TCL Buys Sanyo Tijuana TV Assembly Plant, Plans 4K Set Production

TCL will pay $15 million for the 12-year-old Tijuana, Mexico plant, which has annual capacity for two million units and had been used by Sanyo to assemble branded sets largely for sale through Walmart. TCL North America will operate the plant, retaining the facility’s middle management and other employees, fully transitioning to TCL ownership by month’s end, Chris Larson, vice president-sales and marketing, told us. The sale ends Sanyo’s TV manufacturing in North America, with the company also having stopped production at its Forrest City, Ark., factory.

The Mexico factory will focus this year largely on building 46-inch and up TVs for OEM and original design manufacture (ODM) customers, Larson said. TCL will continue to assemble its branded TVs in China’s Shenzhen region, Larson said. But TCL plans to eventually move production of branded 4K sets -- a line that starts this year at 49 inches -- to Tijuana, since assembling high-value sets there could avoid the 4-to-5 percent tariffs typically charged for some imports, he said. TCL had previously handled some OEM production for Sanyo.

"That facility has capacity for two millions units in primarily large screen sizes since that is where the advantage lies under the NAFTA tariffs,” Larson said. “We are not going to jump in and sell two million units of TCL branded” TVs in the U.S. right away so it makes sense to use that facility for some of our OEM relationships. We may shift some of our large screen production there eventually depending on what our volume looks like and cost efficiencies. In terms of the value of the set, the higher the value the higher the tariff so the more savings” by moving final assembly to North America, Larson said.

With the acquisition, TCL joins a growing list of Chinese suppliers that are moving final TV assembly to North America to avoid import tariffs and quicken the delivery of products to market, Larson said. Seiki Digital parent company TongFang is opening a plant in Columbia, S.C., to assemble Elements brand TVs for Walmart, and Hisense has said it was weighing building sets in North America.

In assembling TVs in North America, TCL will use China Star Optoelectronics panels built at its 8.5-generation LCD plant in China, Larson said. TCL owns 85 percent of China Star, while Samsung Display has 15 percent, he said. The China Star factory has annual capacity for 20 million units, with a goal of doubling that production by 2016, Larson said. China Star is making 49- and 55-inch 4K LCDs and plans to add some in the 70- and 90-inch range this year, Larson said. While TCL demonstrated a 110-inch 4K LCD TV at the 2103 CES, it has no immediate plans for it in the U.S., Larson said. TCL also uses 4K LCDs manufactured by its 10 percent-owned Samsung Suzhou LCD 8th-generation LCD venture with Samsung Display, which began production last fall in Suzhou. The Suzhou facility produces 48-inch and 55-inch 4K panels, the companies have said.

The acquisition is yet another strike by TCL to raise its profile, following its $5 million purchase last year of Grauman’s Chinese Theater in Hollywood and reopening it under the TCL banner. It also grabbed headlines with a 50-inch 4K LCD TV that retailed for $999 and launched a promotion partnership with Disney’s Marvel Studios that allowed it to splash the Iron Man 3 movie name across its LCD TVs and smartphones, the latter being sold here under the Alcatel One Touch brand. TCL is negotiating a new promotional alliance for this year, but details haven’t been finalized, Larson said. The promotional spending spree last year came 11 years after TCL’s first stab at the North America market, when it formed a joint venture with Thomson Multimedia to sell TVs in the U.S. under the RCA brand (CED Nov 3/03 p1). That joint venture eventually dissolved and TCL no longer has the rights to the RCA brand. It continues with rights to sell TVs in Europe under the Thomson brand, Larson said.

TCL also appears to have settled on a strategy for deploying Internet-equipped TVs. It has integrated Roku into a line of 32-55-inch LCD TVs that are expected to start shipping by fall, prices not set, Larson said. The Roku-equipped sets will be 1080p models and there are no plans for 4K sets this year, Larson said. TCL recently signed an agreement with D&H Distributing, which will carry its sets starting May 1, focusing on a mix of small independent retailers and some “special fulfillment opportunities where it makes sense on an Internet basis,” Larson said. Amazon is among the Internet retailers that sells TCL TVs.

The move to Roku follows TCL’s decision not to pursue plans for smart TVs that were to use a customized version of Google TV that was dubbed Movo. The Roku-equipped TVs will be limited to the U.S., Larson said. It also formed in 2011 the China Smart Multimedia Terminal Technical Association with Hisense in a bid to spur development of smart TVs across a common platform. TCL’s smart TVs in China use the Android operating system, Larson said. “We are a big believer that connected TVs are going to be big, but more importantly the customer solution and the simplicity of that is going to gauge whether its successful,” Larson said. “We aren’t necessarily beholden to any one” smart TV platform, but from “what we see today the Roku solution is the best consumer experience and value that we see possible."

Meanwhile, TCL North America has no immediate plans to field the six E5700 and E6700 40-65-inch Game TVs that TCL Multimedia has introduced in China, Larson said. The sets, which have a quad-core CPU, eight-core graphics chip and 16 GB of internal memory, are being launched as part of the TCL Game TV Ecosystem Strategic Alliance that also includes China Unicom Broadband, China-based mobile device supplier ATET, e-commerce site JD.com and videogames developer Gameloft. The TCL Game TV platform will be limited to China for now, but is “easily scaled,” Larson said. If TCL lands agreements with game developers for the U.S. market “we are always looking at opportunities to grow the TCL brand,” Larson said. “Gaming appeals to a demographic that is very important to a brand, but whether I can make the business model work here or not is still open for discussion.”