Sichuan Changhong Electric Co. Ltd. (600839.CN) will stop making conventional televisions next year, signaling its full embrace of the smart TV era.
The decision came after the company posted profit growth of 55 percent year on year in the nine months to September.
If the transition goes smoothly, the company could become a leading player in China’s smart TV market. Its production target this year is 10 million units.
Changhong, which began as a manufacturer of fire control radar, is not stopping there. It recently unveiled plans to make smart lifestyle products including refrigerators, air-conditioners and small appliances. These are expected to make up 20 percent of production starting next year.
Market reaction has been quite positive. The stock has rallied nearly a fifth this week on expectation the move will increase gross margins, strengthen customer loyalty and create strong sales synergy by enhancing interconnectivity between different types of household appliances.
That said, it is not clear whether Changhong will gain any immediate benefits from the network-based strategy, especially as the smart lifestyle concept is yet to catch on in China.
Interestingly, its thin profit margin is a cause for concern. The company earned a paltry 310 million yuan (US$51 million) on revenue of 40.05 billion yuan in the first three quarters of the year.
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