U.S. Upstart Takes On TV Giants in Price War

Static in the global TV-set business is forcing some big players to re-tune their game.

On Monday, Philips Electronics NV blamed a profit dip on its floundering TV operations -- just days after saying it would restructure its North American television business. Earlier this month, Sony Corp. replaced its top TV executive following failed efforts to turn around its unprofitable television unit. Matsushita Electric Industrial Co., the maker of Panasonic products, recently reorganized a part of its U.S. business to better respond to intensifying price competition.

But one upstart, Irvine, Calif.-based Vizio Inc., has largely surfed past the industry's woes. Its single focus: churning out low-priced flat-panel TVs.

Vizio is a fraction the size of Sony and Samsung Electronics Co., both leading brands in the U.S. flat-panel market. Yet Vizio shipped 12.4% of North America's liquid-crystal display, or LCD, TVs in the last quarter of 2007. That's just behind Sony's 12.5% share and Samsung's 14.2%, according to research firm iSuppli Corp. Overall, Vizio's sales have multiplied to just under $2 billion last year, up from $700 million in 2006 and $142 million in 2005, according to the closely held company.

The California company's success illustrates the rise of a new business model in the fast-changing TV industry. Big Korean and Japanese consumer-electronics makers spent huge sums developing and marketing their own technology, creating a high barrier to entry for newcomers. They also built many key components in-house, including the all-important LCD and plasma display panels.

But panel technology is becoming ever more commoditized, meaning big brands aren't the only ones controlling the field. The shift has allowed nimble players like Vizio, which handles the design and marketing, to hook up with contract manufacturers and produce their own cheap TVs. At the same time, discount retailers such as Wal-Mart Stores Inc. are increasing their sales in the electronics category, slashing prices in the process.

By late last year -- after a spate of holiday promotions -- the average flat-panel TV cost just $920, down 24% from 2006, according to DisplaySearch.

Vizio chief executive William Wang was prescient. A native of Taiwan and a former marketer of computer monitors, he was struck by a 2002 ad for a $10,000 Philips flat-panel TV. He sensed an opportunity. Rather than sell the sleek sets as luxury items, he figured he could make flat-panel TVs that were affordable to average consumers.

Back then, the computer-monitor business had largely transitioned from clunky cathode-ray tubes to flat panels. Mr. Wang knew many of the parts in flat computer screens were used in flat-panel TVs. Tapping his computer contacts in Taiwan, he calculated he could get enough parts to qualify for a bulk discount and use them to make inexpensive TVs.

To fund the effort, Mr. Wang borrowed money from friends and family. He also mortgaged his home in Newport Beach, Calif., eventually raising $600,000. While he wanted to name the new company 'W' after himself, he settled for 'V' after learning that a hotel chain had claimed the letter. V launched in October of 2002.

Impressed With V

In January 2003, Mr. Wang met with executives at Costco Wholesale Corp. in Issaquah, Wash. He pitched them on a 46-inch plasma flat-panel TV for $3,800 -- half the price of competitors' sets. During the meeting, Mr. Wang said he wanted to become the next Sony in five years, says Tim Farmer, Costco's vice president of merchandising for consumer electronics. The Costco executives laughed, Mr. Farmer recalls.

Nonetheless, the Costco team was impressed enough with V that they decided to give Mr. Wang a chance, says Mr. Farmer. By February 2003, Costco was stocking V's TVs in 10 of its warehouses. A month later, it expanded the line to all 320 of its U.S. warehouses. That store count has since grown to 385. Today, Costco says Vizio is one of its largest TV suppliers.

'Vizio has always supplied my projections, and I've never been shorted product,' says Mr. Farmer.

For Gabe Billings, a 33-year-old stay-at-home dad, price was the main concern when he purchased a 37-inch Vizio from Costco this month. Mr. Billings, of Eugene, Ore., says he isn't so brand conscious when it comes to TVs. 'I didn't see any point in spending hundreds of dollars more for something I won't be able to tell the difference, once I get home,' says Mr. Billings. He says he spent $749 for the Vizio, versus the roughly $1,100 charged for bigger-name models.

