Technological upgrades bring new value to users.
Editor | Hu Jingyi
On May 12, 36Kr’s first industry summit of 2021, the “Leaders Summit,” will be held as scheduled. The “Leaders Summit” originated from 36Kr’s WISE series IP “New Direction,” which has always carried significant meaning in exploring trends, guiding directions, and observing trends. As we enter the post-pandemic era in 2021, the impact of the pandemic continues, and economic recovery is an inevitable trend. This May, we will once again start from the media’s perspective, continuously focusing on new developments in the industry, proposing more operationally meaningful suggestions, and standing together with more enterprises to discover new opportunities and enhance new value.
During the peak dialogue session of the Leaders Summit, Mr. Wang Cheng, CEO of TCL Industry and TCL Electronics, and Mr. Feng Dagang, CEO of 36Kr, engaged in an in-depth dialogue on the theme of “How to Define True Smart Home?” discussing new trends in the development of the “smart home” vertical field. Mr. Wang believes that the maturity of technology in the smart home sector and changes in consumer concepts have led to the influx of major home appliance manufacturers. Compared to the current competition in the experience and performance of hardware devices, the next important competitive field in smart homes will emerge in the ability to create scenarios and capabilities in the cloud. In the foreseeable future, the software cloud capabilities of smart homes may exist independently of hardware capabilities to a certain extent, creating greater value for users through data interconnectivity.
Mr. Wang Cheng, CEO of TCL Industry and TCL Electronics, and Mr. Feng Dagang, CEO of 36Kr
The following is a transcript of the peak dialogue, organized by 36Kr editors:
Host: Thank you, Mr. Li, for your wonderful sharing. The healthy operation of the market relies not only on capital support but also on the efforts of industry practitioners. Now, let us welcome Mr. Wang Cheng, CEO of TCL Industry and TCL Electronics, and Mr. Feng Dagang, CEO of 36Kr, to engage in an in-depth dialogue on the new trends in the development of the “smart home” vertical field.
Feng Dagang: Thank you, Mr. Wang from TCL. First, I would like to ask the first question. Recently, we have seen many changes in investments in the smart home industry. It seems that many large companies have started to enter this field within a year. In the past, we have seen that the concept of smart homes has existed for a long time, but it was mostly small startups doing minor things, such as switches, speakers, and robotic vacuums. However, today we see significant giants entering. Why at this time? How do you view this? Why is TCL entering the smart home field at this time?
Wang Cheng: I think it can be viewed from two aspects. One is that technology has truly reached a mature and stable application stage. Indeed, as you mentioned, the concept of smart homes has existed for over a decade. For TCL, our internal research institute has conducted extensive research on this topic for many years. Various exchanges have taken place within the industry, but due to various technical issues, it has been impossible to provide users with mature, stable, and valuable applications. In recent years, many new technologies, including connection technologies, have become increasingly stable, and issues related to bandwidth have improved. Products like smartphones, smart TVs, and smart speakers have educated customers. These two aspects interact with each other. As you mentioned, traditional products are undergoing a new intelligent upgrade, even a disruptive upgrade. I believe this opportunity has matured.
On the other hand, the mindset of young consumers is also changing, especially when they purchase what they consider traditional home appliances and functional products. In the past, when we went to the mall to buy a TV, air conditioner, or refrigerator, we might buy one item. Now, more often, they buy a whole set at once. Secondly, the consideration used to be about the functionality of the product. For example, when buying a refrigerator, it was about whether it could keep food fresh, its size, and whether it met the needs of my home. When buying an air conditioner, it was about whether it could cool and whether it was noisy. People still considered functionality, but now the differences in functionality are not significant. Many quality standards have long surpassed those of well-known foreign brands. On the other hand, people have higher expectations for smart products. Through education from smartphones, their understanding of traditional home appliances and the scene functions they should possess has changed. Therefore, the maturity of technology and changes in consumer demand have combined, leading to a trend where major home appliance manufacturers are entering the market and moving towards a new trend of upgrading to technology giants.
