In recent years, with the rise of international trade protectionism, economic globalization has undergone adjustment and differentiation, which has posed severe challenges to the development of China’s economy, especially the manufacturing industry. In this context, how should Chinese companies respond and break through?
The challenge of deglobalization
At present, the international economic and geopolitical environment has undergone major changes. Western countries led by the United States have comprehensively contained and suppressed China, and weakened China’s development trend by launching trade wars, financial wars, and technological wars.
This kind of anti-globalization has brought multiple impacts on China’s economy, especially the development of the manufacturing industry, and has caused various adverse effects. Export costs reduce the competitiveness of enterprises. Under this pressure, Chinese companies have reorganized the industrial chain and must transfer part of the production capacity exported to the United States overseas.
Originally, TCL had a factory in Mexico. In 2019, we felt that the trend would continue. We launched a new factory. Now we have two factories in Mexico. At the same time, we have increased the production capacity of the Vietnam factory and gradually adjusted the export capacity to Mexico. Mainly and Vietnam as the supplementary supply rhythm.
At the same time, the United States and other Western countries have considerable advantages over China in some technical fields, such as patents, technology research and development, and important equipment. Therefore, there are now some “stuck necks”. Under pressure, many “stuck neck” technical and industrial points need to be solved gradually, but some problems will take longer to resolve. Therefore, for a long time in the future, the technological blockade will still have a great impact on Chinese companies.
In order to cope with the complex situation, China has made efforts in both domestic and international markets. Therefore, we have proposed a dual cycle, with the domestic market as the main body, and the policy of mutual promotion of the international and domestic dual cycles. A more open and influential environment will promote the opening of the Chinese market and promote the globalization of the Chinese economy.
In China, the domestic central government is also adjusting economic policies to maintain stable economic growth. In this year’s government work report and the party’s central government’s explanation of economic policies, it is worth noting that we must keep the manufacturing industry’s proportion of China’s GDP basically unchanged. This has laid a major tone for China’s economic structure. .
At present, in terms of economic size, the United States ranks first, and China ranks second in the world. But if we look at the manufacturing industry, in fact, China has surpassed the United States. China’s manufacturing output accounts for 28% of the global manufacturing output, while the United States only has 16%. Therefore, China’s economic future development strategy is very clear. We must maintain the share of the manufacturing industry in the global economy and maintain the relative competitive advantage of our manufacturing industry.
Any economic activity needs to be driven by market forces. One of the most important characteristics of economic globalization is to give full play to the relative comparative advantages of different countries and regions.
In addition, although the impact of this round of “anti-globalization” is great, I don’t think it can change the general trend of economic globalization. Any economic activity needs to be driven by market forces. One of the most important characteristics of economic globalization is to give full play to the relative comparative advantages of different countries and regions. This comparative advantage needs to be produced through trade and exchange. This is a basic pattern of economic globalization. However, economic globalization is carried out under certain rules, so the basis of future economic globalization, that is, global trade rules, will undergo a series of adjustments.
Globalization strategy shift
In 1999, TCL built its first factory in Vietnam. Since then, TCL’s globalization has gone through three stages.
In the initial period, TCL obtained orders for foreign brand processing with its advantages in cost, efficiency and quality, and accumulated original capital and industrial capabilities. In the development stage, establish the TCL brand, cultivate an independent management system, stabilize the domestic market, and develop overseas markets. In the internationalization stage, we will continuously improve our overseas operating capabilities, from leading efficiency and cost to forming industrial capital and core technological advantages, and expanding from domestic operations to global operations.
In 2018, the U.S. launched a trade war with China, and China’s export products were imposed tariffs. As China’s most important overseas market, our business has been greatly affected. Under such circumstances, we have adopted a strategy of letting profit and safeguarding the market, and at the same time, we have re-planned and adjusted some overseas industrial bases to strengthen our competitiveness in the US market.
Due to the epidemic in 2020, our overseas business has grown against the trend, with overseas revenue reaching 80.4 billion, accounting for 53% of product sales revenue. Last year, the growth of brand TV overseas business reached 27.5%, of which the growth in the US market reached 25.4%.
From January to April 2021, TCL’s operating performance has increased significantly, and sales of overseas businesses have increased by more than 30%. This is due to the foundation of overseas competitiveness that we have laid over the years.
At the same time, TCL has also changed its global operation strategy:
first, transform from export products to a global industrial layout, and establish a more complete global supply chain.
In recent years, TCL has continuously improved its global manufacturing and supply chain layout, and has built and expanded a number of color TV modules and photovoltaic cell factories in India, Vietnam, Mexico, Malaysia and other countries. Taking North America as an example, after the Sino-U.S. trade turmoil in 2018, we began to expand the Mexican color TV factory. With the adjustment of overseas production bases and supply chains, the manufacturing ratio of TCL’s color TV exports to the United States in overseas factories reached 36% at the end of last year. In the near future, it will exceed 50% and will reach 70% by the end of this year. This will largely eliminate the impact of tariffs. Next year, we will produce more in Mexico, Vietnam and other bases, and export products to the United States will reach more than 90%.
The second is to continue to increase investment in technology research and development and deploy a global research and development system.
