THE
`
`A N N U A L R E P O R T 2 0 1 6
`
`LIFE
`
`Stock code: 01070
`
`NICHIA EX2012
`
`

`

`
`
` NICHIA EX2012
`
`NICHIA EX2012
`
`

`

`Contents
`
`2
`3
`
`4
`8
`
`Corporate Profile
`Corporate Structure
`
`Year in Review 2016
`Financial Highlight
`
`10
`16
`
`Chairman’s Statement
`Management Discussion and Analysis
`
`30
`
`Directors and Senior Management
`
`44
`45
`72
`75
`97
`103
`
`105
`107
`109
`111
`208
`
`Corporate Information
`Corporate Governance Report
`Human Resources and Social Responsibility
`Report of the Directors
`Independent Auditor’s Report
`Consolidated Statement of Profit or Loss and
` Other Comprehensive Income
`Consolidated Statement of Financial Position
`Consolidated Statement of Changes in Equity
`Consolidated Statement of Cash Flows
`Notes to Financial Statements
`Five Year Financial Summary
`
`NICHIA EX2012
`
`

`

`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`Corporate Profile
`
`002
`
`TCL Multimedia Technology Holdings Limited
`(the “Company”, together with its subsidiaries,
`collectively the “Group”) is one of the leading
`players in the global TV industry. Headquartered
`in China, it is engaged in the research and
`development, manufacturing and distribution of
`consumer electronic products, and its products
`are sold all over the world. Through a new
`product-and-user-oriented business model that
`focuses primarily on a “double +” strategy
`which includes “intelligence + internet” and
`“products + services” as the main direction,
`it strives to build a comprehensive ecosystem
`for smart TVs that provides users with an
`exquisite experience with its smart products
`and services. The ultimate holding company of
`the Company is TCL Corporation.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`Corporate Structure
`
`003
`
`Public
`(including directors
`of the Company)
`27.81%
`
`TCL Corporation
`(Shenzhen SE Code:
`
`000100)52.10%
`
`Leshi Zhixin
`Electronic
`Technology
`(Tianjin) Co., Ltd.
`(“Leshi Zhixin”)
`20.09%
`
`TCL Multimedia
`Technology
`Holdings Limited
`(Hong Kong SE Code: 01070)
`
`100%
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Year in Review 2016
`
`004
`
`JANUARY
`
`MARCH
`
`■ Professor WANG Yijiang has been appointed as an
`independent non-executive director of the Company,
`a member of the audit committee (the “Audit
`Committee”) , the remuneration committee (the
`“Remuneration Committee”) and the nomination
`committee (the “Nomination Committee”) of the
`Company, and the chairman of the Nomination
`Committee;
`
`■ Professor SO Wai Man Raymond has been appointed
`as the chairman of the Audit Committee, and
`has resigned as the chairman of the Nomination
`Committee but shall remain as a member thereof.
`
`■ Mr. TANG Guliang has resigned as an independent
`non-executive director of the Company. Accordingly,
`he has also ceased to be a member of the Audit
`Committee, the Remuneration Committee and the
`Nomination Committee, and the chairman of the Audit
`Committee.
`
`The Group and LeTV jointly organized the “Strategic
`Cooperation Milestones Press Conference” in Beijing.
`At the press conference, the two parties announced the
`strategic cooperation with respect to GoLive, Internet
`ecosystem resources sharing and joint advertising
`operations.
`
`APRIL
`
`The Group held TCL 2016 Spring New Product
`Presentation in Shenzhen, in which debuted its QUHD
`TV – Quantum Dot TVs consisting of two distinctive
`product series, namely the X and the C series. The
`new flagship product X1 series garnered the CES
`2016 Innovation Award and was highly commended as
`the most eye-catching TV model at the International
`Consumer Electronics Show (“CES”) in Las Vegas, the
`United States.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Year in Review 2016
`
`005
`
`JUNE
`
`The Company granted share options
`to the grantees entitled under the
`Company’s share option scheme to
`subscribe for a maximum of a total of
`15,107,220 Shares, with an exercise
`price of HK$4.50 per share, and
`1,695,429 restricted shares to the
`grantees under a restricted share
`award scheme (the “Award Scheme”).
`
`MAY
`
`■ Mr. Winston Shao-min CHENG and Mr. Abulikemu ABULIMITI have
`been appointed as non-executive directors of the Company.
