LeEco buys Vizio in effort to become an American household name

On Tuesday, Chinese tech giant LeEco agreed to buy California-based television maker Vizio for $2 billion.

Although LeEco is not a household name in the United States, it soon could be. The purchase of California-based maker of TVs Vizio is the first step to carving out space in the American market.

Though LeEco is often referred to as the “Netflix of China,” the Chinese company is also making moves to compete with Apple, Sony, Samsung, and Tesla in their respective industries. LeEco sold 3.43 percent of the world’s TVs in 2015, but the company also partnered with Aston Martin to produce a concept electric luxury vehicle, and it has a film division, LeVision Pictures, that financed “The Expendables 2” and is set to produce “The Great Wall” starring Matt Damon with Universal Pictures.

Along with the sale of smartphones, TV sales remains one of LeEco’s core businesses. In 2015, the company made $86 million in profit on $2 billion in TV sales. However, very few of these sales were in the United States, which is where Vizio can play a part. Vizio sold 7.8 million television sets last year. In the first nine months of 2015, Vizio made almost $2 billion in revenue and $45 million in profit.

Vizio designs and markets TV sets but outsources the production to China and Mexico, so the company is often able to beat the prices of Samsung and LG. In buying Vizio, LeEco will acquire a 20 percent share of the TV sales market in the United States.

At the media event announcing the deal between Vizio and LeEco, Winston Cheng, SVP of LeEco, stated, “Vizio is a critical part of LeEco’s entry into the U.S. market.”

Vizio will continue to employ its 400 employees, and the chief executive officer, William Wang, will run Vizio’s data business, Inscape. Mr. Wang, reported in September to own 54 percent of Vizio could reach billionaire status with the LeEco deal.

The United States isn’t the only country into which LeEco is expanding as the Chinese economy cools. The company recently announced it plans on being one of the top three smartphone sellers in India by the end of this year, joining the ranks of Samsung, Apple, and LG.

Paul Gagnon, director of TV set research at IHS Markit, told the LA Times, “Their goal is global. It’s difficult for companies to quickly grow in overseas markets without a substantial brand investment. Acquiring Vizio … it’s a good way to grow quickly.”

American markets, however, present a particular problem for Chinese tech companies. LeEco is a major online retailer, but American consumers prefer to buy electronic products in-store. The company hopes to take advantage of Vizio’s relationship with American retail giants Walmart and Costco in order to boost US sales.

LeEco has also invested in headquarters on US soil, buying 50 acres of land in Santa Clarita, Calif. from Yahoo earlier this month.

The tech giant hopes to introduce its smartphone and TV products with embedded LeEco-produced content to the United States -- an effort to make LeEco a household name beyond its native China.