Foreign Air Conditioner Brands Out

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  LG, Sharp, Hitachi, Samsung, Sanyo, Whirlpool, Electrolux and Mitsubishi… these foreign air conditioner brands from South Korea, Japan, America and Europe have walked on different development paths this year after years’distribution and competition in China: some of them have silently left China; some are forced to move into the field of high-end and commercial air-conditioners; some have to rent their brands to others and some bet on the single distribution channel.
  Compared with the reshuffling of the industry several years ago featured with big domestic companies’ acquiring and merging small ones, the air conditioner industry met a general fall in 2012 and then domestic companies successfully beat the foreign companies and drove some of them out.
   False Proposition of Moving to High-end Industry
  In recent years, the high-end market is considered the “last paradise” for foreign air conditioner brands. However, it is just the “dissatisfactory sales in high-end market” that became the last straw for foreign air conditioner makers in China.
  A few years ago, LG air conditioner chose the strategy of “exchanging size for profits”. This year, Samsung declared the transfer of its air condi- tioner business into the high-end and commercial field and Hitachi re-established the “made in Japan” as their final trump. And Whirlpool and Electrolux respectively accredited Gome and Suning as their unique distributor in China. All these movements show that foreign enterprises are holding the operating policy of “moving into the high-end market with their brand influence”.
  However, Zhang Yanbin, dean of the All View Consulting Institute, said:“In the Chinese air conditioner market, the high-end market is a destitute wasteland. Air conditioners are durable consumer goods along with other home appliances instead of luxury goods. Therefore, the strategy should focus on maximizing the market share based on the ‘best price-performance ratio’. Foreign enterprises want to build the threshold of high-end market with their brand awareness, but they should be told that this market does not exist.”
  An undeniable fact is that foreign air conditioners are having a smaller and smaller living space in China. The data from the China Market Monitor Co., Ltd shows that Midea, Haier, Gree, Aux, Chigo and Hisense took 78% of the air conditioner market in the first half of 2012 while the rest 22% market was shared by the other 20 air conditioner enterprises, i.e. averagely 1% per company. This means that these brands are very likely to be marginalized by the market if they are not cautious enough.
  “The said transfer to the high-end market is nothing but an excuse for foreign brands to gradually leave China,”said Zhang Yanbin, In his opinion, the advantages of Haier, Midea and Gree generated from their large size and innovation ability could not only help them achieve the dominance in the Chinese market, but also bring impact to the foreign brands in the world.
  The current situation is that foreign air conditioner makers cannot improve the sales as well as the prices of their products.
   Polarized Industrial Transformation
  Those foreign air conditioner companies could not even maintain their survival in the “high-end market”. Their struggling in China just represents the heated competition in the air conditioner industry of this country. The foreign companies’ withdrawal just closely follows the track of small domestic companies.
  The European debt crisis, the end of government’s subsidies for buying home appliances and the tight control over the real estate in China are all blamed for the shrinking air conditioner industry. In 2012, all the participants in air conditioner industry are doomed to have tough days. When the industry met its cold time, many small and middle enterprises instinctively took the operating strategy of “surviving first before development” by “shrinking the investment in marketing, research, development and distribution”.
  This ideology undoubtedly provides golden opportunities for the wellestablished big companies with “great stress and abundant capital” to further increase their market share. The financial crisis in 2008 led to Midea’s success in spreading frequency conversion air conditioners and defending the champion of sales volume of frequency conversion air conditioners in the next three years. Haier, Gree, Aux, Chigo and other brands also have seen the further increase of their market shares.
  The data of market supervision shows that the sales of air conditioners dropped 20% year on year in the first half of 2012. However, Gree, Midea and Aux successfully reversed this trend and increased their operating revenue and profits.
  But foreign brands could not survive this winter. Therefore, this round of reshuffling became the battle in which Chinese brands drove out foreign brands. Presently, Sanyo, Samsung and Hitachi are on the brink of death in China. LG and Sharp products are hard to be available in China though they never announced the plan of leaving China.
  No matter Midea’s innovation of frequency conversion, or the differentiated innovation of smart air conditioner launched by Haier, Aux and Chigo, it is certain that the innovation and transformation of China’s air conditioner industry is pushed by the Chinese domestic companies and now it is pushing the air conditioner industry of China onto the way of polarization.
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