Chapter 629 Planning for the LCD Industry

"By the way, there are many different LCD watches now. How is our own brand competing in this area?" Yang Wendong suddenly asked again.

Electronic LCD watches have been released for nearly two years. Honor Electronics quickly gained fame by relying on its first-mover advantage.

However, this industry does not have a very strong copyright protection capability like literary creativity. Others can follow suit and create similar works after seeing it. At most, they can avoid appearance patents and technical patents.

Wang Zhiqun replied: "Mr. Yang, last year we sold a total of 23 electronic watches worldwide. Because there are many models and different prices, the total turnover is about 1300 million.

Nowadays, there are many LCD watch brands in the United States, Japan and even Hong Kong. Big brands will find ways to bypass our patents, while small brands or some unknown brands may directly pirate them. The structure is too simple, and they cannot make the time accurate, but they can barely work.

The price of digital watches is also falling very fast, so fast that it may drop once a month.”

"Yes, this situation will indeed occur." Yang Wendong nodded and said, "And there will be a critical point. Once the price of electronic watches is cheaper than that of mechanical watches, the entire market may be completely overturned."

When electronic watches first came out, they were very expensive. Even though Honor Electronics had its early R&D costs deducted by Yang Wendong, the factory price of a watch was more than $150. It was normal for the price to double by the time it reached the terminal, so it is not an exaggeration to say that this thing was half a luxury item in the early days.
However, the inherent characteristic of electronic products is that the speed of cost reduction is very amazing, especially when there is sufficient competition. Once the volume increases, the price will plummet until the sunk costs are almost evenly distributed.

Compared with cars and home appliances, the raw materials of many electronic products may just be sand. For example, chips can be made cheaper than cabbage in the later stage once the initial cost is recovered.
Originally, electronic watches appeared in the early 70s. However, after the mid-70s, the market for mechanical watches was almost collapsed. If it weren’t for some genius who came up with the idea of making mechanical watches high-end, the entire market would have almost disappeared. Even so, the mechanical watch industry that once almost supported the three Nordic countries has declined, leaving only a few high-end brands.

Wang Zhiqun nodded in agreement: “Yes, at the current rate of price reduction, it is estimated that the cost will soon reach the level of mechanical watches;

Even if the prices are the same, many people will still habitually choose mechanical watches, unless the price of electronic watches continues to drop to a much cheaper price and the accuracy is still acceptable, then the entire mechanical watch market will be completely overturned.”

“Yes, generally speaking, the cost needs to be reduced further before mechanical watches can be completely replaced.” Yang Wendong nodded in agreement.

Unlike smartphones replacing feature phones, the replacement of mechanical watches by electronic watches is not a revolutionary change. After all, no matter how the internal structure changes, the external function is still the same, both are to tell time, but one is a rotating dial and the other is digital, which does not make much difference to people's senses, unlike smartphones.
A similar example is that electric vehicles replaced fuel vehicles in the past. Although there are some differences in driving, the characteristics are similar. When electric vehicles were just emerging in the early days, although they outperformed fuel vehicles in terms of performance, fuel economy, and environmental protection, the penetration rate grew very slowly. It was not until BYD, which controlled the entire industry chain, began to take the low-price route and outperformed other fuel vehicles with higher cost-effectiveness that electric vehicles successfully became mainstream.

When there is no disruptive revolution, price is the most important factor and there is almost no other factor.

Wang Zhiqun said: "If this is the case, the entire electronic watch market will experience an unprecedented explosion."

"Yes, according to the current production capacity, it is definitely not enough, so we need to be fully prepared." Yang Wendong said with a smile: "Hong Kong itself is one of the production bases of mechanical watches, but in the past it was working for Switzerland and other Nordic countries. Now in the electronic watch industry, we must seize the opportunity. Even if we can't take all of it, we must take part of it."

