Roku Mulling Manufacturing Its Own Televisions

Facing product shortages and escalating shipping costs, Roku reportedly is considering manufacturing its branded connected televisions in-house. Media reports cite an internal panel convened this month to investigate the possibility of circumventing Roku’s existing hardware manufacturers in China.

Roku is the No. 4 selling TV brand in the U.S., offering a line of Chinese-made high-definition models featuring the company’s internet-connected operating system. With Roku the largest maker of streaming media devices, its TVs amount to big-screen versions of its handheld retail products.

Speaking on the Feb. 17 fiscal call, founder/CEO Anthony Wood said he wouldn’t comment on media speculation but admitted that manufacturing challenges exist.

“What’s been happening in TVs is that there’s been a shortage of panels and it’s also been much more expensive to ship televisions,” Wood said. “It’s been more expensive to ship players as well, but TVs are bigger. And it impacts that more, so the result of all that is TV prices have gone up a lot for consumers, and that’s reduced demand for TVs.”

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Indeed, Roku saw streaming player sales revenue drop 9% in the fourth quarter (ended Dec. 31, 2021) to $161.7 million, from $178.7 million in the previous-year period. For the year, device revenue dipped 6% to $479.6 million, from $510.6 million in 2020.

The business unit also reported an operating loss exceeding $45 million, compared to operating profit of $4.6 million in the previous-year period. For the fiscal year, Roku reported an operating loss of $52.4 million versus operating profit of $43.6 million in 2020.

“Player margin was pressured … as we chose to prioritize account acquisitions and insulate consumers from higher costs,” Wood said. “We estimate that excluding the year-over-year impact of component and logistic cost increases on the player business, total gross margin would have been roughly 4 points higher for Q4.”

Regardless, Roku’s stock remains in a freefall, with shares down more than 25% in midday trading.

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