Feng Dagang: I think the next question might be difficult to answer. You might think both are important, but I still want to ask which of these two is more important? Is it the maturity of technology or the change in consumer mindset? Which is the primary factor?
Wang Cheng: I believe that for this new consumption to take off, both aspects are very important. However, from my personal perspective, there needs to be a significant upgrade in technology behind it to bring new value to users.
Feng Dagang: When you mention technology, are you referring to smart home technology or smart appliances? Are you more referring to IT technology, connection technology, or some systemic underlying technology? What concept do you have in mind?
Wang Cheng: You are correct about connection technology, including cloud technology, AI technology, and the extensive application of new sensors. Their costs are decreasing, and they can conveniently collect various data, especially data from devices during use. On the other hand, their costs are increasingly accepted by manufacturers and consumers. Their effectiveness, stability, and transmission speed have improved, which greatly enhances the feasibility of these technologies in business applications.
I also personally believe that although technology is continuously developing and some leaders have taken the lead in using these technologies, I believe that large-scale deployment and application still require certain stability in technology.
Feng Dagang: Understood.
Wang Cheng: This aspect will also become a key point of competition.
Feng Dagang: Another question is, why at this time? Previously, we discussed that in the industrial internet, we have a very clear standard, which refers to the ratio of each so-called intelligent unit, simply put, the ratio of robots replacing labor costs. For example, 1.3 or 1.4. However, in smart homes, what do you think is the core line? Is it because we have reached this line that it has exploded this year?
Wang Cheng: I believe that various conditions are gradually maturing. You mentioned whether the cost has increased; I think it is not simply a cost issue. Today, looking at the cost of a single machine, adding some connection modules does not significantly increase hardware costs. More importantly, I believe the costs and expenses are reflected in the cloud, in the App, and in the overall experience refinement. You need to establish such platform capabilities. For enterprises, it is a marginally beneficial platform investment. Without a foundation, it may be difficult to sustain investment. Therefore, at this time, because there is demand, technology has emerged, and companies with rich resources can leverage their marginal effects.
Feng Dagang: Understood. Now, let’s move on to the second major topic. Today, many new technologies such as 5G, IoT, and big data are emerging. How do you think we can project these into our smart home industry? What major opportunities do we have, and in other words, what should we do?
Wang Cheng: I believe these matters are still in the connection phase. Wi-Fi 6 and some NB technologies of 5G make connections faster and more stable. Secondly, the extensive application of sensors will allow for clearer data collection on device operation and the surrounding environment. If we merely say that these things can make individual products intelligent, it cannot be called a smart home. A smart home should be at a system level. It should have intelligent functions on the hardware side, whether it can connect to the internet, and whether it can connect to a mobile App. I believe these technologies are still very fundamental. More proactive intelligent services may occur in the cloud, through various intelligent technologies and data analysis, achieving intelligent scene perception to better understand users’ unmet needs. It may actively find your needs and provide you with services.
Through the interaction between devices, it will bring you greater convenience, leading to a more intelligent and scene-based demand. This still relies on data and cloud capabilities as a foundation. Therefore, as you mentioned, if there is a next more important competitive field, I believe it is still in the ability to create scenarios and in the cloud. The development of smart homes has reached a point where many are still competing in the experience and performance of hardware devices. I believe we have now reached a new stage where competition must occur not only at the terminal but also in the cloud.
Feng Dagang: Understood. So, my previous question was about the biggest opportunity in this track. Your answer indicates that the opportunity lies in data and the cloud. I want to ask, is this cloud competition merely a continuation of past hardware competition? Why do I say this? Because if I buy TCL appliances today, I will use TCL’s cloud. Is there a possibility that it transcends hardware competition, meaning I could buy appliances from other brands but still use TCL‘s data and cloud? Is that possible?
Wang Cheng: I think this is a two-fold question. First, I believe that for providers of these devices, such as providers of complete smart home solutions, if they simply think that they can handle the terminal side and then add some cloud elements, they can make it work. From my past experiences and lessons, this is very difficult because making terminal devices and cloud services involves two different philosophies, similar to the earlier discussions about whether it is “internet+” or “+internet.”
