Li Dongsheng, the founder and chairman of TCL: In global business operations, technology is the most important competitive point.
Recently, the Forum on the Globalization Development of Chinese Enterprises was held in Beijing, jointly organized by the China Center for International Economic Exchanges, TCL Technology Group Corporation Limited, and TCL Industrial Holdings Co., Ltd. The forum conducted in-depth discussions on topics such as "Promoting the Overseas Expansion of the Industrial Chain", "Advancing the Development of Globalization at a Higher Level", and "Facilitating the Construction of a New Dual-Circulation Development Pattern".
At the forum, Lu Jiangyong, a professor at Peking University's Guanghua School of Management, delivered a speech, arguing that the globalization of enterprises will undergo an evolutionary process of four stages: "Exploration - Breakthrough - Rooting - Fractal".
Promoting globalization with localization is one of the cores of TCL's globalization strategy. Currently, TCL's overseas manufacturing bases are distributed in nine countries including Vietnam, Malaysia, the Philippines, Indonesia, India, Pakistan, Poland, Mexico, and Brazil, achieving a localized manufacturing layout in major regions such as Southeast Asia, South Asia, Europe, North America, and South America, and having considerable experience in various stages of enterprise globalization.
In the "Exploration" stage, Li Dongsheng, the founder and chairman of TCL, stated that TCL's globalization began in 1999 when the company built its first overseas factory in Vietnam. The first battle overseas was very difficult, with consecutive losses for 18 months. At that time, I wrote a short article in the company's internal publication called "Build a Solid Camp and Fight to the Death". We won the first battle of internationalization. Today, an industrial system in Vietnam has been established, and there are three modern factories in Vietnam.
In 2004, TCL attempted to enter the "Breakthrough" stage by acquiring Thomson's color TV business and Alcatel's mobile phone business in France. This cross-border acquisition allowed TCL to enter the mainstream markets in Europe and the United States, but this step was a bit too large, and it encountered some setbacks. Li Dongsheng believes that the most important reason for the project's setbacks is that internally, TCL was not ready to transform from a Chinese enterprise to a global one, and the solution is to cultivate the enterprise's global operation capabilities.
To cultivate the enterprise's global operation capabilities, it is necessary to do a good job of "Rooting". TCL links the manufacturing centers and operation centers in multiple overseas countries to form a regional operation system to support the development in different countries and regions. Currently, TCL has 130,000 employees, 46 R & D centers, 38 manufacturing bases, and its business covers 160 countries around the world.
Through overseas localized operations and improving the global industrial layout, TCL's overseas revenue has achieved continuous growth. In the past five years, TCL's overseas revenue has increased from 59 billion yuan to 125.3 billion yuan, with an average annual growth rate of 17.6%; during the same period, the export volume has increased from 9 billion US dollars to 17.3 billion US dollars, with an average annual growth rate of 15.2%.
Currently, TCL deploys three core industries - smart terminals, semiconductor displays, and new energy photovoltaic - through two major entities, TCL Industrial and TCL Technology, with businesses covering more than 160 countries and regions around the world. In 2023, TCL's TV sales reached 25.26 million units, ranking second among global brands and first among Chinese brands. TCL CSOT's e-sports display screen market share ranks first in the world, and TCL Zhonghuan's photovoltaic crystal wafer sales remain firmly in the first place in the world. At the same time, TCL Zhonghuan recently signed a contract with Saudi Arabia to invest in a photovoltaic crystal wafer project to accelerate the overseas expansion of the B-end industry.
The capacity building of enterprise globalization is a long-term accumulation process. In the initial stage of promoting globalization, many difficulties and problems will be encountered because the requirements for enterprise capabilities in overseas and Chinese businesses are different. Combining TCL's practical experience, Li Dongsheng put forward four transformation suggestions: "First, it is necessary to shift from product trade to jointly building industrial capabilities and promoting overseas localized construction; second, it is necessary to transform from the chain leader of the Chinese industrial chain to the chain leader of the overseas regional chain; third, it is necessary to transform from global product manufacturing to global brand operation; fourth, it is necessary to transform from mergers and acquisitions to independent growth."
Appendix: TCL Founder and Chairman Li Dongsheng's Keynote Speech "Opening up the Great Navigation Era of Made in China"
I am very honored to make a keynote speech at today's Forum on the Globalization of Chinese Enterprises of the China Center for International Economic Exchanges. I would like to share with you my understanding of the globalization of Chinese enterprises based on TCL's 25-year globalization experience.