Much of Vizio's success stems from the cozy relationship that Mr. Wang has forged with Taipei-based AmTran Technology Co. AmTran is a contract manufacturer that for years built computer monitors and TVs for companies like Sharp Corp. and Sony. Unlike with those customers, however, AmTran owns a 23% stake in Vizio.

The arrangement gets Vizio preferential treatment. AmTran sometimes swallows shipping costs and pushes component suppliers to ensure Vizio's products are high quality and on time. AmTran now gets about 80% of its revenue from Vizio. In turn, Vizio sources as many as 85% of its TVs from AmTran, according to research firm DisplaySearch.

'Unlike many PC companies who try to make their money by trying to squeezing the vendor, we try to work with our vendor,' says Mr. Wang, 44 years old. Scottie Chiu, AmTran's chief financial officer, doesn't dispute that his company gives Vizio preferential treatment.

Other TV upstarts are pursuing similar strategies. Syntax-Brillian Corp., the Tempe, Ariz., seller of the low-cost Olevia brand of TVs, works with electronics manufacturer Taiwan Kolin Co., which bought a 12.5% stake in the TV maker in 2006. Flat-panel TV maker Westinghouse Digital Electronics LLC of Santa Fe Springs, Calif., says it works closely with Chi Mei Optoelectronics Corp., Taiwan's second-largest maker of LCD panels.

Sony and others, such as Matsushita, say they aren't fazed by their much smaller rivals. Stan Glasgow, president and chief operating officer for Sony Electronics, says Vizio's lack of in-house manufacturing and development resources will hold the company back. 'Vizio doesn't have the kind of resources and money to lock up [flat panel] supply,' he says. 'I think they're in trouble.'

Mr. Wang sees no disadvantage to not owning factories. So far, Vizio has largely made products based on existing technology, although the CEO does have ambitions to dream up new products. 'R&D is the key for innovation, not manufacturing,' he says.

A Profitable Friendship

Born in Taiwan in 1963 and raised in Hawaii, Mr. Wang studied electrical engineering at the University of Southern California. He returned to Taiwan in the 1980s to work for Tatung Co., which made computer monitors for International Business Machines Corp. While at Tatung, Mr. Wang met and befriended Alpha Wu, the future founder of AmTran, who was then a founding executive at a Taiwanese monitor maker.

By 2004, Mr. Wang had changed his six-person company's name to Vizio. He also decided he needed another round of funding, of about $2 million. He targeted manufacturing partners since he wanted to tie suppliers to the success of the brand.

AmTran, the 3,000-employee manufacturer that his friend Mr. Wu founded in 1994, was a natural choice. But AmTran was hurting. The company reported 2004 earnings of $4.1 million on revenue of $428 million and a profit margin of just 0.9%. In 2005, it had a loss.

Mr. Wang suggested to Mr. Wu that AmTran invest in Vizio because its TVs were gaining traction in U.S. retail stores. By then, Vizio was producing $18 million a year in revenue and was profitable, he says. In April 2004, AmTran bought an 8% stake in Vizio for about $1 million, say the companies. (AmTran declined to make Mr. Wu available for comment.) That same month, Mr. Wang sold an additional 8% of Vizio to an affiliate of Hon Hai Precision Industry Co., the world's biggest contract manufacturer of electronics.

Bold and Unique Move

Vizio's move was both bold and unique, because the company wasn't just outsourcing its manufacturing as many companies do, but it was also creating an equity partnership with a major supplier. AmTran CFO Mr. Chiu says the company hoped the Vizio relationship would blossom into a strategic partnership, but 'nobody knew' whether such close cooperation with a customer would work. Suppliers are typically reluctant to do too much business with a single customer, because it risks disaster if the relationship fails.

Vizio soon leveraged its new manufacturing clout to increase its number of television models to five from two. It also broadened its distribution into retailers such as Wal-Mart's Sam's Club division and BJ's Wholesale Club Inc.

In 2006, Vizio says sales of its TVs jumped fivefold, to 700,000 sets from a year earlier. That June, AmTran bought an additional 15% of Vizio's shares from the company's departing CFO, who was moving back to Taiwan, both companies say. They declined to reveal how much the additional stake cost.

