World’s largest aircon maker eyes heat in Africa
DAIKIN Industries, the world’s largest maker of air conditioning equipment, is turning to Africa for further expansion, 10 years after a successful gamble on sharing its key technology with a Chinese company.
As Japanese manufacturers such as Panasonic stepped back from home appliances over a decade ago to avoid price wars with Asian rivals, Daikin did the opposite, going head-tohead with the likes of South Korea’s LG.
Fighting off low-cost competitors through local partnerships and acquisitions, Daikin grabbed top share in markets such as India. Africa, where LG and China’s Haier are established giants, may seem like another difficult target for Daikin.
But Yoshihiro Mineno, Daikin’s senior executive in charge of Asia, said the company is used to silencing critics, recalling the controversy more than 15 years ago over its decision to target mass markets overseas.
“Many sceptics at the time said it would be impossible to make profits in the ‘volume zone’ in Asia, and that it was pointless to invest there,” Mineno told Reuters in an interview.
Conventional wisdom, he said, held that the 94-year-old company should focus on highend markets.
Daikin saw limited potential for growth in that area, however, and executives knew the company would have to focus on low cost and high volume if it wanted to boost its global presence.
Exceeds
The company’s market value now exceeds those of electronics conglomerates Panasonic and Hitachi.
“If advanced technologies or added-value products are your only selling points, your rivals are likely to catch up and overtake you,” said Hideki Yasuda, an analyst at the research arm of Ace Securities.
“But Daikin’s business model is backed by cost competitiveness,” Yasuda added. “It’s among a few Japanese companies that can compete head to head with the Chinese.”
The US, the world’s largest market for air conditioning, has been tougher to crack.
Daikin has struggled to compete with local rivals such as United Technologies’ Carrier and Johnson Controls’ York, which specialise in ducted air conditioning.
Daikin acquired the US company Goodman in 2012 to strengthen its expertise in that area, but has made little headway. The prospect of tariffs from a trade war between the US and China adds another headache: Daikin assembles air conditioners in the US using some Chinese-made parts.
In 2006, Daikin took over Malaysian contract manufacturer OYL Industries for $2.1 billion (R30bn).
Two years later, it shocked the industry by agreeing to a partnership with major Chinese rival Gree Electric Appliances.
The deal gave Daikin mass-market production capabilities in return for access to its advanced inverter technology, which saves electricity by efficiently regulating temperatures.