Secondly, regarding whether users who purchase TCL devices must use TCL’s cloud services or download TCL’s App, this involves two aspects. Currently, there are organizations like OLA in China that are exploring interconnectivity standards together. If it is merely about connecting and controlling devices, that is a relatively simple application, or what we call a thin App. I believe there may be a universal App that can connect different brands’ devices, as long as the interconnectivity standards gradually unify, this can be achieved. However, if you want to create richer scene-based applications and interactions between different devices, I believe different manufacturers will still bring differentiated offerings based on their products and understanding of users. These cannot be replaced by a single universal App or a single cloud service.
So, to answer your question, I believe different brands can establish their own cloud capabilities, but at a certain point in time, they can connect with each other. Through this method, value can be created for users, and brands can extend their ecological services, breaking the current fragmented situation.
Feng Dagang: Can we understand it this way? We can see that in the PC and mobile phone fields, hardware and software are largely separated. For example, in the PC field, there was initially only hardware competition, but it later evolved into software competition, and even the market scale of software has surpassed that of hardware. Will this situation happen in the future, where buying hardware does not mean using its cloud and software?
Wang Cheng: Yes, I believe that many such cases have already occurred in the past decade. A very typical example is in the smartphone sector, from the early emergence of smartphones like the iPhone to a large number of Android devices. The entire industry landscape has changed significantly. On one hand, the smartphone market is large enough, with a market size of over 800 billion RMB in China and even larger globally. In this context, there is a need for rich resource investment in software and cloud services.
On the other hand, the data density and commercial value of these products are significant enough that they can lead to high expectations from users regarding experience and intelligence, including stakeholders who have high demands for this matter. I believe that the enterprises that remain and thrive in the market today must possess strong capabilities in software and cloud services. This process has penetrated into smart TVs and smart speakers, and I believe we have reached a point where our smart home products are gradually evolving from functionality to intelligence. In this rapid development process, the software and cloud capabilities may to some extent exist and develop independently of the hardware capabilities. By learning from successful cases in industries like smartphones and PCs, we have already seen such successful examples.
Feng Dagang: Understood. So, this will be a brand new war, potentially a huge opportunity and competition.
Wang Cheng: Yes, I believe this is not only a significant opportunity for new entrants in the smart home or smart appliance sectors but also for manufacturers that already have certain advantages in the industry chain, brand recognition, and channel coverage. This presents a significant opportunity, but it is also a challenge. Are we willing to disrupt the routines and strategies that everyone has become accustomed to? How do we gain insights into users, define products, and deliver products? In fact, TCL is already doing this. Since 2019, we have established the Honghu Laboratory, where we have unified all hardware units. They should no longer work separately on artificial intelligence, connectivity, or cloud development, nor should they develop their own Apps. Instead, we have unified these efforts to create a platform similar to an AIoT capability platform and related cloud service construction department for TCL.
Similarly, if we want to develop towards solution-oriented products, then the entire product definition planning, including software development, must change in terms of organization, talent allocation, goal setting, and collaboration methods between hardware and software. We call it scene-defined software, where software defines hardware in return. Of course, the categories of hardware will be diverse, which is something we are relatively good at. We are creating a new integrated solution of hardware + software + services that truly brings users the products they feel they should have.
Feng Dagang: Good. I want to ask about openness. Earlier, we discussed that there will be a new war in the cloud. I believe that in this war, you will certainly attract some small and medium-sized startups as allies. I believe there is no problem with openness towards them. But what about giants of the same scale? How do you consider openness towards them?
Wang Cheng: On one hand, I believe that the interconnectivity of devices between brands is a trend that has been established. There is little value in getting entangled in this matter. For us, we have established our own standards and connected our internal systems. If someone is willing to use our modules, we have no problem with that; we are very open to it.
I believe that in the future, all manufacturers will connect with each other in the cloud, allowing each to provide differentiated value to their devices and users. Users will not only buy products from one brand; I believe this is very difficult. Even if they buy a set, they will not buy everything from one brand. This is not easy. I believe we need to give users the right to choose while leaving space for each brand to play. Competition exists, and we must ensure consumer interests. Our attitude is very open. We actively participate in organizations like CHIIP abroad and OLA domestically, where we also play our role. On the other hand, we hope that when connecting clouds, different brands can form a new balance of interests to provide users with a better experience.