`
`■ The completion of the subscription of shares of the Company under
`a subscription agreement dated 11 December 2015 between the
`Company and Leshi Zhixin took place on 11 May 2016, pursuant to
`which an aggregate of 348,850,000 Shares were allotted and issued
`to Letv ZhiXin Investment (HK) Limited (a wholly-owned subsidiary
`of Leshi Zhixin) at the subscription price of HK$6.50 per share,
`representing approximately 20.10% of the issued share capital of the
`Company as enlarged by the allotment and issue of the subscription
`shares.
`
`■ Entered into the sourcing framework agreement (2016) and the key
`component sourcing contract (2016) with Leshi Zhixin.
`
`■ Signed an MOU with its strategic partner ELARABY Group, the largest
`home appliance enterprise in Egypt. A joint-venture TV manufacturing
`plant was set up in Egypt to tap into the broad prospect of the Middle
`East and African markets.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Year in Review 2016
`
`006
`
`JULY
`
`SEPTEMBER
`
`Signed an MOU with a leading Brazilian
`home appliance enterprise SEMP to
`invest in the establishment of a joint
`venture, SEMP TCL in Brazil which
`serves as the basis to facilitate full
`penetration into mid-to-high end home
`appliance markets in South America.
`
`■ The Group hosted the TCL 2016 Autumn New Product Presentation
`in Guangzhou and proudly introduced its high-end sub-brand XESS.
`At the same time, it also presented its high-end TV X1 and X2
`series and other products. The new sub-brand XESS was unveiled
`by China’s most respected national volleyball team head coach Ms.
`LANG Ping who has been appointed as ambassador of the XESS
`brand.
`
`AUGUST
`
`Ms. PANG Siu Yin resigned as the
`company secretary and an authorised
`representative of the Company and Ms.
`CHOY Fung Yee was appointed as the
`company secretary and an authorised
`representative of the Company.
`
`■ Announced further strategic cooperation with Leshi, of which TCL
`smart TVs are equipped with the EUI operating system developed
`by Leshi, covering ecological areas such as content, membership
`and advertisement, and striving to develop China’s largest smart TV
`advertising platform. As a highlight of the cooperation, the exclusive
`live broadcast rights of the World Cup Qualification Matches
`involving China’s national team, which are owned by Leshi, were
`shown on TCL’s various TV models.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Year in Review 2016
`
`007
`
`NOVEMBER
`
`DECEMBER
`
`Entered into several factoring contracts
`with Chongqing Leshi Commercial
`Factory Company Limited (“Chongqing
`Leshi”), Chongqing Leshi provided
`factoring services to a subsidiary of
`the Group subject to the conditions
`and the terms of the contracts,
`aiming to secure the early repayment
`and minimize credit risk exposed to
`the Group and improve the financial
`position and provide flexibility in cash
`flow management of the Group.
`
`■ TCL Corporation and the Company are included in the eligible shares
`list of the Northbound Shenzhen Trading Link and the Southbound
`Hong Kong Trading Link under mutual stock market access between
`Shenzhen and Hong Kong (“Shenzhen-Hong Kong Stock Connect”),
`respectively.
`
`■ The Company announced that the board lot size of the Shares for
`trading on The Stock Exchange of Hong Kong Limited (the “Hong
`Kong Stock Exchange”) would be changed from 2,000 Shares to
`1,000 Shares with effect from 19 January 2017.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Financial Highlight
`
`008
`
`Financial Performance
`
`(HK$ Million)
`
`Turnover
`
`Gross profit
`
`Gross profit margin (%)
`
`Profit attributable to owners of the parent
`
`Basic EPS (HK cents)
`
`2016
`
`2015
`
`33,361
`
`34,017
`
`5,816
`
`5,753
`
`17.4
`
`183
`
`11.78
`
`16.9
`
`26
`
`1.94
`
`TURNOVER BREAKDOWN
`BY PRODUCTS
`
`TV TURNOVER BREAKDOWN BY
`REGIONAL BUSINESS CENTRES
`
`Television 99%
`
`Others 1%
`
`PRC Market 58%
`
`Overseas Markets 42%
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Financial Highlight
`
`009
`
`Financial Position
`
`(HK$ Million)
`
`Property, plant and equipment
`
`Cash and bank balances
`
`Total assets
`
`Total liabilities
`
`Interest-bearing borrowings
`
`Net assets
`
`Operation Indicators
`
`Return on equity (%)
`
`Inventory turnover (days)
`
`Trade receivables turnover (days)
`
`Trade payables turnover (days)
`
`Current ratio
`
`Gearing ratio (%)
`
`Note: The above turnover days are calculated on average balance of the year.
