Today's world is in a period of great changes, with a marked rise in unilateralism and protectionism, a downturn in the world economy, and a clear trend of anti-globalization. The global industrial chain is still being reconstructed at an accelerated pace due to the reshoring plan of the industrial chain and the "friendly shore outsourcing" of some developed economies, showing the characteristics of regionalization and proximity. At the same time, China's economy is facing structural challenges. In the complex and severe internal and external situation, how to further highlight the core advantages has become a question that Chinese enterprises must answer. From an internal point of view, China has basically achieved industrialization and is about to enter the ranks of high-income countries, resource endowment, development stage, development goals have changed, requiring the manufacturing industry to upgrade to a higher level. At the same time, at the technical level, the digital economy is holding enterprises to promote technological change and rapid iteration of management and business logic design.
These are the challenges faced by all Chinese companies, especially those in the manufacturing industry, and they are also the challenges that TCL is facing. As a manufacturing company that firmly promotes its globalization strategy, TCL needs to analyze the current global industrial landscape, accurately identify the technology and development trends of the global market, correctly assess its matching capabilities, and make prudent and deterministic responses.
The key to the transformation and upgrading of China's manufacturing enterprisesand the practice of TCL
How to choose the direction of industrial upgrading?How to overcome the technical bottleneck in the transformation and upgrading?This is a must-answer question in front of TCL, and it is also a must-answer question for China's manufacturing group. To this end, we try to explore a set of methods through enterprise practice.
How to choose the direction of industrial upgrading?In 2009, TCL founded TCL Huaxing and invested 24.5 billion yuan to build a T1 production line to realize the professional expansion from the downstream terminal to the upstream display panel fieldIn 2020, TCL acquired Tianjin Zhonghuan Group, completed two strategic industrial upgrades and expansions, and realized the expansion and extension of the "high-tech, asset-heavy, and long-cycle" industries.
Based on the goal of strategic focus, TCL has entered the new track twice, and there are three supporting elements and principles behind the strategic decision.
The basis for supporting us to create TCL Huaxing and enter the semiconductor display track:The first is to judge the industrial development patternIn 2008, the market demand for color TVs has changed dramatically, LCD has gradually become the mainstream of the industry, and the global financial crisis has slowed down the investment of South Korean companies, the leading companies in the display industry, while China's economic volume and market capacity continue to riseThe second is to confirm the downstream market demandIn 2008, the demand for LCD panels in the Chinese mainland market accounted for about 1 6 of the global output, but at that time, Chinese companies did not master the core display technology, heavily relied on imported screens, and the competition of downstream terminal products was fierce, LCD panels accounted for about 6-7% of the overall cost, and the profits of enterprises under the war were meager;The third is to evaluate the company's own capabilitiesTCL is already a leading enterprise in China's color TV, and has the ability to "reach" into the panel industry. After several arguments, we decided to enter the field of LCD panels.
After 14 years of operation, judging from the market share data, in the first three quarters of 2023, TCL Huaxing has achieved a good business result of ranking second in the world in TV panel shipments and ranking first in the world in the market share of gaming displays. (Data**: OMDIA) Represented by TCL Huaxing, TCL has initially completed the transformation from traditional manufacturing to technology manufacturing.
In 2020, before entering the new energy photovoltaic track, we still consider the industrial structure, market demand and enterprise capabilities. From the perspective of industry, China's photovoltaic industry has occupied an absolute leading position in the world. In 2021, China's global share of polysilicon, wafers, cells and modules reached respectively. 1% and 747%, and also has strong competitiveness in product performance. From the perspective of demand, resource consumption and ecological challenges have become important issues in the world, including China and other countries have drawn up a "carbon peak" and "carbon neutrality" timetable, and photovoltaic and wind power are important ways to reduce emissions in the power sector, new energy photovoltaic and other clean energy industries are expected to enter a period of rapid growth. From the perspective of its own capabilities, semiconductor display and new energy photovoltaic have similar industry and management logic, manufacturing technology and process are strongly related, and the ability requirements are similar. Through strategic synergy or resource endowment synergy, TCL has the ability to empower new areas and accelerate the development of TCL Zhonghuan.
How to overcome technical bottlenecks?Two key transformations have brought TCL important lessons learned to overcome technical bottlenecks:Balance the rhythm of inputs and outputs;Improve the construction of industrial clusters;Maintain strategic focus and support technological innovation with management innovation.
Take into account both input and output, and maintain a steady and pragmatic pace of development. In the high-tech and asset-heavy sectors, it is important to focus on corporate sustainability and profitability. A steady pace not only reduces competitive pressures, but also allows for better response to changes and uncertainties in the industry. In terms of cost control, efficiency improvement should be achieved through refined management. For example, optimizing the ** chain, production processes and resource efficiency. In terms of technology investment, it is possible to focus on proven technologies and production methods in the early stage, rather than necessarily pursuing innovation, in order to quickly launch products and reduce R&D costs. In terms of market selection, select segments with potential profit opportunities, where demand is high and competitive costs are relatively small, and then gradually expand market share and build sustainable cash flow.
