It is easy to tell that the postponement of the most severe tariffs is better than if they had been implemented.  It is certainly better for CE brands who will not incur additional massive increases in cost and absolutely better for consumers, who will only have to incur the tariffs on Chinese goods and the broader ‘token’ 10% across-the-board tariff hike.  However for anyone trying to run a CE business, at almost any level, the inability to plan both short-term and long-term strategies with little or no understanding of the US government’s plan for trade, makes their own planning almost impossible.
The only area where there seems to be some actual demand, not surprisingly, is the server space, where monitors are a necessary adjunct.  However many monitor panel producers are still losing money on monitor panels and are reducing production whenever possible, leaving Chinese producers to pick up the slack.  This has led to slight monitor price increases but was offset by weak pricing for notebooks and TVs, where tariff issues continue to keep brand demand weak.  Pricing pressure overall has been modest, but brands will be looking for some panel price concessions as they absorb higher tariff costs, and that means both up and down the supply chain.  Whether panel producers are willing to share in some of the tariff pain is still an open question, but at some point, the cost of components, both at the panel level and the module level, will add to their cost burden as it has for brand level products. 
We expect addition stocking pull-ins as we get closer to the end of June, which, as we have previously noted, sets a poor tone for the 3rd and 4th quarters, typically the better half of the year for the CE space.  The only hope right now is that those consumers who did not jump in and buy before the last  tariff announcements might now feel the urge before July, assuming the potential for higher prices.  We believe that most CE brands are looking to share tariff price increases with the supply chain, but those negotiations are ongoing and will have to account for the potential for additional tariffs in July, making price negotiations even more difficult than usual.
That said, we believe that while China will still remain a tariff focus, we expect most of the broad ‘reciprocal’ tariffs recently proposed will not be put into effect as promises of trade balancing are made, but whether those promises are fulfilled remains questionable.  Right now, we expect panel prices to remain relatively flat for May as most take a wait and see approach to near-term planning.

Microsoft (MSFT) Windows™ is a popular operating system, averaging a 26.4% share over the last 12 months, but when it comes to number of devices in use, it pales in comparison to Android OS, which averages ~45.1% over the same period.  So as not to offend the Apple (AAPL) base, iOS has averaged ~18.1%, and OS X (Now Mac OS) holds a 5.5% share, so technically Apple OS’s (combined) have a 23.6% share, just a bit behind Windows.  There are other operating systems, particularly Linux, that are used in a wide range of hardware systems, and a number of, for lack of a better name, proprietary operating systems sponsored by companies, for example Chrome OS, the operating system that runs the Chrome  browser, or Samsung’s (005930.KS)  Tizen OS that runs its smart TVs. 
Way back in 2008, HTC (2498.TT) released the Dream smartphone, the first to use the Android OS, competing with Symbian, owned by Nokia (NOKIA.FI) (49.8% share) and Blackberry OS, owned by RIM (BB), with a 16.6% share.  Within 3 years Android became the OS with the largest share and has maintained that position since[1].  The ability to maintain such leadership is based on the fact that the Android kernel is open-source and can therefore be downloaded and modified with paying Google (GOOG). However there are many Google apps that run under Android (Google Maps, Gmail, Google Playstore, etc.) that have to be licensed. 
Because Android is so popular, it is surprising that any company would undertake a project to develop a proprietary OS.  Estimates range from 5 to 10 years to develop the kernel and components for a large team of skilled engineers, with specialties in embedded systems, security, and assembly language.  Cost estimates range from ~$1b to over $10b, with the user interface alone running close to $100m.  This prices out most companies, but instead of developing a proprietary OS from scratch, companies can modify the Android  or Linux kernel in order to create an OS that they believe is best suited to their products and affords some differentiation.
That is exactly what Amazon (AMZN) is thought to be doing.  While the Vega OS is based on the Linux kernel, it is being built from the ground up, allowing it to be highly customized to Amazon hardware, similar to the way Samsung’s Tizen OS is based around Linux rather than Android.  As noted below, the control Amazon gains, including a modern user interface and potentially deep AI integration, is likely far more so than could be achieved through continued Android development, but it takes considerable time to build an application development ecosystem, with no guarantee that it will be successful.  Samsung has been successful with Tizen in the smart TV space, but as the leader in that genre, it has a distinct advantage, although its applications are still a bit limited, even after almost 10 years of development.
Amazon will have to bear the continued development cost and maintenance of the Vega OS system and find ways to encourage developers to hop on board once the OS is officially released (expected some time this year), all of which can be an albatross if little momentum is developed.  It’s a high risk, high reward game that only a few players could afford to play, but Amazon does have over 500m Alexa devices in operation, over 200m streaming sticks, e-readers, home security systems, and lots of smart speakers to eventually connect through Vega OS, so at the least, they have at least a shot over the next few years to gain enough share to make it into the top 5.