`
`2016
`
`1,819
`
`3,882
`
`2015
`
`2,063
`
`2,215
`
`20,309
`
`18,178
`
`13,753
`
`13,769
`
`1,356
`
`6,556
`
`2,605
`
`4,409
`
`2016
`
`2015
`
`3
`
`45
`
`60
`
`79
`
`1.3
`
`0
`
`1
`
`52
`
`54
`
`65
`
`1.2
`
`7.2
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Chairman’s Statement
`
`010
`
`LI Dongsheng
`Chairman
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Chairman’s Statement
`
`011
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Chairman’s Statement
`
`012
`
`DEaR SHaREHOLDERS,
`
`On behalf of the Company, I hereby present to you
`the annual results for the year ended 31 December
`2016.
`
`In 2016, the global macroeconomic environment
`remained difficult. The Group has also faced many
`challenges. The selling prices of products have not
`increased in response to the continued rise of costs
`in the manufacturing industry, which has continued
`to put pressure on enterprises’ profitability. In the
`face of the increasingly fierce market competition,
`we actively enhance the sales proportion of the
`high-end products, improve operational efficiency
`and strengthen cost control. Over the past year,
`the overall sales recorded continuous growth and
`the product mix was further optimized. Various
`measures for reducing costs have also yielded
`results, which contributed to improved results.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Chairman’s Statement
`
`013
`
`The Group achieved a turnover of HK$33.36 billion,
`dropped by 1.9% year-on-year, LCD TV sales volume
`amounted to 19.96 million sets, an increase of
`15.1% year-on-year. Gross profit grew by 1.1% year-
`on-year to HK$5.82 billion, gross profit margin
`improved from 16.9% of the same period of last
`year to 17.4%. Operating profit was HK$300 million.
`Profit attributable to owners of the parent amounted
`to HK$180 million. Basic earnings per share was
`HK11.8 cents.
`
`The Group ranked No.3 in the global LCD TV market
`with a market share of 9.0% in 2016 according
`to the latest IHS Technology and the Company
`shipment data, and ranked No.3 in the PRC LCD
`TV market with a market share of 14.2% in 2016
`according to CMM’s report.
`
`F o r g i n g C o r e C a p a b i l i t i e s t o
`Elevate Overall Competitive Edges
`
`We continue to strive for excellence and innovation
`to lead the market. Maintaining the existing market
`position has been especially difficult under the
`pressures from international and domestic markets
`due to the slowdown of the global economy and
`the Chinese economy entering into a new normal
`stage. Under such conditions, the ability to stay
`competitive in the face of fierce competition is the
`key for success. It is only by strengthening the core
`competencies, carrying out business transformation
`and upgrading and adhering to the international
`development path that an enterprise is able to
`better respond to the ever-changing market demands
`and to obtain competitive advantages in the first
`place.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Chairman’s Statement
`
`014
`
`In the Internet era, manufacturing enterprises are competing with each other in the competitive realms of
`research, production, sales and other aspects of the value chain. Therefore, we adhered to forging four
`core competitiveness objectives including product technology capabilities, industry capabilities, brand and
`globalisation capabilities and internet application service capabilities. With continuous investment and
`accumulation of technologies and craftsmanship, we continued to strengthen our industrial and innovation
`capabilities so as to significantly increase the overall competitiveness.
`
`TCL has achieved breakthroughs in various technologies. In addition to the German iF Product Design Award,
`the quantum dot TV has obtained the influential “Global Display Technology Innovation Award of the Year” by
`Consumer Electronics Show (“CES”). TCL has also been selected as one of the “Top 10 Chinese Consumer
`Electronics Brands” and “Global Top 50 Consumer Electronics Brands”, demonstrating the new power of
`technological innovation to global consumers.
`
`E n t r e n c h i n g D e v e l o p m e n t i n O v e r s e a s M a r k e t s t o a c c e l e r a t e
`Internationalisation
`
`We firmly adhered to the development direction of internationalisation and achieved a solid and sustained
`expansion in the developed markets such as the European and the American markets. At present, with the
`Group’s strategy for internationalisation development entering into a new phase, we has re-designed the
`internationalisation development roadmap. While strengthening the market position in the European and
`American markets, we are vigorously expanding the emerging markets. Our core strategy is to export the
`advanced manufacturing technologies and industrial capabilities and to firmly establish overseas market
`development and deepen our internationalisation, of which the emerging markets including Brazil, India and
`Argentina are our key markets for development.
