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Konka set to expand overseas, riding advances in TVs, home appliances

Konka Group Co Ltd, a Chinese television manufacturer, is ramping up efforts to expand its presence in overseas markets, especially in Africa and the Middle East, in a bid to seek new growth points despite the slowdown in the domestic TV sector.

The company has announced it will set up a joint venture with Hoho Electrical & Furniture Co Ltd, an Egypt-based home appliances company. This will be followed by an investment in the construction of a new factory.

The JV's factory will cover an area of over 10,000 square meters in Cairo, and is expected to achieve an annual production of 600,000 TV sets within three years, providing jobs for more than 600 Egyptians.

This represents the first phase of Konka's investment in Egypt. The second phase will see a manufacturing unit that will expand the TV production to 1 million units per year. It will also increase the categories of products, covering white goods, such as refrigerators, washing machines and small appliances.

"Egypt has experienced extraordinary GDP growth in recent years, with a burgeoning population of consumers, with soaring household incomes. The formation of the joint venture with Hoho is a move to respond to the increasing demands of local consumers, fueled by the economic growth," said Chang Dong, vice-president of Konka Group and president of Shenzhen Konka Electronic Technology Co Ltd, one of the group's subsidiaries.

"Hoho has reached the production capacity of 500,000 TV sets. Through the partnership, Konka will bring high-quality resources and technologies to build up the entire supply chain," Chang said, adding the move will further spread its wings in Africa and the Middle East.

Founded in 2009, Hoho produces TVs, LED lights, electrical kettles and vacuum cleaners, with its factory covering an area of 300,000 square meters.

Chang said China and Egypt have great potential for extensive cooperation under the Belt and Road Initiative. Konka will accelerate its steps to penetrate and expand in Egypt and other overseas markets under the BRI framework, he said.

The Shenzhen-based company has already proven its popularity among the Egyptian households with its TV products reaching the top spot on Jumia, the largest e-commerce platform in Africa.

Riding this momentum, the company inked a strategic cooperation agreement with Jumia earlier this year, accelerating the implementation of its localization strategy for Africa and the Middle East.

Zhou Chi, general manager of Konka's international business division, said TV sales revenue from overseas markets is expected to account for 60 percent of the total next year. The company plans to speed up overseas market expansion through new JVs, and mergers and acquisitions.

In addition, Konka plans to set up its first overseas innovation center in London this year, while its incubators in Israel, Italy, Japan, Germany, the United States, France and Finland are also under way, according to Yang Bo, vice-president of Konka Group.

Yang also said Konka will expand its global layout, and its innovation bases around the world, as well as facilitate the connection between global entrepreneurs and global entrepreneurship resources in the next three years.

According to Beijing-based consultancy All View Cloud, TV sales reached 22 million units nationwide in the first half of this year, down 2.7 percent compared with the same period last year, and related sales revenue totaled 64 billion yuan ($9.0 billion), a fall of 11.8 percent year-on-year.

Prices of major TV products also fell, resulting in a decreasing profit margin and surging pressure for enterprises, said Zhu Yuanyuan, head of the electronic products division at AVC.

In 2018, Konka's R&D investment increased by more than 20 percent year-on-year, covering semiconductor technologies and the internet of things. It helped improve the company's supply chain as well. By focusing on AI, 5G, 8K and other multi-dimensional sectors, the company is committed to building a TV-centered home IoT control and display center.

It invested 482 million yuan in R&D last year, mastered about 100 key technologies, and developed the Aphaea chip with independent intellectual property rights. It will further increase its investment in R&D, Konka executives said.

Industry insiders said with the saturation of local market demand and increase in raw material costs, stepping into overseas markets has become a new profit growth point for Chinese home appliance companies.

They said overseas production bases can not only export China's advanced manufacturing, R&D and management capabilities to overseas markets, but help generate local employment and enhance the level of industrialization.

China exported 97 million TV sets in 2018, up 21 percent, said Peng Jianfeng, deputy secretary general of the China Video Industry Network.

"Expansion into overseas markets could not only relieve the pressure of high inventory in the domestic market but increase Konka's international influence," said Dong Min, an independent researcher in the home appliances sector.

Liang Zhenpeng, an independent consumer electronics analyst, said Konka has an advantage in the traditional TV sector, but it still lags behind its competitors such as Haier and Midea, in refrigerators and washing machines.

Founded in 1980, Konka reported a revenue of 46.13 billion yuan last year, up nearly 48 percent. Its products have reached households in 100 countries and regions in Asia, the Middle East, Australia, Africa, Europe and the Americas.