TCL's globalization began in 1999 when we built our first overseas factory in Vietnam. The first battle overseas was very difficult, with consecutive losses for 18 months. At that time, I wrote a short article in the company's internal publication called "Build a Solid Camp and Fight to the Death" to inspire our team and ourselves. We won the first battle of internationalization. Today, an industrial system in Vietnam has been established. TCL has three modern factories in Vietnam. At the same time, around the three core factories, we have cultivated many supply chain enterprises in China and locally.
In 2004, we made a large-scale cross-border acquisition, acquiring Thomson's color TV business and Alcatel's mobile phone business in France in the same year. This cross-border acquisition allowed us to enter the mainstream markets in Europe and the United States, but this step was a bit too large, so we also encountered some difficulties and setbacks, and paid some prices. But we persisted and used the spirit of "The Rebirth of the Eagle" to reshape our global operation capabilities.
At that time, we reviewed the successes and failures of the acquisition. Although there were some deviations in our judgment of the entire industrial situation during the decision-making process, the most important reason for the project's setbacks is that internally, TCL was not ready to transform from a Chinese enterprise to a global one. The "The Rebirth of the Eagle" transformation mainly focuses on internal strength building and cultivating the enterprise's global operation capabilities.
In the next stage, in our global business expansion, we took one step at a time. First, we expanded our global business in Latin American countries and some other countries in Southeast Asia. Then, we linked the manufacturing centers in different countries around the world, one by one, and established multiple global operation centers to form a regional operation system to support the development in different countries and regions.
Globalization has driven the continuous growth of TCL. Currently, TCL has 130,000 employees, 46 R & D centers, 38 manufacturing bases, and its business covers 160 countries around the world. This number includes the main body in China. Here, we can see that in the past five years of globalization, TCL has promoted the annual growth of the enterprise's overseas operating income by more than 17%. Of course, our domestic marketing is also growing rapidly, and globalization has also promoted the industrial transformation and upgrading. In 2020, we acquired Tianjin Zhonghuan Group and entered the new energy photovoltaic industry. The main business area is in China. After the acquisition in 2020, the overall business scale has increased significantly, but the overseas business still maintains growth.
Another very important figure is that in the past five years, our average annual export growth has also been 15%. The expansion of our overseas business is to enlarge the global business cake and can drive the domestic export.
We have now established an operation network globally, and in every region and every major country market, we have made the localized operation and regional supply chain system more competitive. Especially in the past few years, the unilateral tariffs imposed by the United States on China have eaten up most of our operating profits in the US market. Because the United States is our largest single country market, after the imposition of tariffs, it is difficult for the industrial chain to make adjustments in a short period of time. At that time, our decision was to give up some profits to maintain the market. After several years of adjustments, the layout of the industrial chain for the United States has completed this round of adjustments. More production capacity in Southeast Asia and Mexico is used to support the business in the United States. And the production capacity of these countries has also driven the export of domestic core devices, equipment, and materials.
Globalization has a very important strategic significance for TCL. Through industrial transformation and upgrading, a new business growth curve has been developed. The terminal product business has been the core business since the establishment of the company. In the past 40 years, the terminal product business has continued to grow, and the revenue of the terminal product business reached more than 120 billion last year. In the first half of this year, the terminal product business still maintained a 27% growth. To a large extent, the growth comes from the success of overseas business expansion. At the same time, in 2009, we developed the semiconductor display business. Last year, the semiconductor display business achieved a revenue of 85 billion, and this new business growth has injected a strong impetus into the global operation of our display products. In 2020, we entered the new energy photovoltaic field. Although this business is currently mainly in the domestic market, I believe that in the future, in the photovoltaic new energy and semiconductor material businesses, we will strive for greater space for our development in the global market.
Globalization has also enhanced the technical capabilities of products. Global operation, technology is the most important competitive point. In the past few years, the most important adjustment that Chinese enterprises have encountered in the electronic information industry when going overseas is patents. Basically, those with a large overseas business cannot avoid the patent issue. We must enhance our technical capabilities and strengthen the patent wall so that we can support our continuous development in the global business. In the past ten years, TCL has continuously invested huge resources in technology research and development, with an average annual investment of more than 10 billion in technology research and development expenses in the past few years. TCL's current patent application volume is 110,000, of which PCT patents, US patents, and overseas patents account for 40%. I believe that as long as Chinese enterprises firmly invest in technology research and development, in five or ten years, we will definitely be able to add points to ourselves in the global industrial competition in terms of technical patents.