Feng Dagang: For example, if we envision three to five years from now, when users buy an appliance, will they choose which cloud to use, or will they not have that choice?
Wang Cheng: I believe they will have the option to choose.
Feng Dagang: If this choice eventually becomes a reality, will it be the result of compromise and negotiation among several giants or the result of competition among them?
Wang Cheng: I believe it will be the result of competition among everyone. Of course, this product can choose our cloud or TCL’s App, but it may also choose other brands’ Apps. Why choose this one and not that one? It must be because my choice brings me a better experience, and the value of the scene will be greater.
Feng Dagang: Lastly, I want to ask about the recent “chip shortage” issue. We have seen that Apple has launched Mini LED, which has brought significant changes to the industry. However, I know that TCL has been working on this for three years. What strategic investments and layouts has TCL made in technology, and what actions will follow?
Wang Cheng: In fact, TCL has always regarded smart display technology and products as its core business over the past decade. This includes significant investments in LCD panels in Shenzhen, Wuhan, and Guangzhou, as well as LTPS small screen panels and MLED, including large screen IPs. The investment has been substantial. Recently, we also acquired the 8.5 generation line from Samsung in Suzhou, spending over 200 billion RMB on this business. Of course, we hope that the development of this industry will form our own competitiveness globally, allowing China to completely break free from being constrained by others in display devices.
Secondly, regarding the application of new technologies, such as the Mini LED backlight technology you mentioned, we started focusing on this technology in 2018. We have conducted extensive experiments and research internally. It should be noted that TCL was one of the first in the industry to mass-produce Mini LED backlight products. In mid-2019, we launched 8K Mini LED products, and in the first half of 2020, we officially introduced such products to the US market. By the end of 2020, we calculated internally and consulted third-party organizations to find out how many Mini LED backlight large screen TVs were sold worldwide. They told me that it seems only TCL has mass-produced them, and our market share should be over 90%, indicating that TCL is still leading the industry in this field. Of course, after using Mini LED backlighting, it can significantly improve and enhance the contrast, brightness, and viewing angles of the images, achieving levels comparable to WOLED display technology, and even surpassing it in certain metrics, while the cost is only about 1/3 or even 1/4 of WOLED screens.
Feng Dagang: Earlier, when we were chatting, you mentioned a display technology that can be printed with ink. Is this the most advanced technology we have today?
Wang Cheng: This is actually a technology that TCL has been researching for the past five years. The company has invested a significant amount of funds and manpower into it. Today’s OLED technology still relies on vacuum deposition technology, making it difficult to control the defect rate when producing large and medium-sized panels. This is also why its costs remain high and it cannot be produced in large sizes. We hope to use various materials in an inkjet format, printed on plastic or glass substrates to create larger sizes. This is a new technology, and TCL is also one of the leaders in this area globally.
In fact, it has already been achieved in our laboratories and production lines. About a year and a half ago, we showcased our 31.5-inch RGB inkjet printed products in three colors. I believe that in the near future, we will gradually extend this technology from small and medium sizes to larger sizes. The benefits of this technology are that it should be self-luminous, with vibrant colors, and it will be very thin and light. This will bring us significant advantages, allowing for very lightweight, foldable, and even rollable displays. These will gradually become a reality. TCL also showcased a rollable screen at the technology Open Day last year, which looks like a painting. When you pull it open, the display is already there. I believe that in the future, displays will be ubiquitous, no longer fixed in one place. Due to their thinness, they can be portable, just like the smartphones we carry today, providing a larger display area while being convenient to carry.
Feng Dagang: Is it like a piece of rice paper where we can have displays anywhere we stick it?
Wang Cheng: Yes, in fact, we have already made this a reality in our laboratories.
Feng Dagang: Good. I am very much looking forward to this black technology. Our time is up. Thank you very much, Mr. Wang Cheng, for sharing your insights and the latest information with us. Thank you.