Hong Kong's watch exports have been ranked among the top five in the industry in previous years, but like toys and clothing, they are all OEMs for foreign brands, with pitifully low profits, relying entirely on exploiting ordinary workers to make a little hard-earned money;

There is no other way. When you have no technology and no channel brand, you can only make this little money. The whole society is like this. Several companies within Changxing Group are able to give employees better treatment and humane treatment, essentially because they have some technology or innovation.
Otherwise, if Yang Wendong is just a boss of OEM, even if he is kindhearted and does not exploit workers, other competitors will, and customers will naturally abandon high-cost factories; the so-called good benefits and good treatment are based on the premise of having capable factories. In the past life, there were so many foreign companies in the mainland that had good treatment, and the essence is the same. In many other industries such as clothing and toys, even Yang Wendong, a time traveler, can hardly change the existing global market. At most, he can participate in it. However, the special feature of the electronics industry is that it is highly subversive. Once it is subverted, the entire industry will undergo regional transfer. This is an opportunity for Hong Kong. Although even electronic watches will eventually be infinitely flattened, it is at least much better than the previous OEM. The key lies in whether it can seize the profit points.

Wang Zhiqun thought for a while and said, "The whole industry is now mixed. It may be very difficult for us to gain enough market share in the terminal market. It is better for us to focus on the core components, that is, liquid crystal and transistors. In this way, we can also be tied together with many peers in Hong Kong."

"Haha, yes, I think so too." Yang Wendong smiled and said, "But now that we have created the terminal brand, we should not give up. We can try to go the high-end route and compete with ordinary Hong Kong brands without conflicts of interest. Then we can supply them with core components. This model will be perfect."

Although it is unclear what happened to the electronic watch industry in history, one thing is certain: many big brands eventually gave up on this industry, probably because there were too many pirated products and they simply could not be managed.

Most ordinary people just want a watch. An ordinary, counterfeit watch of unknown brand may be off by a few minutes a day, which actually has little impact. Most people just adjust it once a day in front of the TV, or even once every few days. Big brands naturally need to ensure accuracy, which will inevitably lead to a sharp increase in design and production costs, thus losing competitiveness.

Wang Zhiqun agreed and said, "Okay, I will ask the Honor Electronic Watch Department to design high-end products and see if we can create a different market."

"It's a little difficult, but let's give it a try." Yang Wendong didn't care and said, "The core is still in the area of liquid crystal and transistors. We need to ensure the supply to the Hong Kong market and lower the price. My goal is to make Hong Kong's electronic watches the world's largest production base, and even have the brand here. That would be perfect."

Although the electronic watch industry cannot produce top brands, the global demand is very large. Before feature phones became popular, most people and even children needed a watch, and the market size was in the hundreds of millions.

Such a huge demand, even with a low profit margin, can bring huge wealth and employment to Hong Kong and even the surrounding areas, and these demands can also be used to foundry the LCD, transistor and even future chip industries;
Perhaps electronic watches cannot flourish for a long time, but the wealth they bring can at least enrich a generation. Once the electronic industry behind them develops, they can also be used to make other products, such as future game consoles, computer keyboards and mice, etc. These small things have sufficient demand and are also huge wealth. They can be transferred to inland areas in the future and will enrich countless Chinese groups.

Although Yang Wendong did not want to be a saint, since he needed many people to work for him and would give the workers a certain amount of financial wealth, he would naturally give priority to the Chinese.

Wang Zhiqun replied: "Okay, I will make arrangements in advance. We should be able to make transistors in time, but the current production capacity of LCDs is definitely not enough."

"Then let's expand the LCD production capacity first. I want to make Hong Kong the world's largest LCD production city." Yang Wendong said with a faint smile.

If the explosion of the chip industry will take at least ten years, then LCD may only take two or three years. The demand for LCD in electronic watches alone can drive the development of the entire industry.
There will be calculators, industrial displays, home appliance displays, etc. in the future. Some normal people will think of them, but Yang Wendong will also make some unexpected ones in advance and put them on his own products to increase their level.

Therefore, preparations for the expansion of LCD production capacity must be made. Compared with chips, the restrictions imposed by Western governments on LCDs are much lower, which is also a good thing for ourselves.

There is just one small problem. Liquid crystal has a very high demand for water, but currently only small pieces are produced, so it won’t be a big problem in the short term.

PS: Ask for monthly ticket

(End of this chapter)

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