After twenty years of ups and downs in Europe, TCL has accumulated these assets | Focus Analysis
Text | Su Jianxun
In 2007, it was the third year that TCL entered the European market. An agreement was placed in front of TCL's founder and chairman, Li Dongsheng. Should the Polish factory be sold?
If sold, it would be a correct decision in the short term. TCL's Polish factory originated from the acquisition of Thomson's color TV business in France in 2004. At that time, TCL's globalization had just started, and its overseas product share was not high; moreover, compared with the domestic situation, the labor cost of the Polish factory was much higher.
After much hesitation, Li Dongsheng still did not sell the Polish factory. In his opinion, keeping this "money-burning" factory is a crucial bargaining chip for TCL to advance globalization.
TCL Polish Factory; Picture taken by the author
Twenty years later, at the end of September 2024, Li Dongsheng mentioned the strategic significance of globalization for TCL in a speech. The first point is: Building a global manufacturing network.
(Note from 36Kr: For a complete sharing of TCL's globalization experience, you can refer to the article: "TCL's Founder and Chairman Li Dongsheng: Global Operations, Technology is the Most Important Competitive Point" )
In the past five years, TCL's overseas revenue has increased from 59 billion yuan to 125.3 billion yuan. Overseas manufacturing bases are distributed in nine countries: Vietnam, Malaysia, Philippines, Indonesia, India, Pakistan, Poland, Mexico, and Brazil.
It can be said that the twenty years of ups and downs in Europe are the twenty years when TCL has been accumulating its foundation.
The Polish factory, which was once almost abandoned, has now become an important transit hub for TCL in Europe. After the China-Europe Railway Express was opened in 2016, components such as panels were transported from the Pearl River Delta and Chengdu to Poland. The freight cycle is one-third of that by sea, and the price is one-fifth of that by air transportation.
"Poland is considered the central hub of Europe. After the products are produced and shipped from Poland, it only takes four days to reach the farthest Spain," Chen Chuanlun, general manager of TCL Moka Technology's Overseas Manufacturing Center, told 36Kr.
Faster logistics and local assembly lines enable TCL to better seize the growth of overseas business in the current highly competitive environment.
It should be noted that the domestic TV shipment volume has maintained a negative growth for a long time, while the shipment volumes in the three major markets of North America, Latin America, and Eastern Europe still achieved year-on-year growth of 7.5%, 2.3%, and 3.4% respectively in 2023. Also in this year, TCL's TV sales reached 25.26 million units, ranking second among global brands and first among Chinese brands.
It's not just TVs. At the IFA exhibition in Germany at the beginning of September this year, TCL not only exhibited flagship screen products such as the QD-Mini LED TV X11H with ten thousand-level partitions, but also a series of products such as a massive smart home energy solution, the Xiaolanwing P7 fresh air conditioner, the ultra-thin and flush-mounted refrigerator, the P680 washing and drying set, the smart speaker, and the M series office smart screen.
In addition, in the fields of semiconductor display and new energy photovoltaic, TCL CSOT and TCL Zhonghuan respectively globally launched the 105" high-refresh rate curved e-sports display screen, and showcased the world's first 57" 8K curved MLED e-sports display screen, G12 solar monocrystalline silicon wafer, etc.
TCL's QD-Mini LED TV X11H; Picture provided by TCL
"In the twenty years since TCL entered the European market, it has gradually expanded from initially focusing on TV products to air conditioners, refrigerators, washing machines, wearables, mobile phones, and in the past two years, photovoltaic products. The addition of new products has also improved the overall scale and quality of TCL's operations in Europe," Li Yongping, general manager of TCL Industrial Europe Marketing Headquarters, told 36Kr and other media.
1. Polish Manufacturing Base: Balancing Technological and Economic Aspects
In the early autumn of September, in the small town of Zyrardow, 45 kilometers away from the Polish capital Warsaw, the TCL Polish factory covering an area of 105,000 square meters, with nine production lines operating at full capacity to meet the peak season demand of Christmas and Black Friday.
"The digital advanced level of this factory is leading in the entire Europe," Chen Chuanlun told 36Kr.
36Kr observed that the production lines of the TCL Polish factory are classified according to TV sizes, and the products cover small-size TVs and high-end large-size TVs of 75 inches and above; among them, there are three unit-type production lines, mainly producing oversized TVs. The production and circulation information of each TV is recorded in the system in real time.
In addition, for some complex processes, TCL has also introduced a variety of unmanned production equipment in the Polish factory, such as film wrappers and automatic stackers. The machine efficiency of this type of work is much higher than that of humans, and it is suitable to use machines to improve efficiency.
TCL Polish Factory's Automatic Film Wrapper; Picture taken by the author
From an economic perspective, the TCL Polish factory can also reduce costs for its European business.
Except for packaging materials and other components that are purchased locally in Poland, more than 80% of the components of the TCL Polish factory come from China. These components are exported through the SKD (Semi Knocked Down) method, driving the export of Chinese component products. At the same time, it also enables TCL to achieve local manufacturing and local sales, effectively avoiding trade barriers.
According to EU laws, if the imported product is a complete TV set, the tax rate is 14%, while the import of components + local assembly in the EU model has a tax rate of only 2%.