[1] Note that in terms of active device share, that crossover did note occur until 2017.

In anticipation of US reciprocal tariffs, shippers have been frontloading cargo since late 2024 and US ports, for the most part, have been able to handle the increased shipments without significant congestion as much product has been offloaded to local warehouses.  With the implementation and subsequent 90-day postponement of the reciprocal tariffs, and the additional tariffs placed on Chinese goods, there are a number of indications that Chinese container bookings are being cancelled, with the Port of LA indicating late last week that it has received notice of 12 potential cancellations.  As Chinese shippers have built US inventory, they can hold new shipments for a while as landed inventory gets worked down, but smaller US importers are unable to deal with the on-again-off-again tariff situation as easily.
A recent Freightos survey of small business importers in the US revealed that on a general basis the average rate of ‘concern’ over the tariff situation was 8.9 out of 10, with 62% of respondents choosing 10.   We have seen some panel producers indicate that they are trying to make production adjustments on a bi-weekly basis as customers rapidly change plans in this volatile environment, but small businesses are far less able to make such short-term  alterations to schedules.  When asked what their thoughts were concerning the administration’s plans for further tariff changes, here’s what they said:

• 51.3% said there is no way to know
• 22.6% said they expected tariffs to be reduced
• 17.4% said they expected tariffs to be increased
• 8.7% said they expected tariffs to remain the same

More significant was the response to the increased global and Chinese tariffs from a business perspective:

• 33% have paused shipments entirely
• 29% are exploring sourcing outside of affected regions
• 29% will ‘wait and see’
• 19% are accelerating shipments

Aside from the obvious planning issues that face both large and small CE product shippers, even with the exceptions we have noted previously, small importers face cash flow issues as they now have higher upfront customs costs that they cannot always pass on to customers.  Some are now itemizing shipping costs on invoices to make customers aware of how substantial the changes are, and a number of survey respondents indicated that they would not be able to remain in business if current tariffs remained in place for an extended period.  Many indicated that they are unable to source in the US at a reasonable cost and a number of companies we have spoken with indicated that while they can make relatively small changes between production locations, establishing production in the US would take years and would be limited to higher value products that could absorb higher production costs.
All in, while the tariffs themselves are a serious issue for small CE importers, the uncertainty around tariff policy and the lack of a coherent plan seems to be the real issue that leads to questioning whether some can sustain their business in light of their inability to plan for or recover some of the additional customs costs that still remain.  With the administration threatening additional tariffs, new port call fees for Chinese vessels, and the end to the de minimis exemption for direct-to-consumer shipping on May 3, small importers are facing  serious issues that can cause further disruptions to their business or end it entirely, not the desired goal of current tariff programs. We expect some front loading to resume again as we get closer to July, but the inevitability of price increases to cover higher overall shipping and/or sourcing costs will begin to show as pre-April inventory is reduced.  Large producers can absorb much of the increased cost and reduced cash flow, while smaller ones cannot.