TCL currently has established multiple R&D centers for artificial intelligence and semiconductor display technology in Europe, Wuhan, Hong Kong, Guangdong and other places in China, and two R&D centers in Seattle and Silicon Valley in the United States to develop leading innovative technologies. In 2020, TCL will strategically acquire a stake in Japan’s JOLED company, launch in-depth technical cooperation in the field of inkjet printing OLED, and carry out the ecological construction of the next-generation printing and display industry chain in the fields of materials, equipment, processes, and products.
With the support of the national and local governments, TCL has led the establishment of two national innovation centers, including the National Printing and Flexible Display Innovation Center and the National New Display Technology Innovation Center. Beyond, in the next few years, the next generation of display technology should be realized in the world’s leading ranks, while the application of artificial intelligence, 5G and industrial Internet in products and production will be explored, and the industrial structure will be upgraded to high-end.
Third, integrate resources through mergers and acquisitions, open up new industrial tracks, and enhance corporate competitiveness.
Last year we made two major mergers and acquisitions. One was the acquisition of Zhonghuan Group to enter the photovoltaic industry and the semiconductor wafer industry, and grafted the experience of global operation to the advantages of Zhonghuan’s semiconductor industry. This integration is for us to open up a new competition. Dao has injected tremendous development momentum into the state-owned enterprise in Zhonghuan. The first quarter report of Zhonghuan Semiconductor showed that its sales revenue increased by 65%, and its profit more than doubled during the same period.
This year, Zhonghuan Semiconductor proposed a benefit doubling plan. We hope that both sales revenue and profit will be doubled. This is a very challenging goal, but I am confident that it can be achieved. This also reversely confirms the development impetus brought by the new mechanism and system to the enterprise.
TCL continues to improve its global manufacturing and supply chain layout. Currently, it has established multiple R&D centers for artificial intelligence and semiconductor display technology in Wuhan, Hong Kong, Guangdong and Europe, and two R&D centers in Seattle and Silicon Valley in the United States. Innovative Technology.
At the same time, we acquired Samsung’s LCD factory in Suzhou last year. Samsung also announced that they will strategically withdraw from the LCD industry. Two factories in South Korea will also be closed this year. This case also proves the rapid development of Chinese enterprises in reverse. When we first entered the LCD industry in 2010, Samsung was our benchmark. After more than ten years of development, we have achieved catch-up and surpass in this industry field.
Through the acquisition of Samsung’s Suzhou plant in South Korea, we have expanded our LCD production capacity; at the same time, we have ramped up the construction of the second 11th generation line in Shenzhen, and recently announced the construction of a next-generation new display technology production line in Guangzhou, which will further strengthen our The competitiveness of the global semiconductor display industry.
The fourth is to forge long boards and make up for short boards to help China’s industrial chain to be independent and controllable.
In the process of globalization, if Chinese companies want to build their own advantages, they must accelerate the transformation of their industries into more high-tech, asset-heavy, and long-term strategic emerging industries, and establish some new tracks for high-tech development.
At present, the essence of Western countries’ technological war on China’s development is the struggle for dominance in the high-tech industry. In order to complement the key shortcomings of the national semiconductor and chip industry chain and respond to changes in the global supply chain, TCL has invested 1 billion yuan. Established TCL Semiconductor’s holding platform, namely TCL Microchip Technology. This 1 billion yuan is our first phase of investment. In the future, we will increase investment in integrated circuit design, integrated circuit chips, and devices. Build our competitiveness.
Promote industrial upgrading and transformation
The uncertainty of the global economy not only brings risks and challenges, but also contains huge development opportunities. For Chinese companies that continue to grow and develop, globalization is a path full of risks and challenges. With regard to the experience of globalization strategy, I have the following experience:
First, if Chinese companies dare to go out, they must go out. China’s manufacturing industry accounts for 28% of the global manufacturing industry. The huge manufacturing capacity of the manufacturing industry cannot be digested by the Chinese market alone. The development of China’s manufacturing industry must make breakthroughs in global operations. Enterprises must have a firm understanding of this strategy. , We must have a correct understanding and judgment, and we must firmly promote global business.
Second, Chinese companies must combine globalization and localization in the process of going global. In the past, we sold products, and more of it was international trade. In the past ten years, globalization has grown, and more of it depends on going out to truly establish a global industrial chain layout. We must penetrate our front-end into target countries to develop our business. At the same time, it must contribute to the local economic and social development. This is a basic pattern of the global development of Chinese enterprises.
Third, strengthen R&D to promote the upgrade of the industry to the mid-to-high end of the value chain, and establish a competitive advantage in the global industrial structure. In the early days, China’s manufacturing industry focused more on establishing relative comparative advantages in the low-end and middle-end industries. In the future, in the reconstruction of the global industrial structure, we will find that some of the low-end and middle-end products will be transferred to countries with lower production costs.
If Chinese companies want to build their own advantages, they must accelerate the transformation and upgrading of their industries, transform more into high-tech, asset-heavy, and long-term strategic emerging industries, and establish some new tracks for high-tech development.
The current economic globalization is encountering impacts, and the global industrial structure is accelerating restructuring. National competition is actually economic competition. The main body of competition is enterprises. Chinese enterprises must adapt to the new trends and changes of global competition as soon as possible, and accelerate the optimization of globalization. Industrial Distribution. We are confident that in the future economic globalization, we will further consolidate our competitive advantages and realize the transformation of our company from a Chinese company to a global company and a multinational company.