The alliance helped AmTran turn a corner. According to the company, revenues last year rose to $2.1 billion, up more than double from $959 million in 2006 and nearly five times its 2005 revenue. Earnings were $31.5 million in 2006, compared with a net loss in 2005. Mr. Chiu, the AmTran CFO, says business is hard to predict this year, given the shaky U.S. economy, but he expects revenue to grow by at least 30%.

The synergies continue to benefit both companies. In a brand-boosting coup, Vizio last July snared National Football League star LaDainian Tomlinson as a pitchman. The San Diego Chargers running back has endorsed Vizio's sets through television ads and appearances on shows such as Dr. Phil.

Last October, a Vizio official showed Seong Ohm, senior vice president of merchandising technology for Sam's Club, some new products. Ms. Ohm says she wanted a TV that female customers could relate to, especially something that could blend into a kitchen scheme. She got a peek at a prototype of a white, 20-inch flat-panel TV. Ms. Ohm liked the design so much, she says she asked Vizio to get 20,000 of the TVs to Sam's Club by early March. The sets have since arrived in the U.S. and are featured in Sam's Club's Spring catalog for $348.78 apiece.

Plans to Diversify

Still, some hurdles loom. Vizio may face a shortage of LCD panels. Neither Vizio nor AmTran produce the flat panels themselves, and the companies that make them may hoard them to sell under their own brands. AmTran's Mr. Chiu says the supply of LCD panels in the midsize range -- 32 inches -- could become 'tight' in the second half of 2008 if U.S. demand holds up. But he says AmTran hopes to secure enough supply by leveraging its sizable purchases of large-size panels.

Mr. Wang says Vizio plans to further diversify its product portfolio into TVs made from plasma panels and may also expand into Blu-ray DVD players. But he has tempered his earlier ambitions about quickly becoming the new Sony.

'We still have a long way to go,' he says. 'Our goal is to be the next Sony in 20 or 30 years.'

全球电视机市场风向渐变，业界巨头们正被迫采取应对之策来适应新的游戏规则。

不久前，飞利浦电子(Philips Electronics NV)宣布将重组处于困境的北美电视机业务，几天之后又宣布其电视机业务第一季度利润下滑。这个月初，索尼(Sony Corp.)电视业务换帅，不知道下一任高管是否能妙手回春拯救索尼这块毫不赢利的业务。松下电器公司(Matsushita Electric Industrial Co.)最近部分改组了其美国业务，以更好地应对越来越激烈的价格战。

但有一家总部在加利福尼亚的小公司Vizio却在风向改变之前找到了“定风丹”──它自入行以来，就直奔一个目标──做最便宜的平板电视。

Vizio的规模比起索尼和三星(Samsung Electronics Co.)这些电子行业的领军者来说犹如蚂蚁之于大象。但在市场研究公司iSuppli Corp.的统计结果中，Vizio不容小觑。2007年的最后一季度，Vizio在北美液晶电视机市场的占有率达到了12.4%，仅次于索尼的12.5%和三星的14.2%。更令人吃惊的是它的成长速度──这家少数人持股的公司在2007年的销售额已接近20亿美元，而在2006年其销售额为7亿，2005年仅1.42亿。

长期以来，韩国和日本的家用电器大公司都在花费巨资研发独家新技术，以占稳市场，他们自行生产许多关键部件，包括平板电视机中最重要的液晶平板显示屏和等离子平板显示屏。他们砌起高高的门槛想要将中、小竞争者排除在外。

但是，现在平板电视机的生产技术已经远没有当初那么高不可攀了，这意味着这些大公司不再能够独霸这块市场。像Vizio之类的一批小公司开始跻身其中──他们懂得电视细节的设计，懂得市场开发，能够说服合同制造商为他们代工廉价的电视机。与此同时，沃尔玛(Wal-Mart Stores Inc.)这样的连锁大超市也在不断扩大电子产品的销售规模，并不断向供货商压价。

据Display Search公司统计，在去年年底，经过一波假日促销后，平板电视的平均售价已跌至920美元，比06年下滑了24%。局势在转变，一种新的竞争模式正在形成。



