Omdia responds to market rumors suggesting higher tariffs will be imposed on TVs imported to the US from China

Early in August 2023, rumors were circulating across the TV market about a possible increase in tariffs on TVs shipped to the US. TV display chain participants have been paying close attention following the most recent increase in tariffs applied to imported Chinese goods to the US, which occurred during the US-China trade war in 2018 and has severely affected TV makers and retailers. This resulted in lengthy back-and-forth negotiations between the Chinese and US governments to settle trading deals. In the end, the higher tariffs resulted in higher supply chain costs and average selling prices (ASPs) for many commodities including TVs, leading to smaller profit margins for TV makers and retailers. The higher tariffs also drove TV makers to reshuffle their supply chain bases, either by shifting their manufacturing process outside of China or investing in building new TV manufacturing capacity outside of China to circumvent the higher tariffs on TVs shipped to the US market.

The timeline below shows how negotiations were conducted before the 7.5% tariff increase on TVs was added to the existing general duty of 3.9%. This increase was finalized and came into effect in the latter part of 2019. 

Timeline

• On April 4, 2018, the Office of the United States Trade Representative (USTR) published a list of 1,300 products that could be subject to an additional 25% tariff when imported from China. The list of products was apparently chosen based on categories in which the US believes harm has been caused by violation of intellectual property theft, unfair competitive practices, and policies that favor Chinese companies.
• Surprisingly, the trade war between the US and China suddenly intensified in 2019. Immediately after the USTR officially announced a tariff increase on $200bn worth of imported Chinese goods on May 10, 2019, China retaliated by imposing tariffs on $60bn worth of US goods.
• The trade war escalated to include the remaining imported Chinese goods, implying essentially all Chinese imports could be subject to much higher tariffs. On May 17, 2019, the Federal Register released a notice from the USTR proposing a modification to the action pursuant to Section 301: “China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.” The proposed modification was to take further action in the form of an additional ad valorem duty of up to 25% on China’s products with an annual trade value of approximately $300bn.
• On August 1, 2019, former US President Donald Trump announced that the USTR would impose an additional 10% tariff on the remaining $300bn worth of trade products imported from China. This would effectively include core US consumer electronics goods that had previously avoided the additional tariffs imposed by the trade war.
• On August 23, 2019, former US President Donald Trump announced on Twitter (now known as X) that the additional 10% tariff would be increased to 15% in retaliation for China’s impost on US goods.
• On December 13, 2019, the US and China reached the first phase of a trade agreement. The US would maintain a 25% tariff on approximately $250bn of Chinese imports and a 7.5% tariff on approximately $120bn of Chinese imports.

Possible outcomes

As far as Omdia has heard in recent weeks, the rumors of another possible tariff increase on TVs shipped to the US can be summarized into two types: 

• The first rumor indicates that the current tariff on China-made TVs that are imported to the US (11.4%) will increase to 25%. The current tariff includes the general duty (3.9%) and the additional Section 301 tariffs on China (7.5%) that were implemented as part of the deals made in the fourth quarter of 2019 during the US-China trade war.
• The second rumor indicates that the current tariffs on TVs (11.4%) will be maintained. However, a new tariff of 15% would be imposed on TVs with China-made displays regardless of whether the TVs were produced in or outside of China while the tariff on China-made displays will be as high as 15%.

Omdia view

The first rumor is bound to hurt TV makers that only count on TV production in China. On the other hand, players with large volumes like Samsung, LG Electronics, Hisense, TCL, TPV, and Foxconn—which have competitive production capacity in Mexico and regions outside China like Vietnam, Indonesia, and Thailand—will benefit from it.

The second rumor will be a major issue for the entire TV display and OEM supply chain as currently, Chinese panel makers dominate the TV display supply base with a share of 75–85%, as shown in Figure 2. None of the TV makers across the world can stop adopting LCD TV panels from Chinese panel makers. Although Taiwanese and Japanese TV makers would benefit, their limited supply provides a challenge.