As a catch-up in the semiconductor display industry, it is not realistic to achieve technological leadership at the beginning, and it should first achieve efficiency and cost leadership, and provide a foundation for continued investment and technological innovation in the next stage. The key factor supporting the evolution and upgrading of products is the core technology, and TCL Huaxing's strategy in the breakthrough of core technology is to first make it easy and then difficult, spiraling: in terms of product strategy, start with products with simple technical specifications and low quality, and gradually differentiate and high-end; In terms of product structure, we will first achieve a breakthrough in single products, and then enrich the product portfolio according to market demand; Next, we will continue to invest in R&D and deployment, and continue to promote the innovation of product structure.
The competition in the industrial chain needs to improve the support for the construction of industrial clusters. The future competition is not the competition of enterprises, but the competition of ecology, and efforts to promote the construction of industrial clusters have become an important task to break through the technical bottleneck. The semiconductor display industry involves more than 100 kinds of materials, with a high degree of integration, and the division of labor and coordination between the upstream and downstream of the industrial chain is very prominent. As a result, TCL Huaxing has "walked on two legs" in the construction of industrial clusters, one is to unite upstream and downstream collaborative innovation; The second is to form a strategic alliance with the world's first-class enterprises. The industrialization of TCL Zhonghuan's world-first G12 large-size silicon wafer is also inseparable from the support of the upstream and downstream of the industrial chain. The 600W+ PV Open Innovation Ecological Alliance built around G12 has opened up R&D, manufacturing and application links, covering nearly 100 advanced enterprises in the upstream and downstream of the industrial chain. It should be said that the transformation and upgrading of both TCL Huaxing and TCL Zhonghuan have promoted TCL to enter the development stage of a higher level of industrial ecological construction.
Maintain strategic focus, adhere to long-termism and support technological innovation with management innovation. After making the strategic decision to enter the semiconductor display industry, we continue to focus on the core goals with the pioneering spirit of "blue threads on the road and enlightening mountains and forests", and take the lead in making breakthroughs in the talent management mechanism. In the early stage of TCL Huaxing's construction, we hired panel industry experts from Taiwan, South Korea and Japan to provide 50% higher than their original salary, and further improved the sharing mechanism to encourage the bigger cake while forming an internal "horse racing" mechanism. At the same time, we recruited a large number of doctoral and master's students in related majors through campus recruitment to cultivate our own talent system, and the proportion of 985 students in TCL Huaxing was quite high at that time. In terms of management innovation, the "gear theory" born from TCL Huaxing is also a useful exploration, initiated from the bottom up, to form self-organization, self-management and self-driven gears within the enterprise, so as to achieve the organic combination of stable process and flexible organization.
In the face of the future, TCL needs to support technological innovation with management innovation, realize management innovation from manufacturing to creation, from organization-driven to self-driven, systematization of personal experience and ability, and capitalization of talents and technologies.
The global contribution of China's manufacturing transformation and upgrading
Enterprise transformation and upgrading is the micro foundation of industrial transformation, and it is also the key path for enterprises to obtain sustainable competitive advantages and achieve long-term success. The bottom-up transformation of enterprises continues to inject new vitality into the industry, thereby promoting the continuous upgrading of China's manufacturing industry, and serving the economic and social development of China and the world in the process.
From the perspective of TCL's transformation and upgrading, enterprises participating in and leading the development of the industrial ecology can create significant value for the entire ecosystem. By getting rid of the red sea of competition, relying on core technological innovation to promote the improvement of the entire industrial chain, and forming a strong synergy with upstream and downstream partners to open up new space for industrial development. As a result, we will guide all parties in the industrial chain to jointly enter a new stage of healthy competition and cooperation, and deepen and implement the construction of industrial ecology.
China's manufacturing industry is actively deploying industrial chains and first-chain networks around the world, which can provide strong support for local economic development and people's livelihood and employment. Responding to the latest evolution of the regionalization of the global economy and meeting the urgent requirements of regional economic and people's livelihood development is the proper meaning of long-term sustainable operation of enterprises. By building an efficient and complete industrial chain and first-class chain system in many countries and regions, China's manufacturing industry can use its industrial strength and operation and management capabilities forged for many years to help improve the stability of different markets, which can promote the effective improvement of local manufacturing capabilities.
Only by embracing change and sticking to the same can we navigate the great changes unseen in a century.
This article is selected from the January 2024 issue of Harvard Business Review Chinese.
Li Dongsheng |Wen.
Li Dongsheng is the founder and chairman of TCL.
Li Quanwei |Edit
Wang Yibing **Article Editor.