`
`Over the past year, 42.1% of sales revenue contributed from overseas markets. In the mature and highly
`competitive consumption market in North America, TCL has been recognised by the mainstream media as the
`fastest growing TV brand for two consecutive years. At the same time, as one of the pioneering enterprises
`that initiated the internationalisation, we are also leveraging the “Belt and Road “initiative to accelerate the
`business development in the emerging markets, further enhancing the layout for internationalisation.
`
`Seeking Breakthrough in Transformation to Lay Solid Foundation for
`Innovation Development
`
`In the face of the rapid emergence of the Internet economy, the Group strives to create an ecosystem through
`the “double +” strategic transformation of “Intelligence + Internet” and “Product + Services, and enhanced its
`smart products and internet application services capabilities. This move provided consumers with an exquisite
`experience with its smart products and services, thus promoting the industrial upgrade and transformation,
`and building a solid foundation for the expansion into the global high-end market.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Chairman’s Statement
`
`015
`
`In 2016, the accumulated number of TCL activated smart TV users of the Group totalled 17.29 million, and
`the daily average number of active users was 7.47 million (Source: Huan Technology Co., Ltd. (“Huan”)),
`which over-achieved the annual targets of 16.00 million and 6.70 million, respectively.
`
`Business Outlook
`
`In 2017, the overall economic environment at home and abroad remain challenging. This will lead to a more
`apparent trend that only the most competent players can survive. We can only progress faster to survive and
`strive for excellence in order to move to the forefront. In the coming year, our focus will be on maintaining
`growth, improving efficiency, reducing costs and enhancing effectiveness.
`
`On the one hand, we will further adjust the industrial structure, optimise the resource allocation, and
`improve operating efficiency. Meanwhile, we will continue to optimise the organisation structure, enhance
`efficiency and strengthen organisational vitality. On the other hand, we will accelerate the improvement of
`our core competencies, enhance the craftsmanship spirit of striving for excellence and uniqueness, firmly
`boost product technological capabilities, supply chain and manufacturing capabilities, and brand and channel
`capabilities, of which the product technological capabilities, in particular, is the top priority of the Group’s
`industrial upgrade.
`
`Finally, on behalf of the Board, I would like to express our sincere gratitude to every shareholder, client,
`consumer and business partner for their prolonged support. Meanwhile, I would also like to thank all the
`directors, management and colleagues of the Group for their unwavering efforts and valuable contributions
`over the years.
`
`LI Dongsheng
`
`Hong Kong, 21 March 2017
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`016
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`017
`
`BUSINESS REVIEW FOR THE
`YEaR ENDED 31 DECEMBER
`2016
`In 2016, market competition remained intense.
`Global LCD market shipments decreased by 1.3%
`while the shipping amount declined by 10.9% year-
`on-year. The PRC market has witnessed an increase
`in shipment against the backdrop of a decline in
`global TV shipments, which was mainly attributable
`to the increasing demand for high-end products in
`the PRC market. According to the report from CMM,
`overall sales volume of TVs in the PRC market
`increased by 7.4% year-on-year in 2016. However,
`due to the fluctuations in panel price and the
`downward trend of average market price, the overall
`market sales volume in the PRC market went up,
`but the shipping amount was down by 7.1% year-on-
`year. With the panel costs increased in 2016, the
`profitability of TV industry was impacted to a certain
`extent.
`
`Encountering a challenging market environment
`and fierce competition, the Group continuously
`optimised its product mix to boost the proportion in
`sales volume of high-end products such as quantum
`dot, curved, 4K and large screen TVs, etc.. The
`Group also enhanced operational efficiency and
`strengthened cost control. Various measures for
`reducing costs have yielded results and caused
`the non-panel costs to decrease as well. In the
`overseas markets, the Group has made significant
`breakthroughs and improvements in sales volume
`and earnings. Besides, the foreign exchange gains
`and losses were under control due to the relatively
`stable exchange rate in 2016 when compared with
`2015, resulting in an improvement in operating
`results.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`018
`
`In 2016, the Group achieved a turnover of HK$33.36
`billion, dropped by 1.9% year-on-year. Gross profit
`increased by 1.1% year-on-year to HK$5.82 billion,
`and gross profit margin rose from 16.9% of the
`same period of last year to 17.4%. Operating profit
`was HK$300 million, and net profit after tax was
`HK$180 million. Profit attributable to owners of the
`parent amounted to HK$180 million. Basic earnings
`per share was HK11.8 cents.