While there are still a few murky areas, Friday’s exemptions to the latest round of tariffs afford the CE space a bit of breathing room during the 90-day postponement of President Trump’s reciprocal tariff program.  At least as far as can be seen based on current White House statements, while the exemptions shown below remove the additional tariffs placed on specific Chinese goods entering the US, they are still subject to tariffs that were placed on said products previously, which we believe amount to ~50% on most semiconductor products.  Therefore exemptions only seem to remove the last round of additional tariffs, leaving those previously levied.
All of this said, the President and cabinet officials continue to insist that new semiconductor and similar tariffs are ‘under investigation’, but with no timeframe attached, only give very near-term relief to CE companies, doing nothing for mid-term or long-term planning.  CE companies can always make promises to shift more capacity to the US, but in most cases such commitments will take years to plan and execute.  For those that are willing to make such a commitment, we remind them that Foxconn (2354.TT) still has plenty of room at its Wisconsin “6th Wonder of the World” manufacturing center, even after Microsoft’s (MSFT) $3.3b data center construction plans for a portion of the site.  As of January (2025), Microsoft has put two of the three Foxconn site projects on hold[1]
While the Friday semiconductor exemptions give CE companies a bit of breathing room, the volatility remains, and while it will take some time for Trump-aligned CE companies to come up with satisfactory plan for production in the US, placating headlines can be created by leaking that some production has been shifted out of China, preferably to an existing production location with low potential reciprocal tariff liabilities.  Given how often the trade situation changes, we expect only those countries or even companies that are so desperate to maintain trade with the US will make more substantial concessions until more trade stability can be maintained.  Rumors stating that some of Apple’s (AAPL) production lines in China have been shuttered have been denied by suppliers, but we expect more of the same until a more stable policy can be established, 1,307 days left…
Semiconductor exemptions

• 8471:  Automatic data processing machines, magnetic or optical readers, machines  for processing such data, including (847330) parts & accessories.  While not specifically mentioned, it seems to cover all desktop and laptop computers.
• 8486: Tools for the manufacture of semiconductor boules or wafers, semiconductor devices, electronic integrated circuits or flat panel displays.
• 85171300: Smartphones.
• 85176200: Routers, modems, and network equipment  
• 85235100: Solid-state non-volatile storage devices.
• 8524: Flat panel display modules, with or without touch
• 85285200: Computer monitors.
• 85411000: Diodes, other than photosensitive or light-emitting diodes.
• 85412100: Transistors, with a dissipation rate of less than 1W.
• 85412900:  Transistors, with a dissipation rate greater than 1W.
• 85413000:  Thyristors, diacs and triacs, other than photosensitive devices.
• 85414910, 85414970, 85414980, 85414995:   Photosensitive semiconductor devices, meaning LEDs and other light-sensitive sensors.  
• 85415100: More specific to LEDs.
• 85415900: This covers pretty much any semiconductor that has not been covered previously, and parts (85419000) including piezoelectric crystals
• 8542: Broad coverage of Microprocessors (CPUs), Memory chips (RAM, ROM), Logic, Amplifiers, Processors and controllers.

We note also that ‘certain critical minerals’ were also excluded from the additional Chinese tariffs, and while not specified, we can guess at a few of them, particularly the ones for which the US relies almost exclusively on China.  Yttrium and Scandium fall under the 280530 code, with Yttrium used in red display phosphors, YAG lasers, microwave (radar) filters, automobile exhaust sensors, superconductors, and in fuel cells.  The US imported over 400,000 kg. of Yttrium in 2023, with China being the source for 99.2% and 94% for yttrium compounds.  Even a simpler material such as graphite, used to line furnaces, for lithium-ion batteries, as a lubricant, in electric motors, and, of course, in pencils, is not produced in the US, which buys 42% of its common graphite and 100% of its battery grade graphite from China.  China has put some limitations on where such materials may be exported, but they have yet to take a hardline when it comes to strategic materials tariffs.   are an area where the US


[1]  While no public details have been given as to why the postponement by Microsoft was made, the company has reduced data center capacity plans in a number of locations this year.

We have noted recently that Sony (SNE) has shown a prototype of a new Mini-LED backlight system that uses colored LEDs instead of the usual white (or blue) LEDs.  The system, which is expected to be commercialized sometime this year, should be able to deliver color purity that would rival OLED (See “Resurrection” (03/24/25) for more details).  However, Chinese TV set brand Hisense (600060.CH) also announced a similar RGB Mini-LED 116” set that would directly compete with Sony and others who are developing the same technology including Samsung (005930.KS), LG Electronics (066570.KS), and TCL (000100.CH).
While RGB backlight technology has the potential to enhance the quality of LCD based TV sets, once again extending the life of LCD as a display technology, there are two questions that must be answered when evaluating whether RGB backlight technology will be a gamechanger, or whether it will be just a marketing gimmick to bring shoppers over to the premium TV set section on the retail floor. 
The first is whether enough TV set buyers will be able to discern enough of a difference between Tv sets using RGB backlights and those using more standard white or blue backlights.  Unfortunately much of the feedback on RGB backlight systems comes from those at shows where such displays are being shown, and most of those viewers are there because they either work in the CE industry or report on it.  This leads to a more biased view of new display technologies and one that is a bit removed from that of the average consumer, so the true test will come when such sets are on the floor at Best Buy (BBY) or WalMart (WMT).
​

