TCL's Li doubles down on global markets, nudges Qualcomm on fees

BEIJING, March 10 Mon Mar 10, 2014 4:22am EDT

BEIJING, March 10 (Reuters) - TCL Corp expects group revenues to surpass 100 billion yuan ($16.32 billion) this year for the first time as the Chinese electronics giant increasingly turns to Europe, Latin America and the United States to sell more smartphones and televisions.

TCL expects to see sustained revenue growth at its handset company, now the world's fifth-biggest, while profits at its television unit are expected rebound, company chief executive Thomson Li Dongheng told Reuters.

Li also called on Qualcomm Inc., the U.S. chipset maker, to lower the fees it charges Chinese companies.

TCL Multimedia Technology Holdings, TCL's Hong Kong-listed television unit, posted losses of HK$119 million ($15.33 million)last year even as revenue increased 9.6 percent to HK$39.5 billion, as overstocking of raw materials and supplier mishaps raised sales costs.

"We have to be more competitive and speed up the transformation of the television business," Li said in an interview on the sidelines of China's annual parliamentary session in Beijing. Li said revenue for the TV set business should increase about 10 percent this year.

TCL is targeting international markets, which now account for 42 percent of total sales, as cheaper technology makes Chinese-made electronic goods affordable in both emerging and developed markets. The percentage of global sales is expected to increase, Li said.

TCL reported group revenue last year reached 85.32 billion yuan, an increase of 22.9 percent, while net profit jumped to 2.88 billion yuan.

TCL Communication Technology Holdings, the group's Hong Kong-listed handset maker, makes more than 90 percent of its revenue offshore, primarily in the Americas and Europe.

Last year, TCL purchased the rights to rename Grauman's Chinese Theater, along Hollywood's Walk of Fame in Los Angeles, the TCL Chinese Theatre..

Handset sales in 2013 reached 55.2 million units, including 17.6 million smartphones, and have been a main driver for the company since last July. TCL Communications, which sells under the Alcatel brand overseas, also competes against Huawei Technologies Co, ZTE Corp and Lenovo Group .

TCL's mobile phone sales should increase by 50 percent this year, Li said. Profitability remains an issue, particularly as increased competition forces handset makers to lower prices.

"We remain concerned about how the company can cope with mounting smartphone margin pressure in both emerging and matured markets," wrote Andrew Hsu, an analyst with J.P. Morgan Securities (Asia Pacific) Ltd in a research note last month.

"Chinese companies are becoming more competitive. There are five Chinese brands in the world's top ten, but our profitability is poor compared with Samsung or Apple," Li said. "Chinese firms do better against brands like LG, Nokia and Motorola."

The TCL chief also said he supported efforts by China's anti-monopoly regulator to help lower the license fees on chipsets paid to Qualcomm Inc.

"Qualcomm's patent fees, frankly speaking, are relatively high," said Li. "Our profits last year were only a little more than 1 percent. It's clear this standard isn't reasonable."

TCL on average paid royalty fees amounting to 5 percent of sales for chipsets used in its 3G and 4G handsets.

China's National Development and Reform Commission, which in November started investigating Qualcomm's rates, said in February that the San Diego-based firm was suspected of overcharging and abusing its market position.

Li said a more suitable level for all mobile royalties would be 3 percent.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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