Michael Shi, a 33-year-old businessman in Shenzhen, remembers when he first watched TV 22 years ago in Zhenba County, northwest China's Shaanxi Province. At the time, there were only two TVs in the county one at the local TV transmission station and the other one at a local company, where hundreds of people gathered every night to watch TV programs or videos.

 

In 1985, the penetration rate of TV sets in urban Chinese families was 17.2 per 100 households, and just 0.8 in rural families.

 

The TV industry's development since 1978 epitomizes China's economic development over this period.

 

When China adopted the opening and reform policy in 1978, the nation had just one color TV factory, in Tianjin, which had an annual output of 3,800 sets. Last year, China produced 82.83 million TVs, almost a half of the world's total and with almost a half of the products sold overseas.

 

"The TV industry was one of the biggest beneficiaries of China's opening and its transformation from a planned economy to a market economy," said Yang Lei, a consumer electronics analyst at CCID Consulting Co Ltd, a consultancy under the Ministry of Information Industry.

 

From 1978, hundreds of production lines appeared in almost every part of China, mainly with Japanese technology.

 

Just like the country, which was learning from international practices, Chinese TV manufacturers also learnt a great deal in the 1980s from major Japanese firms such as Hitachi and Panasonic.

 

In the 1990s, China's labor cost advantage and its sheer size of the 1.3-billion population attracted almost every TV maker to produce in China.

 

The year 1996 was a milestone in the nation's electronics industry, when China cut the import tariff on color TV sets from 35 percent 23 percent, which led to worries that local brands would be crushed by global giants.

 

In March 1996, Chinese maker Changhong launched the most famous one of its eight rounds of price wars in the 1990s, in which 120 manufacturers were involved.

 

The consequences of the war were twofold over 30 players were eliminated and, more importantly, Chinese brands took the lion's share of the market.

 

"TV manufacturing came as a result of the opening policy and grew with the market economy and globalization," said Lu Renbo, a TV market expert with the Institute of Market Economy under the State Council Development and Research Centre.

 

But local manufacturers soon found that price wars hurt them as badly as their competitors. In 2000, the combined profits of all Chinese brands were just half of those of Sony China.

 

Since then, Chinese TV manufacturers have turned to overseas markets and innovation for profits and growth. In the meantime, China also vowed to become an innovation-driven country.

 

Lu said it might not be too late for Chinese manufacturers to become major players, if they can take advantage of the transition to flat-panel TV sets.

 

He estimated that two million such sets were sold in China last year, but shipments for this year are forecast to be five million units.

 

Only 8 percent of TVs were flat-panel sets in the first three quarters of this year, but this figure is estimated to reach 80 percent in 2009.

 

(China Daily November 22, 2006)