The second issue is price.  Most new display technologies, when initially released, carry a large price tag, as in many cases the sets are produced almost by hand until brands are able to develop cost-effective mass production processes.  A good example would be Samsung’s Micro-LED TVs (vastly different from Mini-LED TVs), which when released last June started at $110,000 for an 89” set and climbed to a jaw dropping $150,000 for the 114” set, putting them at the very top of the premium Tv market.  This does not lead to large sales volume but can be used as a banner for the entire premium Tv line.

However, things are different now.  The battle for supremacy in the display and TV markets is no longer a gentlemen’s game, where a civil meeting between rivals might have been held to discuss ways to avoid conflicts.  Now Chinese brands are willing to take that same discussion out to the back alley if they think they can gain share over incumbents, with those battles being waged primarily with product pricing.  It has become ever more difficult for brands that are known for their premium pricing, Sony in particular, to offer a new technology or improvement at such lofty prices, as Chinese CE companies are not only able to quickly match the technology, but are willing to offer it at a far more reasonable price.
​

One might expect Sony, if and when they commercialize their RGB Mini-LED TV, to offer it at a steep premium to other models, especially if it is offered in an extra-large size format. While that is certainly a strong possibility, Chinese brand Hisense has recently announced that it will be releasing its own RGB Mini-LED TV set this month.  What makes that unusual is that Hisense was the first to market with the technology AND at a low-enough initial price that both limits the premium that others might charge and also incorporates it into the largest Mini-LED TV available to retail customers.
We took a quick look at the XXL TV set segment (only sets 100” or larger) to see how the Hisense RGB set pricing compared to other generic XXL Mini-LED sets and here is what we found:

​The Hisense RGB Mini-LED TV is priced (in China) at ~$13,780 US, and we note that it is a 116” model, one inch larger than others on the diagonal (1.64% larger in area), but instead of being offered at a massive premium, like the Samsung Micro-LED 114” model, its price is more comparable to 100” generic Mini-LED backlight models, along with its value on a price- to-area basis.  This will make it more difficult for Sony, Samsung, and others  to introduce their versions at the lofty premiums they might normally use, especially if their sets are smaller than the Hisense model, essentially lowering the price bar before the market has even developed.
Of course, we take into consideration that RGB backlight technology will have a higher cost both in the fact that each backlight ‘pixel’ is comprised of three (RGB) LEDs instead of one, and the driving circuitry for each pixel is now far more complex and costly to produce.  That said, either Hisense has found ways to keep costs low, even during early production, or they are willing to forgo product profitability in order to maintain a share lead over rivals (TCL in China) and in South Korea and Japan.  Sony, Samsung, and LG will now have to find another feature to add to their initial RGB backlight Mini-LED sets when they are released, in order to garner a price premium over Hisense, likely something they were not planning for until recently.

Shippers have been frontloading cargo for the last few months in response to the continuing tariff onslaught provided by President Trump.  While uncertainty was the watchword for most manufacturers who have been trying to balance accelerated production for product stockpiling against relatively weak demand, shippers were determined to get whatever cargo they could to North America and even Europe before April.  There have been some rush shipments, primarily by air at the last minute, but as the latest round of tariffs get folded in, if whatever was being shipped is not already there, it’s a moot point.
Now, with the tariffs in place and plenty of inventory sitting in containers and warehouses, shippers have little incentive to be aggressive and the charts below point to that fact.  March container price (index) dropped 24.6% and is now down 46.6% for the year, even with the recent US/Houthi escalation, while the China route index is down 53.5% YTD after a 38.5% drop in March.  We expect April (down ~1% in week 1) to drift lower unless the tariff situation escalates or abates, but there is also the chance that the fear of a global tariff-related recession begins to worry manufacturers as it seems to be doing to consumers. 
With inventory already in the States, it will take some time for higher prices on CE products to surface, perhaps giving a false sense of hope to economists and prognosticators, with some CE products likely having benefitted from the push to buy before the new tariffs hit, but as consumers see a year’s worth of 401-k profits vaporize, we expect they will not only be a bit more careful about spending, but will see the inevitable price increases as a further hindrance to new purchases.
As we are heading into the slow shipping season, the likelihood of container shipping prices moving up in 2Q are small and seem to be getting smaller, so the question then becomes whether we can hold the levels seen in the charts below or do they crack before the end of 2Q?.  Right now we favor little change, but things seem to change on a daily basis.