Omdia’s understanding is that the rumors arose seemingly because the exclusions in the Section 301 tariffs on China are set to expire by the end of September 2023, however TVs are not included in the exclusions.  

In the last week of July 2023, members of Americans for Free Trade wrote a letter to the USTR to request an extension for the limited exclusions in the Section 301 tariffs on China, including COVID–19 related products. These exclusions are currently set to expire in less than two months on September 30.  Formed in 2018, Americans for Free Trade is a coalition that represents many sectors of the US economy, including the following:

• Manufacturers
• Farmers and agribusinesses
• Retailers
• Technology companies
• Powersports
• Service suppliers
• Natural oil & gas companies
• Renewable energy companies
• Importers
• Exporters
• Other supply chain stakeholders

In the last five years, it is said that US importers, including members of the coalition, have paid more than $183bn in Section 301 tariffs on products imported from China. To date, the product exclusions granted have provided limited relief for some companies over this period. However, the USTR has yet to announce whether the current exclusions—which expire in less than 50 days—will be extended.

In the letter, members of Americans for Free Trade pointed out that the “failure to provide early and timely information undermines the Administration’s state goals of ensuring supply chain resiliency.” Any delay in announcements regarding the exclusions extension or expiration compels US companies to incorporate a 25% price increase onto product lines that may soon be left without a Section 301 tariff exclusion. Upward pricing pressure of this kind will continue to exacerbate inflationary pressures on US companies and the US economy. 

It is assumed that the USTR may soon respond to the requests from the Americans for Free Trade. It may also need to review or reset some products, including TVs, that had higher tariffs imposed during the previous trade war deals. 

It remains to be seen whether another run of tariff increases on TVs shipped to the US will occur. From the supply chain perspective, it is critical to note China’s role and competitiveness in TV manufacturing and the dominance Chinese panel makers wield over LCD TV panels.  

The next section is Omdia’s analysis of China’s role in TV manufacturing and how the LCD TV display industry is becoming an oligopoly dominated by a few strong Chinese panel makers.

Geopolitical tensions and protectionism have reshaped the supply chain, but China’s role is irreplaceable

China’s TV manufacturing capacity, which is heavily concentrated in Guangdong and coastal provinces, had greatly increased since 2010. Its production capacity share peaked in 2019 but started to trend downwards due to intensified tensions in the US-China trade war. 

The available TV production capacity in China peaked in 2020 following a surge in global TV demand during the pandemic. However, the share of China-made TVs continued to decline because several TV makers had shifted their production capacity outside of China to avoid higher tariffs and complications arising from pandemic lockdowns in the country.        

In 2022, the available Chinese TV capacity and share of global TV capacity declined owing to slow demand. In addition, TV makers shifted more production capacity to manufacturing sites overseas as geopolitical concerns arose.   

Regardless of the declining TV capacity share, China remains the largest country for TV manufacturing, with more than 50% of the global market share. Most importantly, all of the supply chain clusters for TV display and TV set–related materials and components have been embedded near the TV set manufacturing capacity in China. 

1. Figure 1: TV production capacity in China and China’s share of the global TV capacity

Notes: The TV capacity is based on the available production capacity.

Source: Omdia

The LCD TV display industry has become an oligopoly dominated by a few strong Chinese panel makers 

There have been drastic changes in the LCD TV panel supply base since the start of 2023. Several LCD TV panel makers, including Samsung Display, LG Display, and CEC Panda, either quit the business or are determined to accelerate their LCD TV exit strategy.

This in turn had shifted the Chinese panel makers focus towards LCD TV panels instead. The oligopoly of Chinese panel makers for certain commodity sizes, such as the 32- and 55-inch sizes and the large and ultra-large sizes like the 65-, 75-, and 85-inch sizes, is very pronounced and can account for as high as 75–85% share of the total supply base worldwide. This implies that none of the TV makers across the world can stop adopting LCD TV panels made from Chinese panel makers.

2. Figure 2: The concentration of Chinese panel makers for LCD TV panels by size and percentage

Source: Omdia