Abstract

In 2005, the Chinese TV manufacturing industry's annual production volume broke through the 90 million units mark. However, competition in the TV industry has grown increasingly intense, and gross profit margins have fallen to only around 2%. To reduce production costs and achieving product differentiation, leading Chinese TV vendors such as Changhong and Hisense have been implementing backward vertical integration, establishing Panovasic and Hiview respectively for TV controller IC development. Encouraged by the Chinese government's active support for the IC industry and by the potential of the TV controller IC market, many Chinese who had returned to China after studying or working overseas have established start-ups such as WSC and Arkmicro to design and develop TV controller chips. WSC has already succeeding in building collaborative partnerships with TV vendors Skyworth and Amoi.

These newly established Chinese TV controller IC design firms have to cope with the problems resulting from limited capitalization and limited access to technology. At the same time, the Chinese TV controller IC market is still dominated by international companies such as Genesis and NXP. The main challenge for the Chinese design firms is thus to change the existing supply chain structure and convince domestic TV makers that their products are of sufficiently high quality. Examination of the performance of WSC, Panovasic, Hiview, and Arkmicro shows significant variation in terms of their ability to overcome these challenges.

Panovasic and Hiview have enjoyed funding support from their parent companies, along with access to technology and the opportunity to secure contracts from the parent companies.  With the help of their parent companies, Panovasic and Hiview have also been able to secure technical support from leading international TV controller IC vendors such as PW, which has been collaborating with Panovasic. However, to continue to grow over the long term, Panovasic and Hiview will need to be able to secure orders from their parent companies' competitors. Ultimately, for these firms, success will also depend on how far they are able to escape from under their parent companies' shadow.

WSC and Arkmicro, both of which were established by Chinese who had returned to China after studying overseas, have had to rely on venture capital firms for funding. To secure customers, WSC invited first-tier TV vendors to acquire shares in WSC, and then continued to build up its customer portfolio by developing collaborative relationships with second-tier TV makers such as Amoi and Dalian Daxian. The main problem facing WSC and Arkmicro in the future will be how to continue to improve their technology.

Appendix

List of Companies