Apple (AAPL) has changed its healthcare focus from a meager “Project Quartz” to a more meaningful and robust “Project Mulberry”, including AI agents to collect and process the data that Apple devices collect about you.  This is not the ‘secret stuff’ brands collect, like what OS you are using, what device you are on, your search results (if you let them), and almost everything about what you have bought[1], but more the data that you allow Apple to collect by using the Apple watch, your iPhone, your AirPods, and even some 3rd party applications.  This is ‘health’ data, that includes sleep patterns, steps, calories, heart rate, weight, and a variety of other metrics about your bodily functions.
The objective is to provide Apple users with information that will make them healthier and more fit, but Apple, even before the platform is available, has made the upgrade to AI agents and an integration with Apple Intelligence, to make that information more ‘real-time’, personal, and meaningful.  The agents are the scavengers that will poll your Apple devices for the health information they collect and bring it to Apple Intelligence for monitoring and evaluation.  It is thought that Apple will not only offer you evaluations of your nutritional and sleep habits but could even offer camera-based assessments of your workouts and access to educational videos, put together by internal and external health experts. 
While the range of detail is thought to delve into physical therapy, mental health, and even cardiology, the initial focus is thought to be nutritional, with monitoring and alerts leading to personalized health advice based on your data, although there has been talk of AI-based mental health counseling and chronic disease predictive analysis.  As one might expect, Apple’s focus seems to be on the ‘user experience’, the part of the Apple persona that allows them to charge a premium for their products, but Apple is certainly not the first to go in this direction in this new age of AI.  Google’s  (GOOG) Fit is a similar collector of personal health data through Android’s Health Connect.  This platform allows permitted 3rd party apps to supply and collect data that feed the Google Fit app, but is more a collector, aggregator, and visualizer than an advice tool, although Google is currently working to integrate that data into its other health related services, with a tie-in to reference ‘reputable sources’ on YouTube.
Amazon (AMZN) also has a health program, but its focus is more oriented toward B2B with the Amazon Pharmacy supplying information on medications and interactions and the Amazon Clinic and One Medical able to set up virtual video or text sessions with clinicians (some on staff) that can evaluate conditions, make diagnoses, and prescribe medication for relatively common illnesses.  There are also companies like Noom (pvt) or MyFitnessPal (pvt) that are more specific to food and calorie management but given the enthusiasm for Ai that seems rampant across the health sector, we expect almost every health related application to leverage AI to stay competitive.
There are a few caveats here, particularly HIPAA regulations which regulate any health information that is maintained or transferred.  Entities involved must encrypt health data, limit access, perform risk assessment, maintain audit trails, breach notifications, and take ‘reasonable steps’ to prevent access to or disclosure of patient information.  HIPAA is difficult enough to understand and maintain, but adding AI to the mix opens everything up to new legal questions, many of which have yet to reach the courts and as liability becomes a potential issue when health-related advice is being given, we expect many new court cases that will not only focus on the potential liability of poor or incorrect data, but will include questions of algorithmic bias, inadequate software testing, and the fact that Ai systems are essentially ‘black boxes’ that make it impossible to derive where or how an AI arrived at a particular diagnosis or conclusion. 
Smart lawyers will not only include site owners but also those who wrote the algos that run them, looking for biases that could cause hallucinations, errors in judgement, or flawed diagnoses based on poor human vetting.  When Ai developers are called into court to defend issues like what data was included in an AI’s training or what process was used to draw a conclusion, high level math will not be how they are judged by a jury, so while Apple jumps into the fray to provide a positive health experience through Project Mulberry and Apple Intelligence, its not like Wikipedia, where you take things with a grain of salt.  Healthcare decisions affect people’s lives, as some can be significantly influenced by the information given by Ai healthcare.  There are good and bad doctors, and sometimes doctors make mistakes, which is why malpractice insurance exists, but will there be malpractice insurance for an application that gives incorrect advice or misdiagnoses an ailment or mental condition?