In the first half of 2024, TCL's TV shipments in Europe increased by 40.1% year-on-year, and revenue increased by 50%. It is estimated that this year, the production capacity of TCL's Polish factory will exceed 4 million units, reaching an all-time high.
After more than twenty years of local operation, TCL has also accumulated a thick production and operation manual.
Hiring people has always been a major problem for local operating factories in Poland. A obvious comparison is that the salary of Polish workers is around 4,000 Polish zlotys (about 7,200 yuan), while the minimum monthly salary in Germany is 2,080 euros (about 16,000 yuan), nearly double the difference, causing a large number of young Poles to go to other European countries for work.
In order to alleviate the shortage of labor, the TCL Polish manufacturing base has adopted a more flexible and flexible employment system. The entire factory has only 200 full-time local Polish workers, while during the peak production season (September - December), workers from Ukraine and the Middle East are hired in an outsourcing form.
In the Polish factory in early September, 36Kr saw that there were workers in different color uniforms in the factory. Those in black uniforms are full-time workers, and those in blue uniforms are outsourced employees. Since this is the peak season, there are more than 600 outsourced workers.
During the peak season of the factory, the TCL Polish factory will recruit outsourced employees to meet the production demand; Picture taken by the author
2. Localization is Not Just Empty Talk
Since it is a Chinese enterprise operating in Europe, localization is a key word that cannot be avoided.
"The overall operating situation in Europe is relatively complex," Li Yongping, general manager of TCL Industrial Europe Marketing Headquarters, said frankly in an interview with 36Kr and other media.
The European market is at the global brand highland. Whether it is the consumption power level or the requirements of consumers for products, compared with emerging markets in other regions, there are higher thresholds.
On the other hand, European consumers tend to be conservative in brand selection. On the positive side, they have a relatively strong loyalty to the brand, but this also means that they are not willing to try new brands easily. For manufacturers in the latecomer market, they must have products with sufficient differentiation and innovative elements to impress consumers.
What is more complex is that although Europe seems to be a whole, the more than 40 countries it contains have different channels and consumer habits in each region. The corresponding local operations such as the layout of the warehousing network, the improvement of turnover efficiency, and the development of service outlets will also be more challenging.
However, even in such a complex market background, in the first half of 2024, TCL brand TVs' shipments in the European market still increased by 40.1% year-on-year, and the retail market share ranked second in France, Sweden, and Poland, and third in the Czech Republic and Spain.
Why can TCL achieve such a growth rate? Zuo Bo, deputy general manager of TCL Industrial Pan-Smart Screen BU and general manager of the Global Product Management Center, believes that the strategic deployment of the organization is particularly important.
Currently, TCL has built a three-horse carriage organizational structure of BU, BG, and Capability Center globally, where:
BU focuses on making good products and conducting good user research, especially products that are adaptable to various regions;
There are six BGs globally, that is, six major sales centers. The core is to be responsible for communicating with users in various regional markets, expanding channels, front-end retail and promotions, and putting products on the market to better communicate with consumers;
The Capability Center, including the Research Institute Center, the Marketing Center, the After-sales/User Service Center, and the Finance and other platform centers. These centers continuously extract the excellent experience of BU and BG, form experience accumulation, and then empower other BUs and BGs, so that good experience can be quickly implemented globally.
"This strategic drive enables us to continuously launch good products, acquire the market at the front end, and continuously accumulate new advantageous energy for rapid iteration. This is the core point for us to be able to maintain high growth," Zuo Bo concluded. When the organization is agile enough, TCL's gameplay in Europe can naturally be quickly iterated.
In terms of products, focusing on the consumption preferences of European users, TCL has launched the "TCL Art" series, setting up the exhibition stand with a rather romantic touch. At the same time, the A300 series third-generation art TV is the main promotion. This product adopts a flat and thin picture frame design. The overall thickness of the 65-inch TV is only 27.9mm, and it almost seamlessly adheres to the wall. When hung at home, it is like a picture frame.
TCL's "TCL Art" series; Picture provided by TCL
In terms of marketing, this year TCL still continues its sponsorship strategy in sports events. It sponsors five top national teams (Germany, Spain, Italy, Poland, Slovakia) to participate in the European Cup, among which the Spanish national team won the European Cup championship.
Why attach so much importance to sports event sponsorship?
Zuo Bo shared that the sports spirit of the national team is in line with the value trend of the TCL brand. This emotional connection is also a brand perception that can be formed for consumers beyond products and services.
The penetration in the fields of art and sports has also cultivated European consumers' recognition of TCL from the product demand. Both the colors in art and the viewing of sports events require larger and clearer screens to accommodate, which invisibly boosts the sales of TCL's large-screen products.
"One feature of European consumers' preference for screen sizes is the large-screen trend. Especially for the requirements of high image quality, it is significantly higher than other regions. Therefore, our growth in Mini LED and QLED products is also higher," Zuo Bo said.
Data shows that in the first half of 2024, TCL's global shipments of 65-inch and above TVs increased by 14.5% year-on-year, and the global shipments of 75-inch and above TVs increased by 34.5% year-on-year. TCL's global shipments of Mini LED TVs increased by 122.4% year-on-year.