`
`In the fourth quarter, the Group’s turnover was
`HK$9.69 billion, representing an increase of 1.2%
`year-on-year. Gross profit decreased by 12.7%
`when compared with the same period of last year
`to HK$1.77 billion and gross profit margin declined
`by 2.9 percentage points in the same period of
`last year to 18.2%. Operating profit amounted to
`HK$47.36 million, and net profit after tax was
`HK$39.79 million. Profit attributable to owners of
`the parent amounted to HK$35.88 million. Basic
`earnings per share was HK2.17 cents.
`
`The Group ranked No. 3 in the global LCD TV market
`with a market share of 9.0% in 2016 according
`to the latest IHS Technology and the Company
`shipment data, and ranked No. 3 in the PRC LCD
`TV market with a market share of 14.2% in 2016
`according to CMM’s report.
`
`On 5 December, 2016, the Company was included
`in the eligible shares list of the Southbound Hong
`Kong Trading Link under Shenzhen-Hong Kong Stock
`Connect (“Shenzhen-Hong Kong Stock Connect”).
`The Shenzhen-Hong Kong Stock Connect will offer
`alternative investing channels in both the PRC and
`Hong Kong stock markets, to enliven the two stock
`markets by boosting trade volume and increasing
`the valuations of Hong Kong stocks. The Group
`expects to attract more Chinese and overseas
`investors through the programme.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`019
`
`The Group’s sales volume of LCD TVs by regions and the number of TCL smart TV users during the year were
`as follows:
`
`2016
`(’000 sets)
`
`2015
`(’000 sets)
`
`Change
`
`19,956
`
`17,343
`
`15.1%
`
`9,415
`10,541
`10,593
`3,977
`
`9,244^
`8,099^
`6,265
`1,858
`
`1.8%
`30.2%
`69.1%
`114.1%
`
`accumulated
`total as of
`31 December
`2016
`
`December
`2016
`
`December
`2015
`
`Change
`
`2016
`
`2015
`
`Change
`
`17,289,434
`
`606,989
`
`483,653
`
`25.5%
`
`5,364,578
`
`4,558,404
`
`17.7%
`
`N/a
`
`7,473,240
`
`4,800,723
`
`55.7%
`
`N/a
`
`N/A
`
`N/A
`
`LCD TVs
`Total
` – PRC Market
` – Overseas Markets
`Of which: Smart TVs
`4K TVs
`
`^ Restated
`
`Number of TCL activated
`smart TV users(1)
`
`Daily average number of
`active users(2)
`
`Notes:
`
`(1)
`
`Number of TCL activated smart TV users refers to the number of users who use the internet TV web service for more
`than once.
`
`(2)
`
`Daily average number of active users refers to the number of unrepeated individual users who visit within 7 days.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`020
`
`The PRC Market
`
`According to the CMM’s report, the sales volume in the PRC market for the year 2016 was 52.05 million sets,
`up by 7.4% year-on-year. Impacted by the fluctuations in prices of raw materials and average market selling
`price, turnover was conversely down by 7.1% year-on-year to RMB152.4 billion. Although there was an upward
`adjustment later, earnings were still affected due to the increase in panel prices.
`
`In 2016, the Group’s LCD TV sales volume increased by 1.8% year-on-year to 9.41 million sets. Affected by
`prices of major raw materials, average market selling price and 6.1% year-on-year depreciation in the average
`exchange rate of Renminbi against Hong Kong dollars in 2016, the average selling price of LCD TVs decreased
`by 13.8% year-on-year while turnover decreased by 12.2% year-on-year to HK$19.17 billion, imposing pressure
`on earnings.
`
`Despite this, the Group has proactively optimised its product mix and further strengthened cost control, which
`resulted in a significant improvement in non-panel cost reduction and a year-on-year increase in gross profit
`margin of LCD TVs from 20.6% to 20.9%.
`
`With continued product mix enhancements, the proportion of mid-to-high-end products has been steadily
`increasing in 2016 (data below excluded ODM business).