Vizio的CEO王蔚在位于加州的总部Vizio的创始人王蔚(William Wang)是个有先见之明的人。他出生于台湾，曾在一家生产电脑监视器的公司做市场工作。2002年，他在商场里看到了一台标价1万美元的飞利浦平板电视。如此昂贵的价格把他震住了，但同时他也看到了机遇，萌发了试水平板电视行业的念头。王蔚琢磨着，与其生产昂贵的平板电视把它当奢侈品贡着，还不如生产出便宜的、让普通消费者都能负担得起的平板电视。毕业于南加利福尼亚大学电机工程系、又恰好在电脑监视器公司工作的王蔚知道，其实很多平面电脑显示器的组件也可以用于制造平板电视。在台湾的家里，他快速地查阅了公司在台湾代工电脑监视器的合同，敲打着键盘计算着生产成本。结果如他所料，他完全有可能获得足够的廉价部件去制造这种昂贵的电视，这意味着生产成本会大大降低。

从生产笨重的阴极射线管电脑监视器到生产精巧的平板电视，这不啻是个转变。为了筹集第一笔启动资金，王蔚从亲友那里借了一笔钱，抵押了在加州新港的房子，最终凑到60万美元。在给公司起名字时，他本来打算用自己姓氏的打头字母“W”，但无奈得知一家连锁酒店已经抢了先，最终他决定使用“V”。这样V公司在2002年10月成立了。

令人印象深刻的“V”

2003年1月，王蔚带着一台自己的46寸平板电视找到了华盛顿州的好事多仓储公司(Costco Wholesale Corp.)。他给那台电视的标价为3,800美元，仅为同规格其他品牌产品价格的一半。好事多负责家用电器销售的副总裁提姆·法默(Farmer)回忆说，那天王蔚信心十足说他的公司会在5年内成为下一个索尼，当时好事多在场的高管们都笑了。

尽管如此，他们还是决定给王蔚和他的V电视一个机会。2003年2月，好事多在其旗下的10家店面投放了V电视。而一个月后，他们就把销售范围扩展至320家，那是好事多当时在美国的店面总数。现在，好事多共拥有385家分店，Vizio已经成为了它最大的电视机供货商之一。

法默说：“Vizio令人印象深刻，他们供货总是很及时，我们从来没有出现过断货。”

对于俄勒冈州33岁的“家庭主夫”加布·比林斯(Gabe Billings)来说，价格是他在购物时最关心的因素之一。他上月在好事多花749美元买了台37英寸的Vizio，而如果买台品牌稍响的其他电视，大概得1,100美元。比林斯说，牌子对于他意义不大，多花几百块钱买个回家后就再分辨不出优势的名牌没有必要。

大胆的合作模式，互利的伙伴关系

Vizio的成功很大程度上要归功于它与台北瑞轩科技(AmTran)坚实的伙伴关系。瑞轩是一家电子业的合同制造商，有多年为夏普(Sharp Corp.)和索尼生产电脑显示器和电视机的经验。但对瑞轩来说，Vizio不同于其他客户，因为他们自己持有Vizio公司23%的股份。因此Vizio总能获得优先待遇，瑞轩会认真做好零部件供货商的监督工作，以确保Vizio的质量。有时为了让Vizio能及时交货，瑞轩甚至自己咽下运输费用。现在瑞轩80%的收益都来自Vizio。相应地，Vizio将85%的产品都交由瑞轩代工。

Vizio与瑞轩的友谊得从上个世纪80年代说起。王蔚出生于台湾，在夏威夷长大。从南加州理工毕业后在80年代回到台湾工作。当时他供职的Tatung Co.是国际商用机器公司(IBM)的合同制造商。在台湾，王蔚结识了吴春发(Alpha Wu)，也就是后来瑞轩的创始人。

在2004年，王蔚将公司名字由V改为Vizio，那时包括王蔚在内公司还只有6名员工。他急需新一轮注资以扩大公司规模，大概需要200万美元资金。很自然地，王蔚想到了他的合作伙伴，Vizio的成功一定离不开瑞轩。

瑞轩成立于1994年，已拥有3,000员工。但当时瑞轩正处于困难期，2004年，公司收入4.2亿美元，但净利润只有410万美元，利润率仅0.9%。但王蔚请吴春发相信他，因为Vizio已经得到美国零售商的肯定，年产值达到180万美元且利润丰厚。在经过一番思量后，吴春发用100万美元买入了Vizio公司8%的股份。同时，王蔚也找到当时世界上最大的电子业合同制造商宏海精密工业有限公司（Hon Hai Precision Industry Co.）的一家子公司，向其卖出了8%的股份。

