Japanese enterprises are forced to downsize and shut down factories, while Chinese air conditioners are making a huge impact in Thailand. | Hardcore Analysis
Author | Ye Danxuan
Editor | Yuan Silai
Thailand, located in the central part of Southeast Asia, borders Cambodia, Laos, Myanmar, and Malaysia. Its hot climate and dense population make it an important battlefield for home appliance enterprises.
In addition to the consumption potential of the local market, Thailand is also becoming the largest transit site for the manufacturing and export of Chinese home appliance enterprises.
Recently, the Haier Zhijia Thailand factory held a groundbreaking ceremony for an air conditioning base in Chonburi Province in eastern Thailand. The overall planning of the air conditioning manufacturing industrial park has an annual production capacity of 6 million sets of air conditioners, and it will become the largest overseas manufacturing base of Haier's air conditioning industry.
Coincidentally, in March this year, the groundbreaking ceremony of Midea's Intelligent Manufacturing Thailand Technology Industrial Park was held in Rayong Province, Thailand. Before that, Midea's air conditioning factory in Chonburi Province, Thailand, has become Midea's largest digital and intelligent factory overseas.
So far, the white goods (air conditioners, refrigerators, washing machines) business layouts of well-known home appliance enterprises from China, Japan, and South Korea in Thailand have been implemented to varying degrees. Brands such as Haier, Midea, Aux, Panasonic, Toshiba, Hitachi, LG, and Samsung all have white goods production bases in Thailand.
According to the data of Industry Online, the global production capacity of the three major white goods in 2023 is about 900 million units. Excluding China, Thailand accounts for 5% of the global white goods production capacity and is the second largest white goods manufacturing country in the world.
Thailand has become a hot spot for home appliance manufacturing enterprises. Behind the waves of land acquisition and factory construction, changes in the production and sales pattern are taking place here.
01 Anchoring in Thailand
The layout of home appliance enterprises in Thailand can be traced back to the 1980s.
At that time, Japanese and South Korean home appliance enterprises were in the limelight. In 1979, Panasonic had already started to produce washing machines and refrigerators in Thailand. In 1988, Sharp established a factory in Thailand, and the products it produced included refrigerators, air conditioners, washing machines, etc. In the 1990s, Hitachi also started its business layout in Thailand and established HADSYS (Thailand) Co., Ltd., mainly engaged in the production and sales of refrigerator compressor business.
It is not difficult to find that when home appliance enterprises first chose Thailand, the focus of production and sales was on the refrigerator category. Industry insiders told Yingke that although the weather in Southeast Asia is hot, the economic development level is relatively low. When entering the market, the refrigerator category is mostly taken as the focus because the demand for food preservation is more rigid.
The second wave of factory construction in Thailand has been concentrated in the past ten years. The focus of production and sales has gradually shifted from refrigerators and washing machines to the air conditioning category.
In May 2012, Toshiba launched the construction plan of its second production factory in Thailand. In November of the same year, Toshiba announced the establishment of a joint venture in Thailand to produce compressors, the core components of air conditioners.
Aux is one of the Chinese home appliance enterprises that have earlier layouts overseas. In 2019, the first overseas air conditioning manufacturing base of Aux Group was officially completed in Rayong Industrial Park, Thailand.
The other two leading enterprises going global, Haier Zhijia and Midea, are betting on Thailand through acquisitions and mergers.
In 2015, Haier Zhijia acquired the Southeast Asian white goods business of Japan's Sanyo Electric. Subsequently, Midea Group acquired Japan's Toshiba's white goods business at a price of 3.3 billion yuan in 2016.
Facing the Southeast Asian market that more advocates Japanese and South Korean brands, it is obviously a highly efficient move for Chinese brands to improve their market discourse power.
A research report by Haitong Securities shows that in 2018, the top three brands in terms of air conditioner sales in Thailand were Mitsubishi, Daikin, and Panasonic. In 2023, Haier has ranked among the top three in this category, and the market share of Chinese brands has increased from 13.1% to 21%. In the refrigerator category, the sales of Toshiba acquired by Midea and Haier have firmly occupied the top two positions.