`
`•
`
`•
`
`•
`
`•
`
`•
`
`Smart TV sales volume increased by 10.1% year-on-year to 5.15 million sets, which accounted for
`66.1% of the LCD TV sales volume, rising from 53.7% in the same period of last year.
`
`4K TV sales volume increased by 63.3% year-on-year to 2.83 million sets, which accounted for 36.3%
`of the LCD TV sales volume, rising from 19.9% in the same period of last year.
`
`Market share of curved TVs was 30.4% in 2016, maintaining No.1 position among the domestic brands
`in the market (Source: CMM). The proportion of accumulated curved TV sales volume to the Group’s
`LCD TV sales volume in the PRC market rose from 2.5% in the same period of last year to 10.9%.
`
`Proportion of the sales volume of products with screen size of 55 inches and above increased from
`16.6% of LCD TV sales volume in 2015 to 29.0% in 2016.
`
`The average size of TVs sold increased from 41.5 inches in the same period of last year to 44.3
`inches.
`
`According to CMM’s report, TCL’s LCD TV brand price index increased from 87 in 2015 to 93, ranking No. 3.
`
`The Group continued to promote the integration of online and offline channels, diversify its sales channels
`and enhance cooperation with the existing channels. Proportion of sales volume from electronic business
`sales channels increased from 16.1% in 2015 to 20.0% in 2016.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`021
`
`Overseas Markets
`
`Along with the Group’s continued efforts in
`expanding the sales channels, accelerating its
`product mix transition towards high-end products
`such as large screen, smart, 4K and curved TVs
`etc., the product mix was further improved and the
`TCL brand image was enhanced, contributing to a
`significant improvement in operating results in the
`overseas markets.
`
`P r o d u c t m i x ( e x c l u d i n g O D M b u s i n e s s ) w a s
`enhanced through the CBUS (curved, large screen,
`4K, smart TVs) strategy:
`
`•
`
`•
`
`•
`
`•
`
`The proportion of curved TV sales volume
`increased from 0.2% in 2015 to 1.9% in
`2016
`
`The proportion of TV with screen size of 55
`inches and above sales volume increased
`from 8.2% in 2015 to 14.8% in 2016
`
`The proportion of 4K TV sales volume
`increased from 2.6% in 2015 to 14.8% in
`2016
`
`The proportion of smart TV sales volume
`increased from 33.8% in 2015 to 58.2% in 2016
`
`Contributed by the continued sales growth in the
`North American market and the emerging markets,
`the Group’s LCD TV sales volume in 2016 increased
`by 30.2% year-on-year to 10.54 million sets,
`turnover was up by 16.2% year-on-year to HK$13.92
`billion and gross profit margin rose to 12.5% from
`10.0% in the same period of last year.
`
`Besides, the associate company established by
`TCL and Brazilian SEMP enables both parties to
`share channels and resources, enhance capacities
`in sales, brand promotion as well as supply chain
`efficiency.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`022
`
`Performance in the overseas markets in 2016:
`
`•
`
`•
`
`•
`
`•
`
`In the North American market, LCD TV sales volume surged by 71.8% year-on-year, with its ranking of
`market share, in terms of sales volume, climbing from No.9 in the same period of last year to No.6 in
`2016 (Source: NPD).
`
`LCD TV sales volume in the emerging markets rose by 44.3% year-on-year, of which market shares, in
`terms of sales volume for the year 2016 in Thailand, remained No.3. Ranking in Vietnam has increased
`from No.5 in the same period of last year to No.4 in 2016, while ranking in Australia was No.6 (Source:
`GfK).
`
`Due to fluctuations in exchange rates and increased panel prices, LCD TV sales volume in the European
`market slightly dropped by 0.9% year-on-year. In terms of sales volume, the Group ranked No.3 in
`France in 2016, rising from No.4 in the same period of last year (Source: GfK).
`
`LCD TV sales volume of the strategic ODM business was up by 21.3% when compared with the same
`period of last year.
`
`The Group continued to optimise its product mix to strengthen competitiveness, actively developed new
`markets, expanded sales channels as well as taking advantages of different channels to increase sales.
`
`Internet Business
`
`Adhering to the development strategy of “double +” strategic transformation, the Group has actively built TCL
`TV+ service ecosystem, and established strengthened cooperation with internet service providers for mutual
`collaboration.
