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Zebra Consumption Ren Jianxin

Even the leader in the projector industry can’t take it anymore.

Following a performance decline of more than 75% in 2023, Xgimi Technology's performance in the first half of 2024 continued to decline by 96%, with net profit attributable to the parent being only 3.6731 million yuan, and non-net profit directly falling by 126% to -15.2683 million yuan.

Projectors are indeed not selling well. In 2023, the shipment of projectors was 4.736 million units, more than 300,000 units less than the previous year, and the industry sales volume was 14.77 billion yuan, a quarter less.

The pressure on demand caused by the economic situation, the war of words caused by the dispute over the projector route, and the cyclical product destocking are not sufficient explanations.

The most fundamental reason is the extreme internal competition under homogeneous competition, which directly dragged the industry into the low-end channel. The average selling price of projectors in China will be around 3,932 yuan in 2022, and will drop to around 3,119 yuan in 2023.

In order to break through the bottleneck period, small projector giants led by Xgimi Technology are innovating internally and going overseas, trying to replicate the next golden age in overseas markets.

The whole industry is under pressure

In early June 2023, Wang Xiaoyi, Chief Product Officer of JMGO Projector, fired a shot in his WeChat Moments: "If the so-called 'industry leader', after earning the most profits in the industry, does not use the real money given by users to promote innovation and progress in the industry, but instead uses shoddy cheap technology and money-burning marketing that reverses right and wrong to suppress innovators and reverse the industry, then this industry is not far from death."

At that time, many companies participated in the debate, and media reports and live broadcasts continued, and the heat continued until after 618.

Although no one was directly named, everyone knows that the target of the attack is XGIMI Technology. The core point of this war of words is the technical dispute between XGIMI's mixed light and JMGO's three-color laser.

Who will be the winner in the midfield battle of China's projector industry? At that time, it was still difficult to judge. But looking back now, it is nothing more than a battle of trapped beasts in a multi-loss battle.

IDC data shows that the total shipments of China's projector market in 2023 were 4.736 million units, a year-on-year decrease of 6.2%, and sales of 14.77 billion yuan, a year-on-year decrease of 25.6%.

The industry leader Xgimi Technology was also not immune to the impact. Last year, it sold 963,600 projectors, a year-on-year decrease of more than 10%. The company's revenue was 3.557 billion yuan, a decrease of 15.77%; its net profit attributable to the parent company was 121 million yuan, a decrease of 75.97%.

The latest disclosed 2024 half-year performance forecast shows that the company's net profit was 3.6731 million yuan, a year-on-year decrease of 96.04%, and the non-net profit was -15.2683 million yuan, a year-on-year decrease of 126.09%.

The industry is reducing production and cutting prices, and the sales and performance of other projector brands are not expected to be optimistic. Unexpectedly, the youth crisis in the Chinese projector market came so suddenly.

In 1989, Epson developed the world's first projector, the VPJ-700. A few years later, projectors began to enter the Chinese market. For a long time, Epson was the leader in projectors in the global and even Chinese markets.

In 2011, Tianjin University of Science and Technology achieved a breakthrough in the technical research of micro-projectors, and China's projector industry began to take shape. In 2013, Zhong Bo, who graduated from the University of Electronic Science and Technology of China and worked in R&D for TV manufacturers such as Hisense for a long time, founded XGIMI Technology and launched the Android-based smart projector Z3 the following year.

Since then, China's projector industry has entered a period of rapid development. By 2018, home projectors accounted for more than 50% of the entire projector market; it was also in this year that XGIMI surpassed Epson to become the leader of China's projector market and has continued to this day.

In 2021, XGIMI Technology (688696.SH) was listed on the Science and Technology Innovation Board, becoming a landmark event in the projector industry. By last year, home projectors accounted for more than 85% of the projector market.

During this period, local manufacturers have reversed the situation of multinational companies. In 2018, the top five brands in the Chinese projector market were XGIMI, Epson, BenQ, Sony and NEC; in 2023, the top five brands in terms of shipments were XGIMI, JMGO, Epson, Fengmi and Dangbei.

Low-end projector

The rapid development of China's projector market is first of all due to the rising entertainment demand of young people in rental scenarios under the background of rapid economic growth.

Unlike the previous generation of consumers who were more accustomed to TVs, this generation of young people has higher mobility, stronger payment capabilities, is more accustomed to Internet channels, and is willing to accept new things and new brands. These characteristics correspond to projectors, which are new, lightweight, e-commerce-based, and can meet the needs of diversified entertainment forms.

But we have all seen the situation in recent years. The consumption power suppression in the rental scenario is even more serious, which is tantamount to cutting off the source of funds for the emerging projector market.

In addition, as the technological upgrades in the projector industry have slowed down in recent years, its appeal to users as a consumer electronics product is declining.

This is similar to the mobile phone industry in previous years. However, the current mobile phone industry has found two major hardware and software drivers: AI and folding screens. However, projectors are still waiting for their own technology tree to bear fruit.

It was during this period that the cost-effectiveness of televisions increased significantly. In particular, the affordable prices of ultra-large screen televisions made some young people who switched from renting to buying houses choose televisions.

The projector market has entered a plateau period in terms of technology and product upgrades, which has also lowered the entry barriers for new manufacturers to a certain extent.

