There’s nothing sexy about air conditioners. No one wakes up dreaming of compressors and dehumidifiers. Or washing machines. And if you’ve got any business sense, you see ultra-competitive markets like headphones and – dear god – smartphones and you turn around and run away.
So what the hell is in the water at TCL?
The company started as one of a thousand factories in China, making stuff for others – maybe not in mom’s garage, but perhaps down the street from it. Now it’s determined to turn those humble beginnings into an empire, to topple South Korean rivals like Samsung and LG just as those companies upended the world while Japan’s giants sat back and watched. But to do that, China can’t just make stuff – it can’t even make better stuff. It needs to make stuff people truly want. And to do that, TCL needs to build a brand people crave.
“The chairman started this company as a simple manufacturing company, and only in let’s say the last ten years did the idea of building the brand became a prominent issue,” Wiebo Vaartjes, CEO of TCL Entertainment Solutions, told Digital Trends. “So we are not building a business, we are not building some products. We are building a brand.”
In an exclusive interview after the company’s IFA 2019 press conference, Vaartjes and fellow Dutchman Jeroen Steenblik, Business Leader for the new Smart Audio division, explained where the company is headed, what consumers really want — and why smart appliances are sometimes the dumbest things in the world.
It Started With the TVs
If you know the TCL brand at all, you probably know it for televisions. But let’s be honest, the odds are good you don’t. People think of three brands when they shop for TVs, and TCL ain’t one of ’em. The company has carved a niche for itself nonetheless; it announced in June that global TV sales were up 24 percent, and overall sales volume of smart TVs (including 4K models) increased nearly 16 million units, said Mark Vena, a senior analyst with market research firm Moor Insights & Strategy.
“They’ve really came out of nowhere and are taking share from more well-established (higher end) brands like Sony and Samsung,” Vena told us. TCL is one of only three TV makers that are vertically integrated, meaning the company builds its own panels and electronics and then sells them under its own brand name (you can probably guess who the other two are). And the company is enormous in China, simply gargantuan. That company you don’t know? It’s the world’s second largest TV manufacturer; TCL sold more than 28 million sets worldwide last year, and looks poised to grow this year, thanks to a newly unveiled lineup featuring cutting edge quantum-dot technology and an innovative local-dimming system that displays blacks darker than midnight.
“They’ve really came out of nowhere and are taking share from more well-established (higher end) brands like Sony and Samsung,”
TCL already makes products in dozens or even hundreds of categories, almost none of which sell outside of China. But a key thing missing from the portfolio was the audio space, an enormous category in the U.S. dominated by rivals. Vaartjes fixed that problem.
“TCL Entertainment Solutions didn’t have headphones, they didn’t have audio stuff, nothing. And they didn’t really have smart home stuff. That’s where we come in. Ta-da!” he says with a chuckle.
Expanding into Audio
At IFA, TCL unleashed the first steps toward its goal of world domination: A smart new soundbar that’s clearly a shot over the bow of competitors. Featuring Dolby Atmos technology, a unique echo-chamber design called Ray-Danz, and a style unlike anything else on the market, it’s clearly not just another soundbar.
“It’s amazing. I call it a double-whammy product. You have a very wide soundstage and a very wide sweet spot. So it creates the right sound everywhere,” Vaartjes said.
And TCL brought out a full portfolio of headphones as well, including wireless earbuds and a noise-canceling model. To build the headphones, the company sought to solve a particular problem: Fit. How do you make a product to fit the average ear when there’s no such thing as average?
“We have 400 people’s ears molded,” Steenblik said. “Volunteers, obviously. We made molds of their ears, and we have this kind of big jar of these molded ears that we use for fittings that looks really funny. But when you think about it, who does that?”
You see, the goal for a company thinking long term can’t be to simply make a thing, hope to sell it, and move on to the next thing. Apple succeeds because its products play into each other. Use iTunes long enough for your music and iMessage long enough to communicate and you become committed to buying the next iPhone — whether or not it does anything new for you. Buy enough Samsung TVs and Galaxy phones and you’ll gravitate toward the brand for your next washing machine, you’ll see the utility in the SmartThings system that’s designed to tie it all together. You’ll maybe even — *gasp* — start using the Bixby A.I. that’s meant to help you get the most out of all of your Samsung stuff. Tying everything together and building an ecosystem is how the biggest tech brands have built and maintained monopolies.
TCL has the same vision, but it’s not in a hurry to get there.
“We don’t strive to necessarily be the first. Being the first often is this kind of race to claim a stake in something. But often it’s a product without context,” Steenblik told me. “We’re spending considerable time right now to focus on the right consumer experiences. I always use the example of, yes I can have a lightbulb that’s smart and I can turn it on with an app. But does that make my life any better? Is that better than walking to the wall switch? No, not really. And frankly it’s actually worse in a lot of cases.”
A cautionary tale
TCL isn’t the first Chinese brand that sees Boston and New York and San Francisco as an opportunity. Consider LeEco, which burned through billions of bucks blindly throwing everything at the market. In early 2016, the company revealed its plans to Digital Trends: To transform itself from a streaming media giant called Letv, sometimes referred to as “the Netflix of China,” into the planet-devouring company LeEco. Less than a year later, the company had bought TV maker Vizio, unveiled a streaming service, partnered up to build an electric car, and more. Cracks soon showed in the façade.
“No company has had such an experience, a simultaneous time in ice and fire,” founder Yueting Jia wrote in a letter to employees outlining efforts to maintain growth. “We blindly sped ahead, and our cash demand ballooned. We got overextended in our global strategy. At the same time, our capital and resources were in fact limited.”
“No company has had such an experience, a simultaneous time in ice and fire.”
Many assumed this would put LeEco’s expansion plans on hold. The company tried to shrug those concerns off. “We literally went from having a 2,000 workforce to growing to 10,000 people,” Kenny Mathers, a GM at LeEco, told Digital Trends at CES 2017. “And so as we got to that point, what [YueTing] was saying is we’re no longer a small startup now — we’re a big company with big resources and we need to be more efficient about how we manage that.”
The company sold its U.S. headquarters a year after buying it, ambitions thwarted. Too much too soon isn’t helpful, and often being first doesn’t mean being best.
Words meeting deeds
“You will not see us getting into the market with hundreds of new products, and quickly curating volume. We want to do things that make sense,” Vaartjes said. You will see growth and an emphasis on branding, however. Beyond audio gear, the company’s smartphone arm is the real-world phase one of its branding efforts.
You might not realize it, but TCL has a long history in the smartphone space. It owns a license to make BlackBerry-branded smartphones, and it partnered with Alcatel – and then bought the company out. TCL is the third largest smartphone maker in North America, but it didn’t have a brand presence … until now. At IFA, the company unveiled the TCL Plex, a mid-range Android phone destined for a select few European countries, where it will be sold independently and through carrier partners. It’s a pretty little thing, with a hole-punch selfie camera in the 6.53-inch screen, and an eye-catching mother-of-pearl finish on one model.
The phone won’t hit the U.S., but maybe the following product will, improving where possible, growing slowly and steadily.
“I’m really thinking of building a house, or building Berlin or Rome. You do it house by house. Sometimes you have to really fight for success, and sometimes it comes on its own,” Vaartjes said.
“It’s going to be an exciting ride!”
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