[1] IP Address
Device Type & Model
Operating System
Device Identifiers (trackers like AAID, IMEI
Screen Resolution
Installed apps (some)
Browser type & version
Cookies (optional)
Browsing History (Optional)
Location Data (Optional)
Referring websites
App usage
Contacts & Calendar (Optional)
Photos & Videos (Optional)
In-app purchases
Search queries (Optional)
Social Media Activity
Shopping activity
Form submissions
Wi-Fi network name
Data usage
Bluetooth data
Sensor tracking
Accelerometer & Gyroscope data
Ambient Lighting data
‘like’ data
DNS lookups
…To name a few.

While the world watches the daily Trump tariff circus erode any near-term chance of stability in the housing market, the CE space and even the avocado market, there is another problem afoot that most people have yet to see.   Cobalt is a key component of airplane gas turbine engines, and it is what makes blue glass blue, but its most common use is in the production of the anode in batteries, typically those used in mobile devices but more recently in electric car batteries.  China is the largest consumer of cobalt (~87%) and on a general basis EVs consume ~40% of the global supply, but what makes cobalt unique is that almost 75% of all cobalt produced globally comes from one country, and its not the US or China.
The Democratic Republic of the Congo produces ~74% of the world’s supply of cobalt and has ~54% of the world’s reserves of the metal, and while Australia produces between 2% and 3.5% of global supply, it is the only other country with more than 4% or 5% of global reserves (~15.5%).  This means that the DRC essentially controls the world’s supply of cobalt.  This is not a new occurrence, but something has changed recently that makes Trump’s tariff threats look mealy-mouthed in comparison.  On February 22 of last month the government of the DRC decided to halt all cobalt exports for four months.
The DRC statement indicated that the ban was put into effect “to regulate supply on the international market which is faced with a supply glut”, a reference to China’s CMOC Group (603993.CH), the globes largest miner of cobalt, more than doubling production last year, amid slowing demand.  The reaction was quick, as can be seen in the long-term and short-term charts below, with prices rising every day since the ban was announced.  That said, the long-term chart also indicates that the material is down severely from its peak in 2022, hitting lows last year not seen in over a decade.
The DRC has indicated that it will revisit the ban after three months to decide further action, but with the country holding more than half of the world’s cobalt reserves, it is expected that stockpiling has already begun.  Hopefully you bought that Tesla last year and won’t need another battery for 15 – 20 years unless it gets damaged.   Wait, do I smell something burning?

Yesterday we spent some time examining the effect of Chinese TV set consumer subsidies, and as part of that note mentioned the substantial growth seen in China for large and ultra-large TV sets.  While we appreciate the desire among Chinese consumers to fill their living rooms with the largest TV set possible, that desire is not always the case in the US and other countries. CNET did a survey last December, polling almost 1,200 respondents with two questions.

• If money were not an issue, what is the largest TV you’d put in your house?
• How much are you willing to spend on your next TV?

The responses to the first question were weighted and calculated against four age groups, Gen Z (13 – 28 yrs.), Millennials (29 – 44), Gen X (45 – 60), and Boomers (61-79), along with an ‘all’ category (red).  Surprisingly, the TV size with the highest response rate overall was 65”, smaller than we might have expected, followed by 75”, both of which were popular with older consumers (45 -79), while Gen X’ers seemed to favor 85” sets considerably more than other age groups.  Millennials stood out in the 100”+ category, but more telling was the “No TV” category, where younger consumers were the most likely not to have a TV at all.
The second question, the more valuable of the two in our view, reflected the current spending ‘potential’ of US consumers.  40% of the consumers surveyed indicated that they were only willing to spend under $500 for a new TV, which, in most cases, rules out the ‘premium’ TV category that includes most OLED and Mini-LED/QD TVs, but does include a number of 75” LCD TVs.  While the overall share of those who will be willing to spend between $500 and $1,000 drops from 40% to 33%, the combined share of those who will be willing to spend up to $1,000 is 73%, leaving only 19% willing to spend above $1,000 and 8% not will to spend anything on a new TV.  Millennials stood out as those most willing to spend over $1,000 (26%), although that was not significantly above the average. 

