The Globalization of Chinese Home Appliance Brands: A Long Way to Go

China is one of the world’s largest manufacturers of home appliances. The country’s home appliances market is dominated by domestic brands, which have started to gain an advantage over foreign competitors. The industry chain exhibits a smiling curve, with brand globalization and upstream core electronic components being the high value-added segments into which China’s home appliance industry has yet to venture. In this report, we analyze the development and characteristics of the home appliance industry, and study opportunities and challenges presented by the globalization of the industry, with a view to shedding some light on the path to its future growth. China is one of the world’s largest manufacturers of home appliances but has weak brand visibility globally. (1) The world has witnessed the shift of the home appliance value chain from Europe and the US to Japan and South Korea, and more recently, to China. However, the overseas home appliance market is still dominated by global brands from Europe, the US, Japan, and South Korea, with Chinese brands having a weak presence. (2) Low labor costs, strong domestic demand, and well-equipped supporting facilities of the industry chain were major contributing factors to the rise of China’s home appliance industry, which is now facing mounting pressure from rising labor costs and relocation of production capacity to other countries. This has prompted China to move to higher value-added activities by globalizing its brands. (3) China has a comprehensive home appliance industry chain, but relies heavily on foreign companies for the supply of some components (e.g., chips and raw materials of liquid crystal display [LCD] panels), and could face critical technological hurdles in extreme cases. A lack of brand awareness may also bring volatility in demand. Globalization presents both opportunities and challenges. (1) The US is one of the most important home appliance markets. The US tariffs have led to the relocation of some home appliance production capacity to regions such as Southeast Asia, where home appliance industrial clusters could potentially emerge to compete with China. (2) The Indian home appliance market has great potential, and the country is attracting foreign investment through tariffs. However, Chinese companies confront certain restrictions, posing challenges to their presence in the fast-growing Indian market. (3) Chinese home appliance companies are striving to globalize their brands through a variety of formats. Following rapid growth in 2020 and 2021, China’s home appliance exports are facing downward pressure as headwinds, including high inflation and energy crises, erode purchasing power and reduce at-home consumption in Europe and the US. Thoughts and implications: (1) We believe Chinese home appliance companies might follow the industry trend of going global: By leveraging domestic success in the development of industrial clusters, China could collaborate with Southeast Asian countries on cultivating new home appliance industrial clusters in a way that benefits Chinese companies, and encourage large home appliance groups to lead and share their knowledge and expertise with inexperienced companies regarding how to build a presence in overseas markets. (2) China could adopt a tiered deployment of production capacity while continuing its opening-up policy in a bid to achieve a higher degree of import substitution. Home appliance manufacturing spans a variety of industries, with core technologies mainly originating from upstream segments. The restraints on China’s high-end technologies may undermine the innovation of China’s home appliance industry. (3) China can also turn technological advantages into standard advantages through active participation in the formulation of international standards.