`
`As of December 2016, the accumulated number of TCL activated smart TV users totalled 17,289,434, the
`daily average number of active users in December 2016 was 7,473,240 (Source: Huan).
`
`•
`
`•
`
`•
`
`Video-on-demand business totalled 17.40 million users, increasing by 12.4% when compared with the
`first three quarters of 2016;
`
`Lifestyle business totalled 4.89 million users, increasing by 51.8% when compared with the first three
`quarters of 2016;
`
`Applications business totalled 15.40 million users, increasing by 32.0% when compared with the first
`three quarters of 2016.
`
`•
`
`Spending time of users reached 4.7 hours, representing an enhancement in user loyalty.
`
`The Group’s internet business recorded an increase of 69.3% year-on-year in the turnover to approximately
`RMB72.29 million in 2016.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`023
`
`R&D
`
`The Group has achieved breakthroughs in various
`technologies, such as local dimming backlight
`technology in thin products, the quantum dot
`technology in rimless TV, etc. These technologies
`were firstly applied in the high-end sub-brand XESS
`series TVs, significantly improving the TV display
`quality and boosting the core competitiveness of
`TCL brand.
`
`Applying state-of-the-art technologies, the XESS X1
`series are equipped with the best ever light-emitting
`material – Yue Cai quantum dot display material,
`to achieve a 110% of the industry’s highest colour
`gamut, pure colour performance and precise colour
`expression. The X1 adopts the most advanced
`local dimming backlight technology, Dolby Vision
`High Dynamic Range technology and the superior
`Harman Kardon stereo. In addition, X1 has built-in
`smart home control centers with three core scene-
`oriented content platforms, namely Magic Theater,
`Home Mode and Smart Mode, as well as a brand
`new TCL TV + OS 3.0 system. Products are also
`installed with Tencent video applications, offering
`a rich variety of contents covering entertainment
`programmes, sports, movies, etc.
`
`Additionally, the Group’s high-end 4K Android TV X1
`was debuted and well recognized in the European
`market during the year. The Group will also utilise
`the Android Google Play applications to enrich the
`product contents, in order to provide diversified
`services and more convenient experience.
`
`For nine consecutive years, TCL has been selected
`as the “Global Top 50 Consumer Electronics
`Brands” and “Top 10 Chinese Consumer Electronics
`Brands” hosted by the International Data Group
`(“IDG”), the United States of America. Its quantum
`d o t T V h a s a l s o b e e n a w a r d e d “ C o n s u m e r
`Electronics Show (“CES”) Global Display Technology
`Innovation Award of the Year”, which again showed
`that TCL has been well-recognized by the industry.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`024
`
`Furthermore, the Group has won three awards for its
`three products respectively at the German iF Product
`Design Award 2017, namely TCL high-end sub-brand
`XESS TV series flagship X1, the quantum dot curved
`4K TV and the latest TCL TV remote controls series
`RC800, demonstrating the world’s leading design
`concepts and technological innovation.
`
`Outlook
`
`Looking into 2017, it is expected that the PRC and
`global economy will continue to face downward
`pressure, leading to sluggish market demand. On
`the other hand, factors like the fluctuations in panel
`prices and intensified competition brought by the
`Internet brands, etc., are expected to bring more
`challenges to the TV industry.
`
`In view of this, the Group will set “efficiency is
`basis, structure is core, profit is goal” as its
`overall operation strategy for 2017 and continue to
`strengthen the establishment of core competencies
`of the enterprise and forge core competitiveness. It
`will continue to promote strategic transformation of
`twin drivers of “double +” and internationalisation.
`Meanwhile, the Group will also strive to improve
`operational efficiency and further implement
`stringent cost control measures, thus strengthening
`t h e c o r e b r a n d c o m p e t i t i v e n e s s , i m p r o v i n g
`profitability and achieving sustainable development.
`
`TCL MULTIMEDIA TECHNOLOGY HOLDINGS LIMITED
`
` ANNUAL REPORT 2016
`
`NICHIA EX2012
`
`

`

`Management Discussion and Analysis
`
`025
`
`The “efficiency is basis, structure is core, profit is goal” operation philosophy: Focus on “two-up and two-
`down” as operating strategy to increase the proportion of products with high gross profit and low cost
`channels while decreasing system costs and asset turnover days; implement structure-based competitive
`strategy including flagship product strategy, new product category and new technology; continue to foster the
`establishment of f