Mar. 15 (NBD) -- The Internet television (TV) market, which once has cornered the traditional color television sector, is to see big reshuffle because of rising penal price and weak demand facing the entire TV industry.

By Internet TV, it refers to smart TV sets which can be connected to the internet for access to movies, music, social networking and more.

According to the big data information platform All View Cloud, China's color TV sales volume in 2017 stood at about 47.5 million sets, down 6.6 percent year on year.

As the Internet TV firms generally subcontracting the TV manufacturing part to OEMs (original equipment manufacturer), they have little bargain chip in the supply chain systems. It's noticed that the panel cost takes up 60 percent to 70 percent of the total cost of a TV set. The rising panel price will enlarge the loss of the Internet TV companies since they can hardly make a profit from the TV hardware.

Li Shanhui, senior analyst at Beijing-based Sigmaintell Research, said to NBD that over the past two years, the price of TV components saw drastic fluctuation, which resulted in the surging cost of Internet TV hardware, hence climbing price of TV sets. The Internet TV companies thus was hit by declining sales growth as well as the loss in TV hardware which couldn't be offset by profit in content operation in a short term, Li explained. When those companies couldn't live up to expectations in terms of profit and sales volume, they also found difficulties in raising funds, Li concluded.

Regarded as a game-changer, Leshi Internet Information & Technology Corp (Leshi) made foray into the niche sector of Internet TV as early as 2012. The electronics and software company Xiaomi Inc., the Beijing-based internet entertainment and video company Baofeng and a bunch of internet companies then followed the trend to launch their Internet TV brands.

Leshi was the first one to provide subsidies for hardware to push up TV sales, forming a model for other companies, Yang Qingxiang, research assistant at WitsView of the consulting firm Trend Force told NBD.

However, when Leshi fell into financial problems, money was withdrawn from those Internet TV brands which adopted the same operation model. This led to the rapid deterioration of the entire industry's financial status, Yang noted.

Despite the difficult situations facing the TV sector, some brands including Xiaomi and Baofeng succeeded in increasing their TV shipment. According to Baofeng's annual report for 2017, Baofei TV achieved an year-on-year growth of around 45 percent in operation revenue.

Yang introduced that Xiaomi reported a shipment of approximately 2 million sets, much higher than the predicted 1.5 million sets.

As a matter of fact, some Internet TV brands have made changes to their strategies.

Li Huaiyu, CEO of the Internet TV firm Whaley, noted that bubbles in the Internet TV field has burst and here comes a stage where a benign industry structure has to be constructed. Li said that the niche sector has entered into a new phase where profit should be made from the hardware.

Email: gaohan@nbd.com.cn