2005年瑞轩出现亏损，员工对公司投资Vizio提出质疑，吴春发面对着巨大压力。但瑞轩的首席财务长邱裕平(Scottie Chiu)对老板给予Vizio的特殊待遇没有提出异议。他说，Vizio不像其他客户那样拼命压榨代工商，相反，我们的合作关系是平等互利的。

很快，Vizio将它的机型从2种增加到5种，从而打入了沃尔玛，山姆会员商店(Sam's Club)和 BJ批发会员店(BJ's Wholesale Club Inc.)等卖场。2006年Vizio的销售量较上年增长了五倍，买出了70万台。7月，Vizio的原首席财务长离职回台湾，瑞轩一次性从他手中买入15%的Vizio股份。瑞轩和Vizio都不愿透露这次购股花了多少。

到去年，瑞轩的收入达到21亿美元，等于2006年的两倍和2005年的五倍。2006年它赚了3.15亿美元，走出了2005年亏损的阴影。与Vizio的合作使得瑞轩度过了难关。但邱裕平说，2008年的市场状况很难预测，尤其是在美国经济动荡的大背景下，但他希望公司的收益增长率不低于30%。

邱裕平也说，瑞轩与Vizio目前的合作模式是大胆的。对于合同制造商来说，把公司的大半业务都押在一家合作伙伴身上十分危险，一旦关系破裂公司将陷入瘫痪。但至今为止，他们的合作模式仍然是十分积极的，瑞轩希望与Vizio走得更近，希望双方的合作关系能上升到战略伙伴的高度。

其他一些电视业的后起之秀也在运用类似的战略。Syntax-Brillian Corp.、Tempe, Ariz等都在与台湾的科林集团(Kolin Co.)合作，科林2006年在电视合同造商中占到了12.5%的市场份额。加利福尼亚的另一家平板电视机公司西屋数字电子(Westinghouse Digital Electronics LLC)也正与台湾第二大平板显示器生产商奇美电子股份有限公司(Chi Mei Optoelectronics Corp.)密切合作。

但索尼和松下等巨头称他们并不惧怕这些小竞争者。索尼电子的首席运营长斯坦·格拉斯高(Stan Glasgow)说，Vizio没有自己的工厂和充足的拓展资金，不能够锁牢关键零部件的供应，这都会阻碍该公司的发展。

王蔚却认为自己开家工厂没有太多好处。尽管现在Vizio都是依靠现有技术生产产品，但这位Vizio的CEO有雄心打造新产品。他说，研发是革新的关键却不是生产的关键。

去年7月Vizio邀请了全美橄榄球明星LaDainian Tomlinson为其代言，拍了则生动有趣的广告。10月，Vizio的一款新产品进入山姆会员商店。在洽谈时，山姆会员商店负责采购的高级副总裁Seong Ohm女士说，她们希望有一款方便女性在厨房里观看的电视。Vizio的工作人员给她看了一款20英寸的白色样机。Ohm女士十分喜欢，当即订了2万台。今年3月，这款电视机出现在山姆会员商店的春季商品宣传手册上，标价为每台348.78美元。

产品多样化计划

2008年平板电视市场阻碍重重，Vizio很可能面临液晶屏供货短缺的局面。由于Vizio和瑞轩本身都不生产液晶屏，而生产液晶屏的公司很可能把产品留给自有品牌电视机使用。邱裕平说，如果美国市场对中等尺寸平板电视的需求持续上升，那么中等尺寸液晶屏，特别是32寸液晶屏的需求2008年会十分强劲。但他说瑞轩希望通过其大批采购大尺寸液晶屏的优势来确保能获得足够的中等尺寸液晶屏供应。

面对挑战王蔚还是充满了信心，他说Visio将来的产品多元化方向可能是等离子平板电视和蓝光DVD播放器。但比起刚入行时，他少了分轻狂多了分沉稳：“我们还有很长的路要走，我们的目标是在20年或30年内成为下一个索尼。”

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