This summer, it was impossible to miss Hisense’s bold presence at the UEFA European Championship in Germany, where its slogan “China’s No. 1, never settle for No. 2 globally” dominated the landscape.
After years of pouring resources into international marketing, Hisense is reaping the rewards. In its 2024 semi-annual report, Hisense highlighted how its marketing efforts at the Euros significantly boosted its overseas market development, with a 20.06% year-on-year (YoY) surge in revenue from its core European business.
Eighteen years ago, Hisense outlined a strategy to prioritize overseas expansion—a vision that has now materialized. For instance, last year, Hisense’s overseas revenue reached RMB 27.92 billion (USD 3.9 billion), contributing over half of its total earnings.
Chinese giants Hisense and TCL have both secured the second spot in global shipments of “black goods” for years, which refer to electronic devices typically housed in black or dark casings, such as television sets. Each achieved global sales exceeding 20 million units last year.
The key to Hisense’s rapid globalization lies in its brand marketing and the construction of overseas supply chains.
Since 2008, Hisense has been steadily building its global brand recognition through sponsorship of major sports events, with its logo appearing at the Australian Open, FIFA World Cup, Euros, and more.
Though traditional, this marketing approach has proven effective. Pre- and post-World Cup surveys by Ipsos revealed that brand awareness for Hisense TVs in overseas markets, including the US and Australia, increased by 5 percentage points. A similar rise was noted in the US, UK, and Japan.
But advertising is just the first step. For large household appliances like black goods, expanding into overseas markets requires tackling challenges like tariffs, transportation costs, and supply chain efficiency. These hurdles have led many home appliance companies to establish their own factories abroad, ensuring localized production and supply chain support, which in turn allows them to tap into new markets and mitigate risks such as tariffs.
Hisense has been proactive in this regard, setting up a global footprint that spans continents. Currently, Hisense operates 26 R&D institutions, 34 industrial parks, and production bases worldwide. On August 8, several media outlets reported that Hisense plans to establish a TV factory in Egypt—its second large manufacturing plant in Africa, following the South African plant.
In recent years, Chinese companies like Hisense have increasingly turned their attention to Asia, Africa, and Latin America. As markets in Europe and the US reach saturation, these regions represent the next growth curve. However, to achieve substantial profits, high-end products remain the key.
Beyond Egypt
Hisense’s TV factory project in Egypt, covering about 200 acres, is slated to start production in 2024. The factory will serve not only the domestic market but also export to 21 countries and regions, including the Arab League, North Africa, and East Africa, with plans to gradually expand into West Africa, the European Union, and the Americas.
This isn’t Hisense’s first venture in Egypt.
Back in 2008, Hisense Group built a production base in Egypt’s 6th of October Governorate, primarily producing cathode-ray tube (CRT) and LCD TVs. At the time, Hisense positioned the Egyptian base as its largest television manufacturing hub in the Middle East and North Africa.
Today, Egypt stands out as an ideal location for Chinese companies to establish manufacturing bases.
Strategically located between the Mediterranean and Red Seas, Egypt serves as a vital link connecting the Middle East, Africa, and Europe. It is also the most populous country in the Middle East and the third most populous in Africa, leading the continent in economy and technology, and ranking as its third largest economy.
According to the Arab-China Institute for Economics and Policy, Egypt is not only a significant production center in Africa but also a critical bridge connecting Africa and Europe. With a large, skilled, and competitively priced labor force, Egypt offers ideal conditions for labor-intensive industries. The government’s proactive investment incentives and infrastructure projects further enhance the appeal of manufacturing in Egypt. In Africa, Egypt’s manufacturing sector plays a central role, producing a wide range of goods, including textiles, chemicals, and processed foods.
Egypt’s recent inclusion as a BRICS member and its pivotal role in the Belt and Road Initiative (BRI) have made it an attractive destination for companies like Hisense, Midea, and Haier to establish production bases.
Big screens, rapid growth
As Chinese black goods giants vie for the title of being second in the world, Samsung, the global leader, is feeling the pressure.
Recent data from market research firm Counterpoint Research shows that global TV shipments in the second quarter reached 56 million units, a 3% YoY increase. The European market, driven by the Olympic effect, saw a 13% growth.
High-end TV shipments jumped 45% compared to the same period last year, with mini-LED and OLED TV shipments rising by 69% and 21%, respectively. This marks the first time mini-LED TV shipments have surpassed OLED. In the high-end market, Samsung Electronics’ market share fell below 40% for the first time, down to 33%, followed by LG Electronics (18%), Hisense (17%), TCL (15%), and Xiaomi (5%).
In the high-end product category, international and Chinese brands have long taken distinct paths, with international brands focusing on OLED and Chinese brands on mini-LED BLU TVs. To diversify its strategy, Samsung is shifting its high-end product focus toward OLED TVs and expanding its white OLED product line in 2024, while LG Electronics remains committed to its OLED strategy.
New market data suggests that mini-LED TVs are gradually gaining acceptance in overseas markets and are poised to become a critical asset for Chinese black goods companies looking to break into the high-end TV market globally.
Hisense’s latest performance supports this trend. According to its semi-annual report, the company’s global sales of 85-inch and larger, as well as 100-inch and larger, smart display terminals surged by 62.34% and 641.36% YoY, respectively. Mini-LED TV sales more than doubled, and sales of self-branded TVs featuring ULED and ULED X technology continued their double-digit growth.
During the reporting period, Hisense sold 12.89 million smart display terminals, excluding laser TVs and commercial display businesses. According to AVC Revo, Hisense-branded TVs held 14.12% of the global TV shipment market, ranking second worldwide. Additionally, according to Omdia, Hisense-branded TVs accounted for 58.5% of the global market for 100-inch and larger TVs, maintaining the top position. Hisense-branded TVs also led the retail market share in the 100-inch and larger segments in Germany, Italy, and the US.
However, despite significant market share gains in various regions, Hisense’s performance highlights an issue of increased revenue without increased profits. The report shows that the company’s revenue in the first half of the year reached RMB 25.461 billion (USD 3.6 billion), up 2.36% YoY. However, net profit attributable to shareholders fell to RMB 834 million (USD 117.2 million), down 19.56% YoY.
The decline in domestic sales and continued erosion of gross profit margins have impacted Hisense’s profits.
In its financial report, Hisense attributed these issues to temporary increases in raw material costs, significant short-term fluctuations in global shipping prices, and a notable drop in domestic sales of its main brand, all of which have temporarily affected profitability.
A research report by Guolian Securities echoed these concerns, pointing to the rise in panel prices, short-term volatility in freight rates, and a significant decline in domestic sales as the main reasons for the lower gross profit margins. However, as panel price increases are expected to narrow in Q3 2024, the company’s cost pressures may ease.
For Hisense, the commitment to a global strategy is more crucial than ever.
After several rounds of high growth, the Chinese TV industry appears to be struggling to sustain itself, with TV usage rates dropping to less than 30% as of 2022. In the overseas market, Hisense’s challenge is to secure a place in the high-end segment under the guidance of strategies focused on premium products and large screens.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Leslie Zhang for 36Kr.