In addition, in the process of globalization, a group of management cadres has been cultivated. Today, many managers of TCL come to this meeting to learn from experts. Among these managers, most of them have worked overseas. Now, the majority of TCL's executive team has an overseas work background. The experience of global operation and overseas work background have further enhanced TCL's management and organizational capabilities.
How to promote a higher level of globalization for China's manufacturing industry? First, we can see that China's investment has continued to grow in the past few years. First, we must dare to go global and invest resources overseas.
In the current period, China's globalization must adapt to the reconstruction of the global economic pattern. Now, everyone is discussing the so-called fifth industrial transfer. The third industrial transfer was mainly from the United States to countries such as Japan, and this transfer made Japan the second-largest economy in the world. The fourth industrial transfer was from Japan, the United States, and Europe to countries including China, Southeast Asia, Latin America, and South Asia. China benefited the most from the fourth industrial transfer, but this industrial transfer was not targeted at China. However, China's reform and opening-up allowed us to seize the opportunity of the fourth industrial transfer. In this round of industrial transfer, China has greatly surpassed other countries and regions in Southeast Asia. We have attracted the most foreign investment in the world. In the manufacturing industry, we have absorbed the industrial experience and technology output of others. I don't think that it is because Europe, the United States, and Japan are particularly kind to China, but rather that China's reform and opening-up has created the best economic environment and industrial development environment. Therefore, in this round of industrial transfer, China's manufacturing industry is the biggest beneficiary.
Ten years ago, China has become the largest manufacturing country. In the past two years, China's manufacturing output has accounted for more than 30% of the global total. In the past few years, due to the superposition of various factors, the fifth industrial transfer has been promoted. How to adapt to the fifth industrial transfer and how to establish China's global competitiveness in the process of the fifth industrial transfer is a challenge and perhaps an opportunity for China's manufacturing industry and Chinese enterprises.
Based on TCL's globalization experience, our understanding is that the so-called economic globalization and manufacturing globalization, the most important thing is that enterprises must change their concepts and business strategies, from product trade to building industrial chain capabilities in major overseas country markets, and promoting the construction of overseas local industrial bases and the construction of overseas local operation capabilities.
The chain leader of China's industrial chain should extend from China to the chain leader of overseas regions, and the core capabilities should remain in China. I think this is inevitable. The success of Chinese enterprises and the globalization capabilities of Chinese enterprises must be rooted in China. Without the reform and opening-up of the past 40 years and the formation of a globally competitive industrial infrastructure and conditions in China, the current globalization of Chinese enterprises would have no foundation. Therefore, the globalization of Chinese enterprises must be rooted in China and extend globally with China's capabilities as the core.
When we go global, we must bring the best technology and organize the best talents. It is not a good choice to take the relatively backward previous-generation technology to fight. When we go overseas to compete, we are facing multinational companies. We must bring our best talents, the best industrial capabilities, and the best product technology to compete with foreign multinational companies in the global market.
To establish a global brand capability, we must go beyond being a manufacturing enterprise that can only produce products. We must be able to establish a competitive advantage for Chinese brands globally. To achieve this, the most important thing is to enhance the product technology capabilities and achieve industrial transformation and upgrading. Our products should shift from the mid-to-low end to the mid-to-high end, and we must establish a competitive advantage in more technology-intensive and capital-intensive industrial fields. TCL CSOT has established an advantage in the semiconductor display field and the liquid crystal industry field. Chinese enterprises now account for more than 70% of the global liquid crystal industry output. TCL and some other Chinese display industries have established a relative advantage in the liquid crystal display field. With product technology as support, TCL, like other Chinese enterprises, will establish a stronger brand influence and competitiveness globally.
The growth path can also be diverse, including both mergers and acquisitions and independent establishment of a global operation system through "Build a Solid Camp and Fight to the Death". In the future, in the face of global competition, only by going global more firmly can Chinese enterprises strive for greater development space in the global market and the reconstruction of the global economic pattern. Thank you all!