TV’s next generation may come from China

September 17, 2012, 3:23 PM UTC

FORTUNE — At last month’s IFA 2012 electronics show in Berlin, one of the biggest head-turning products was from China-based TCL Multimedia. The company introduced the Ice Screen, a 26-inch Android-based smart display that reportedly offers the functionality of a tablet while aiming to capture the changing TV viewing habits of the youth market. It will debut in China as part of a partnership with Chinese Internet provider Tencent as the world’s first large screen mobile intelligent cloud product.

Just don’t call it a television.

“It is a 26-inch large display,” says Hao Yi, chief sales officer. “It is not just for TV, as the younger generation doesn’t watch TV like the older generation.”

While the vast majority of its business still comes from China, TCL has also looked to expand into the international TV market. The company just released its monthly sales volume for August of LCD TVs, reporting a 38.7% total year-on-year increase, with a marked increase of LED backlight LCD sets specifically. In its overseas market TCL reported an increase of 36.5% year-on-year, with notable expansion in emerging markets.

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“The Chinese market is our backbone and that remains the main climber for the volume of our products,” adds Yi, who noted that 50% of sales come from its home markets, while internationally the “main driver is Latin America.”

Until a few years ago TCL’s sets were sold in the United States under the RCA brand, but Yi says that the company changed its strategy in 2010 to focus on promoting the TCL brand instead. It has a licensing deal with Thomson in Europe. “We are investing in a new brand image, so that is why we solely run with the TCL brand in the United States and North America, while we will continue to have dual brands in Europe with both TCL and the Thomson brand,” he says.

The two-prong strategy in Europe essentially comes to down to marketing TCL products to the younger audience, while focusing on Thomson for what Yi calls the “established family brand.”

But even as TCL looks to North America, Europe and the emerging markets in Latin America, it continues to rededicate its efforts in mainland China, and for good reason.

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“The Chinese TV market is really the growth market for Chinese TV makers,” says Ed Border, TV technology analyst at IHS iSuppli. “At the moment, even as TCL expands to overseas markets, the growth forecast for Chinese TV makers is going to be domestic.”

China is also now the largest TV market, with expected growth over the next few years from 47 million to 55 million sets sold annually, a number that now dwarfs the 40 million in sales generated in the United States.

TCL could also see expansion just as its rivals throughout Asia are seeing a level of retraction. “Part of the opportunity has come from the fact that the Japanese TV makers have scaled back,” emphasizes Border. “Japanese brands are lowering volumes as Chinese brands are expanding.”

The company is also looking at new products such as the Ice Screen to attract the youth market. While to date only a Chinese version has been announced, Yi said that the product does have international potential. The key is finding a content provider. “Tencent Holding is like MSN or Facebook in China, with 1 billion Internet users,” Yi says. “But the key component in this is that the content is from the Internet. So to bring it to other markets simply requires a strong content partner.”

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The device certainly could appeal to the changing tastes in viewing TV, as it also has options for music downloads and Internet applications. But it still requires a connection to a cloud service, or else it is just a screen without a tuner. “It would be difficult to launch this one product for the world, because it is Android-based we don’t want to bring it empty like you can with a smartphone,” noted Yi.

Products such as the Ice Screen further suggest that the Chinese TV makers have overcome a prior issue of reacting to changing trends and trying to adapt to evolving markets. This, coupled with the continued low barrier of entry for TV makers, has presented an opportunity that hasn’t existed in the past, and which could help TCL – which now ranks just outside the top five makers of sets according to NPD Groups’ Display Search – successfully bridge its business internationally.

“The Chinese set makers are doing their job catching up in technical development that typically took the Chinese brands a years to roll out,” says Paul Gagnon, director of North America TV Research at DisplaySearch. “They still lag in promoting marketing. If they can figure that out, they would have a real chance to make it big overseas.”