In terms of performance, Skyworth Group’s two major home-listing platforms faced significant losses. Recently, Skyworth Digital released its interim results for the 2017/18 fiscal year. While operating income increased by 5.9% year-on-year, net profit fell sharply to a loss of HK$192 million, a 123% drop compared to the previous year. For the first nine months of 2017, net profit was only HK$48.91 million, down nearly 90% from the same period in 2016.
Skyworth Digital's TV sales were also underperforming. Revenue dropped by 6.5% year-on-year to HK$8.764 billion, and total units sold fell by 11%, with a 21% decline in the mainland market. Industry observers noted that the color TV market is highly competitive, with limited brand concentration, leading to potential price wars as companies try to capture market share.
The reporter reached out to Skyworth Group regarding strategies to improve profitability and boost TV sales, but no official response was received at the time of writing.
Skyworth Digital’s net profit has been declining rapidly. In the 2016/17 fiscal year, it reported a net profit of HK$1.31 billion, a 40% drop from the previous year. The 2017/18 report showed a sharp reversal: operating income rose by 5.9%, but net profit turned into a loss of HK$192 million, down from HK$836 million in the same period the prior year—a staggering 123% decrease.
Skyworth Group’s other listed subsidiary, Skyworth, also experienced a similar trend, with revenue rising 21% to HK$5.144 billion, but net profit falling 87% to just HK$48.91 million.
As a key player in Skyworth Group’s strategy, Skyworth Digital focuses primarily on color TVs. Since its spin-off in 2014, it has been a core business unit. Analysts suggest the recent profit declines are largely due to rising raw material costs, including panel shortages and higher prices for key components.
Skyworth Digital attributed the drop in gross margins to increased costs of memory chips like DDR3, EMMC Flash, and NOR Flash. These factors led to higher production costs and lower demand as consumers became more price-sensitive.
Liu Buchen, an industry analyst, noted that the decline in profitability across domestic color TV manufacturers in 2017 was widespread. Even Hisense, which had previously enjoyed strong profits, saw a sharp drop in net income.
According to Liu, the rise in panel prices starting in mid-2016 was unprecedented, causing significant cost pressures. Meanwhile, low-price competition from internet brands kept TV prices stagnant, further squeezing margins. Compared to other home appliances, color TVs have traditionally had lower profit margins.
Liu added that many TV companies lack control over their supply chains, making it difficult to raise prices. Without vertical integration or strong brand positioning, they remain vulnerable to fluctuating material costs.
To address these challenges, Skyworth Digital has taken several steps, including optimizing product structures, controlling costs, and accelerating R&D for high-margin, converged products. It also plans to reform its supply chain system to better manage panel price fluctuations during peak seasons.
Looking ahead, Liu predicted that set-top boxes will become obsolete as their functions are integrated into smart TVs, reducing market opportunities for standalone devices.
Despite some growth in overseas markets, Skyworth Digital’s overall gross margin fell to 15.8%, down 4.8 percentage points from the previous year. This was partly due to the growing share of lower-margin international sales, which impacted overall profitability.
Industry experts believe that the Chinese color TV market remains challenging. AVC data shows a 12.9% year-on-year decline in retail volume during Q3 2017, with Ovum predicting a 6.1% drop in annual sales. Rising panel prices have contributed to this downturn, as higher costs have led to increased average selling prices, which in turn reduced demand.
However, there is hope on the horizon. Panel prices have recently started to fall, with reports showing declines in 50-inch and 55-inch panels in late November. Skyworth Group expects this trend to help improve profitability in the coming quarters.
Liu Weizhi, CEO of Skyworth Group, believes the industry will move toward a healthier state in 2018, with improved conditions for all players. Peng Xiandong, from China Blackcom Research Center, added that while panel prices may fall, other raw material costs could still rise, potentially affecting future pricing strategies.
Consumer Electronics
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