Fu Jiaozhi, an official from the China Household Electric Appliance Commercial Association, said the high-end market will become a key battleground. Domestic makers pay more attention on high-tech development and move closer to their foreign counterparts, and foreign makers gradually phase out production on low-end products in China after they lost out in the market.

Last week, for the first time, two large domestic TV manufacturers - Skyworth and Hisense - declared price cuts on their range of high-end TV sets, which mainly include large-screen, high-definition, plasma, liquified crystal display and projection TVs.

Skyworth cut its prices of high-end products by an average 20 per cent. Hisense also announced cuts on 18 types of film TVs. For example, a high-definition TV which cost 5,000 yuan (US$604) now costs 3,980 yuan (US$356).

Yang Dongwen, manager of the colour-TV marketing department at Skyworth, said the core of competition in China's TV making industry has been shifting from simple price wars on ordinary products to the development of TV sets involving more high technologies since last year.

"Our price cutting this time is a natural result of the strategy shift which led to lower costs after one year's development on high-end TV sets," Yang said. It will help Skyworth expand in the high-end products market by making prices more affordable to Chinese families, he added.

Other domestic TV set makers are also expanding high-end product output this year.

The largest TV maker, Changhong, which has captured 18.5 per cent of the domestic projection TV market, plans to add four production lines and put out 500,000 projection TV sets this year.

Hisense aims to produce an annual capacity of 4 million units of film TVs and projection TVs this year.

This indicates Chinese TV set makers are preparing to battle foreign counterparts in the high-end field, which control 80 per cent of the Chinese market, Fu said.

Foreign makers' failure in the domestic low-end market, due to the never-ending price wars, has also pushed them to attach more importance on the high-end market alongside Chinese counterparts, Fu said.

Many foreign makers have decided to phase out production of low-end TV sets and concentrate on high-end output in China, Fu added.

Japan's Sharp will quit production of ordinary TV sets in China by 2005, according to Hua Ning, manager of Sharp's North China operations.

Another two leading Japanese electronics makers also announced earlier this year they will stop making and selling low-price TV sets in China. Hitachi stopped last month and JVC is expected to cease production at the end of the year. Both will switch to high-tech products, such as large-screen plasma TV sets.

Meanwhile, foreign makers have gradually lowered prices of high-end TV sets since December and shrank their pricing gap with Chinese makers, which are 20 per cent higher than domestic prices, Fu said.

(China Daily April 8, 2002)