynamics in the U.S. market are very different. For one thing, the margins are very low, but we also understand that if we don’t invest in brand building over here we will never make it to the second level, we will never enjoy the benefits of brand training and the margins will never go up. To achieve our goal of 10 percent market share we must make the brand building investments. How, when and where we will do that will be determined by our local marketing teams.

TWICE: You have said that you have chosen to work in the low-end to the middle of the TV market with models and pricing. Do you see that changing?

Li: In time, for sure, we will develop production methods in order to produce products with a better price-performance ratio. For example, through the establishment of our 8.5 generation LCD plant, we will soon implement modularly integrated product development so that the module and TV are designed together to improve our competitive cost structure. We will also start to launch our new mid- to high-end products with more functions such as 3D or smart TV.

TWICE: Do you see 3DTV developing into a big market opportunity?

Li: We see it as another feature of an HDTV. Once the price comes down a little more it will become more widespread. Hollywood and the gaming industry are promoting it more and more heavily. We were the first manufacturer from China to have a universal 3D approach – meaning TVs based on active shutter glasses, polarized 3D glasses and glasses free technology, though glasses-free 3D was for commercial use. This has been very popular in China.
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