MIDEA’S AMBITION TAKES GLOBAL AIM
Home appliance maker eyes 10 per cent of world market within five years on expanded network using high-level automated production facilities
Midea Group, China’s largest home appliances company, is expanding overseas production with plants featuring enhanced automation as part of its ambition to corner about 10 per cent of the global market within five years, according to an executive.
The company is in the process of choosing one or two locations for setting up new manufacturing facilities in North America, which is expected to be finalised before the end of the first half of this year, according to Wang Jianguo, president of Midea International, a unit of Midea Group responsible for overseas operations.
The company, which has production facilities in 15 countries apart from China, plans to further expand capacity at many overseas plants, particularly in Egypt and Brazil, he said, adding that the firm was also looking at mergers and acquisitions.
“After the outbreak of [the] coronavirus pandemic, we understand the importance of a more balanced global allocation [of resources as] the safety of supply chain is of the utmost importance,” said Wang, who is also vice-president of parent Midea Group, at Midea’s headquarters in Foshan, the fourth-largest economy in the Greater Bay Area.
He said while China was still the most competitive in terms of manufacturing, the firm needed to use its overseas production capacity to counter such unforeseen uncertainties in the future.
Midea has come a long way since its founding in 1968 in Foshan’s Shunde district when it started making plastic lids and glass bottles. It later became popular for its fans and air conditioners. Midea has now grown into a conglomerate, with interests ranging from robots and automation to property development and education, ranking 307th in the Fortune Global 500 List last year.
It owns the Colmo, Toshiba, Comfee, Little Swan and Eureka home appliances brands, making a range of products including refrigerators, washing machines, air conditioners and vacuum cleaners.
Midea is aiming for home appliance sales outside China of US$40 billion by 2025, which should give it a 10 per cent share of the global market, from about 4 per cent currently, Wang said.
Revenue from overseas operations came in at 121.1 billion yuan (HK$142.2 billion) last year. In important markets like the US, it was aiming for more than 20 per cent market share, he added.
To reach this target, the company has, since early last year, accelerated efforts to ramp up production abroad, in addition to supplying products from China. Half of its 34 factories are outside the mainland. After establishing its first overseas factory in Vietnam in 2007, the company has also built facilities in Argentina, India, Malaysia, Thailand and the United States.
Last year, Chinese home appliance makers recorded an 18 per cent surge in exports – the most in almost a decade – to US$83.7 billion, according to the China Household Electrical Appliances Association.
Lockdowns and quarantines in nations across the globe fuelled demand for items made by Chinese manufacturers used at home.
This helped to boost Midea’s revenue in the first quarter, which soared 42.2 per cent year on year to 82.5 billion yuan, while net profit jumped 34.5 per cent to 6.5 billion yuan.
For last year, revenue jumped 2.2 per cent to 284.2 billion yuan, while net profit rose 12.4 per cent to 27.2 billion yuan despite the pandemic in China which caused factories to shut for about two months.
As demand surges, the company is expanding its production in Egypt, which serves as a bridge to Europe and the rest of Africa, to produce all categories of Midea’s products from the current focus on air conditioners, Wang said, adding that annual revenues from the Egyptian operations had crossed US$200 million.
Midea is also eyeing acquisitions in line with its aggressive shift to a technology company in recent years.
“In some regions where we have operations, such as Europe, North America, Asean and Brazil, there are some small targets that we are looking at, and some have technologies that are complementary to ours,” Wang said.
And while Midea is aggressively looking at expansion, it is trying to keep costs down by increasingly relying on automation. His team is launching some small and easy automation processes in Thailand, and is preparing for higher level automation in North America to cut labour costs and improve efficiency.
“The overall trend globally is to automate production,” Wang said.
We understand the importance of a ... balanced global allocation [of resources]
WANG JIANGUO, MIDEA INTERNATIONAL