LIVE FROM APAC INNOVATION SUMMIT, HONG KONG: The chairman and CEO of China’s TCL Communication – the company which offers devices under the Alcatel OneTouch brand – admitted that TCL’s growth rate is not keeping pace with that of internet and social media firms, which “is why we are exploring a refocusing strategy with us moving towards smart appliances and a TV-plus services model”.
Li Dongsheng (pictured) said TCL’s revenue has increased from CNY28 billion ($4.56 billion) to CNY100 billion since its first aggressive move into foreign markets, when it acquired Alcatel’s handset business and Thomson’s TV unit in 2004.
Overseas revenue accounts for 28 per cent of its total business and is a major driver of its growth.
Speaking about the two acquisitions a decade ago, he said TCL has been through a lot of difficulties, challenges and failures. “We have achieved our targets, but it hasn’t been easy.”
Despite his advisers telling him that the chance of success with the acquisitions was less than 50 per cent, he was intrigued by the possibility of quickly gaining access to foreign consumer markets, enhancing its technological capabilities as well as creating a global supply-chain system, which would allow it to avoid tariff barriers in many markets.
He noted that this was the initial phase of Chinese firms going global, which of course has had its setbacks. He noted that Acer’s move shortly after to acquire Siemens’ handset division wasn’t successful.
TCL is now ranked sixth globally in the mobile phone market and its growth this year is 50 per cent higher than the previous year, he said. It is number 2 in many Latin American markets.
TCL is exploring supply-chain bundling packages – that is services plus TV – which he said could bring revolutionary changes to the TV sector. “With a smart TV you can apply new services and the functionality becomes closer to a computer.”
With a generally much larger screen, many video use cases are much better suited for TV’s high-quality display, he said, noting it’s not just entertainment, but applications like distance medical diagnosis. “It’s hard to imagine your doctor and health team being able to view you clearly on a smartphone. Whether entertainment, commerce or other applications, the TV still has a bright future.”
This year TCL announced it will set up its largest R&D centre in Hong Kong. It plans to rent an entire building at Hong Kong Science & Technology Park. It set up an R&D centre in Silicon Valley five years ago and has had one in France for 10 years.
Adopting an internet business model
Meanwhile Li noted that companies today are adopting the internet model of doing business as well as an internet way of thinking. “The internet is into each and every aspect of a traditional business today, including finance.”
Li said that the success of Chinese internet giants – Alibaba, Baidu and Tencent – are all based on the unsuccessful stories of many companies that we have never heard about.
“Frankly speaking, it’s a winner take all situation. You may not like this statement, but it’s a very real one. These companies have controlling roles in these particular industries, and some people have lost the battles and have had very painful experiences. So it is logical that these companies can now provide a sustainable return for shareholders and are valued at a high rate.”
Li is an independent director at Tencent, which TCL now has a stake in of just under 10 per cent.
He said that with revenue and profit growing so rapidly at Tencent, its board meetings always end on schedule because its performance is always better than expected. “There’s really nothing to discuss.”