The projector industry has always been divided into three main technology routes: LCD, DLP, and LCOS, a combination of the two. In 2020, the shortage of DLP chips from Texas Instruments in the United States caused a sharp drop in the market share of DLP technology in China's smart projectors. This also made Chinese manufacturers realize the risk of being stuck, so they flocked to the LCD track.

In fact, the difference in display effects between the affordable LCD technology and the high-end 3LCD and DLP technologies at the product level is not that big in terms of user eye perception - this was also one of the core points of the debate between JMGO and XGIMI at the time.

Therefore, in the projector industry, there has been a trend of low-end products in recent years. In the LCD route, mainstream manufacturers mostly used 3LCD technology in the early stage; but in the past two years, many 1LCD products have been able to reduce the price of projectors to 1,000 yuan or less, becoming the main growth point in the market.

Low-end projector brands such as Weying, Hongtianpao, Nobixing, Huiqu, Ruishida, and Huanletou attract price-sensitive consumers with absolutely low prices; mid-range brands such as Dangbei, Tmall Magic Screen, and Dayancheng shape their brand value through cost-effective configuration of software and hardware.

The average unit price of the Chinese projector market has dropped from about 3,932 yuan in 2022 to about 3,119 yuan. Therefore, last year the shipment volume of the entire projector market only fell by 6.2%, but sales fell by 25.6%.

XGIMI Technology also had to lower its profile and launch high-cost-effective products with a mid-to-high-end positioning. In the fourth quarter of 2023, the company's entry-level product "one-handed DLP pan-tilt projector" Play 3, priced at less than 2,000 yuan, ranked among the top 10 domestic projector sales in IDC's 2023 based on sales in a single quarter.

However, even so, XGIMI could not compete with the general trend of the industry. DLP gave way to LCD, and 3LCD could not beat 1LCD. The company's sales volume fell more than the industry average last year, and the gross profit margin of its projector business was only 27.47%, a year-on-year decrease of 6.90 percentage points. In the first half of this year, it fell directly into a dilemma of non-net-worthiness loss.

Aiming to go overseas

The low-end of the projector industry has led to endless internal competition. Competition in price, performance, technology, scenarios, and services.

In today's projector market, if it does not have functions such as voice recognition, auto focus, automatic keystone correction, automatic screen entry, and screen obstacle avoidance, even if it is a thousand-yuan machine, I am afraid that not many people will buy it.

In order to break out of homogeneous competition and continue to launch a dimensionality reduction attack on televisions, the projector industry is currently using ultra-high definition as a technical focus to try to enhance its business value.

In addition to deepening its penetration in the living room, projection technology has been gradually expanding to cars in recent years. From the initial HUD to today's AR HUD, smart headlights, and smart cockpits, car projection may help XGIMI and other companies alleviate their growth anxiety.

More and more manufacturers are realizing that the repurchase rate problem of projector consumption has never been solved. When the incremental growth reaches a bottleneck period, they can only further tap the value of existing users.

In the past 10 years, XGIMI Technology has accumulated millions of GMUI users, who stay in the projection system for several hours every day. These "traffic" was monetized through advertising, content and other means, contributing 148 million yuan in revenue to the company last year, a year-on-year increase of 53.10%, and a gross profit margin of 93.13%, becoming one of the few major growth points of XGIMI Technology last year.

However, this business innovation is not enough to offset the long-term and short-term problems in the projector market. In the long run, the core technology of projectors is still in the hands of foreign manufacturers; in the short term, the demand for projectors is shrinking and competition is intensifying.

Behind XGIMI Technology, there are JMGO, Fengmi, Dangbei, etc., all of which are not to be underestimated. JMGO Projector is second only to XGIMI in scale, and its main laser light source concept is deeply rooted in people's hearts; Fengmi is backed by Xiaomi, and has strong technical, supply chain and channel advantages; Dangbei Projector has become popular with content marketing and advertising, and you have probably heard Dangbei's brainwashing advertisements in elevator advertisements.

In order to avoid internal competition, the projector industry has also turned its attention to overseas, just like the e-commerce, short video, gaming and other industries in the past.

Take XGIMI Technology as an example. As the leader of local projectors, the company planned to go overseas as early as July 2016 and launched the smart projection product Aladdin for the Japanese market. In order to expand its overseas business, in 2023, the company acquired assets related to the Aladdin business.

In 2023, the company's overseas business revenue was 913 million yuan, a year-on-year increase of 15.60%, and the gross profit margin was 44.63%, far exceeding the growth rate (-23.07%) and gross profit margin (26.66%) of the domestic business. Last year, XGIMI's overseas business accounted for 25.66%, an increase of nearly 7 percentage points from the previous year.

Compared with foreign manufacturers, the relative advantages of China's projector industry are mainly reflected in product design and performance, system integration and supply chain integration capabilities.

The past 10 years in the Chinese projector market have been a decade in which local manufacturers have replaced foreign brands. Next, if these advantages can be replicated in overseas markets, perhaps a golden decade for projectors to go overseas can be created.

Of course, in the more distant future, the comprehensive development of hardware products + content ecology, with technological breakthroughs as the core, will be the long-term strategy for the industry.