Speaking at an electronic appliances conference in Shenzhen last week, Qu Weizhi, vice-minister of the MII, insisted that China's TV set sector was suffering from insufficient economies of scale and needed to move in the direction of merger and acquisition.

Small manufacturers with low production scales and low profitability should quit the market as soon as possible, Qu said.

In their place, he envisioned a small number of stable, large-scale enterprises.

China is the world's largest manufacturer of colour TV sets with annual capability of more than 50 million units.

But a fairly large portion of this production capacity goes to waste.

Chinese manufacturers sold only 20 million units domestically and 10 million units overseas last year, leaving many factories largely idle.

Although several big TV makers have emerged on the Chinese market in recent years, production is still divided among more than 70 companies.

"The industry concentration rate for the TV sector is quite low,'' Qu explained. "The MII encourages big companies acquire smaller ones to further reduce production costs.''

Despite a sense of desperation, the MII can only encourage TV makers to merge, not force them, because they are independent entities.

Left to their own devices, China's colour TV manufacturers have lately engaged in a series of suicidal price wars in an effort to unload unwanted stock.

At one point earlier in the year, a 29-inch colour TV went for as low as 1,500 yuan (US$181), a price that barely covers manufacturing costs.

While good for consumers, these battles for the price basement have put most colour TV makers in the red for the year.

The nation's top TV makers -- Sichuan Changhong, Shenzhen Konka and Xiamen Xoceco -- have warned that if the situation continues, industrial collapse is unavoidable.

International home appliances makers Sony, Philips and Matsushita, avoided taking part in price wars by selling a diversity of high-end devices.

"We pay more attention to the high-end market and provide more high-tech functions,'' a Matsushita spokesman said.

By contrast, most Chinese TV makers produce low-end sets with little to distinguish them from competing products. In that situation, according to the Matsushita spokesman, the only way to win is to lower prices.

(China Daily 08/28/2001)