Based on the data from the survey, we were curious to see if retailers matched their TV set offerings with consumer spending expectations.  Our quick survey of TV set models at Best Buy (BBY), Walmart (WMT), Amazon (AMZN), and Samsung’s (005930.KS) on-line site makes it quite easy to see what customer price point each retailer is trying to appeal to.  Amazon, the volume leader, is close to being as price agnostic as possible, offering roughly the same number of models in each price category, essentially an all-things-to-all-people retail approach.   Best Buy is focused on high-end consumers, with by far, the largest number of model offerings in the over $2,000 category, while Samsung’s offerings are a bit more balanced, although certainly more oriented to the middle and upper price tiers.  Walmart’s approach is most closely aligned with the survey results, with almost 70% of its offerings priced at $1,000 or less, similar to the 73% of survey respondents in that same category, so it seems not only does Walmart know its customer base but would be the logical destination choice for the most number of TV set buyer.

TV set unit volume has been on the decline in China, and, as we have noted, the Chinese government has been subsidizing TV set purchases since August of last year as part of a broader program to stimulate the replacement of older CE products.  The “Swap Old for New” program has a stated purpose of stimulating consumer spending, promoting energy conservation, and improving the quality of life of consumers by upgrading appliances to newer and more technically advanced models, although we believe stimulating consumer spending is the overriding goal.
There is little empirical data as to why TV set volumes have been on the decline in China for the last few years but if the Chinese population is moving closer to the attitudes of westernized countries, they have less time to sit in front of a TV as their lives become more complex.  However, even more of an influence is the availability of other display types, particularly inexpensive smartphones.  US consumers spend 3 hrs. 33 mins. on their phones each day, just a bit below the global average of 3 hrs. 50 mins, and Chinese citizens are getting close at 3 hrs. 19 mins.[1]  With less overall time available and a more convenient solution than TV, it is not surprising that TV set volumes have declined as China’s social development matures.
.


[1] https://explodingtopics.com/blog/smartphone-usage-stats

In fact, TV set sales in China have declined, but have also shifted to larger sets, serving as an entertainment source rather than an information source, with the average TV set size increasing 3.3” in 2024 after a 3.0” increase the year before.  For the first time ever, the unit volume share of 75” TVs was greater than that of 65” TVs.  65” TVs became the leader only two years ago and 85” TVs, which made up 10.9% of unit volume, saw 56.7% y/y unit growth last year.
 

The effectiveness of Chinese consumer subsidies, which are financed through both government budget allocations and the issuance of bonds, can be measured to a degree as they are specific to certain product criteria.  The Chinese government has 5 levels of energy efficiency that are attached to consumer products, with one being the most efficient and 5 the least.  The subsidies only apply to levels 1 and 2 on a sliding scale, and Chinese TV brands found relatively inexpensive ways to move lower efficiency rated Tv models up to levels 1 and 2 to qualify without the expense and time of a full redesign.  By the time the TV set subsidies kicked in, many lower efficiency models had already been upgraded, giving consumers a wide range of choices under the plan.
Since TV set energy efficiency was only a small factor in Chinese consumer’s minds before the subsidy became effective, comparing 1H energy efficient TV set volumes (Pre-Subsidy) against 2H energy efficient TV set volumes (Post-Subsidy) gives clues as to how influential the subsidies were.  As shown below, energy-efficient TVs (level 1 & 2) represented 27.1% of unit volume and 38.1% of sales, however in 2H, after the subsidies had been put in place (August), energy efficient TVs represented 72.3% of unit volume and 80.8% of sales.  To compensate for possible seasonality we show that the y/y increase in units in 1H was 66.3% but was 232.2% in 2H and similarly, sales were up 44.1% y/y in 1H but up 184.5% y/y in 2H.

​The Chinese swap subsidy plan remains in effect in 1Q, although we expect its effect will diminish over time, however Chinese prognosticators expect it to have enough of an impact to grow Chinese TV set shipment 2.1% this year.  While from a macro view, there is certainly a case to be made for TV set shipment growth on the mainland, but our concern is that the 2024 TV set subsidies have ‘stolen’ sales and potential upgraders from 2025, resulting in weaker than expected full year 2025-unit volume.  Sales could increase as the share of larger TVs  continues to grow, against the negative of competitive brand pricing, but growth in unit volume might be harder to find.  Of course there is always the potential for larger subsidies but buying growth through subsidies is expensive way for the Chinese government to show the world that China is back on a growth track.