In the semi-annual report of 2024, Midea Group also mentioned that the revenue of its overseas business, which has been actively laid out for many years, has increased by approximately 13% year-on-year, significantly higher than the 8% growth rate of domestic operating income. Among them, the cumulative shipment volume of Midea Group's global production base export business in the first half of 2024 has increased by more than 20% year-on-year.
Perhaps encouraged by the overseas performance, Midea has been continuously accelerating its layout in Thailand in recent years and has currently laid out four overseas production bases. The Meizhi Compressor and Welling Motor Factory in Phra Nakhon Si Ayutthaya, the refrigerator and washing machine factory in Pathum Thani, the refrigerator, microwave oven, and small household appliance factory in Nonthaburi, and the air conditioning factory in Chonburi cover the upstream and downstream of the production chain in terms of business layout.
02 Opportunities and Changes
It is not by chance that Thailand has become the new main battlefield for the production and sales of air conditioners of Chinese enterprises to go global.
A research report by Weizhuo shows that the average monthly output of electrical appliances in Thailand is about 4 million pieces, while the average monthly sales is only 1 million pieces. The remaining electrical appliance production capacity is mainly exported to other Southeast Asian countries. According to the calculation of Industry Online, the air conditioning production capacity in Thailand in 2023 is 20.8 million units, and the compound annual growth rate in the next five years will be as high as 12.3%, leading far ahead in the white goods category.
In addition to the industrial agglomeration effect of Japanese and South Korean brands establishing factories in Thailand in the early years and the changes in the international trade environment forcing home appliance enterprises to accelerate their overseas layout, the development potential of the Southeast Asian market itself also attracts the attention of Chinese home appliance enterprises.
According to Euromonitor data, the sales volume of the air conditioning category in the six Southeast Asian countries is 4.3 billion US dollars, which is only 9% of the sales volume of this category in China. The refrigerator and washing machine categories have a relatively higher sales volume and sales share because the consumption habits were established earlier.
A research report by Haitong Securities also shows that the penetration rate of air conditioners per 100 households in the Southeast Asian home appliance category is the lowest. In Thailand, only 50.9 households out of every 100 households own air conditioners, while the penetration rates of home appliance categories such as refrigerators and televisions are close to 100%.
Industry insiders told Yingke that during the brand's market research in the Thai market, it was found that the demand for air conditioners in the Thai market is becoming one of the strongest growing categories among home appliances.
In recent years, the hot season in Thailand is getting longer and the temperature is continuously rising. According to the Thai Meteorological Department, the hot season in 2024 started on February 21, and some areas even recorded a high temperature of 45.4°C. Air conditioners are becoming a rigid demand in Thailand and even the tropical regions of Southeast Asia.
At the same time, the strong consumption potential in Southeast Asia, especially in Thailand and Vietnam, is also an important reason for Chinese enterprises to bet on Thailand.
Although the per capita GDP of Thailand and Vietnam is $6,385 and $3,817 respectively, equivalent to the level of China from 2006 to 2012, the person in charge of a certain intelligent cleaning appliance brand told Yingke that according to the brand monitoring data, the Thai and Vietnamese markets show a high degree of enthusiasm beyond their economic level when replacing home appliances and accepting high-price category products. "The young people in these two countries are willing to pay for an improved living experience."
The sales pattern is also changing here.
Liu Jianwei, a Chinese who has lived in Chiang Mai for many years, found that in the past two years, many Chinese brands have appeared in the offline electrical appliance stores in Thailand. Especially in the mid-range and below price range, the recognition of Chinese brands is significantly improving.
The aforementioned industry insider told Yingke that the business layout of Chinese home appliance enterprises before and after the second wave of factory construction in Thailand is challenging the traditional home appliance sales pattern in the Southeast Asian market. The strong market of traditional Japanese and South Korean brands is being disrupted, and the ebb of Japanese brands is quite obvious. Panasonic closed its production factory and R & D base in Thailand in 2021 and laid off about 800 Thai employees.
The financial data of Haier Zhijia may be able to corroborate this. In the first half of 2024, Haier Zhijia's revenue in Southeast Asia increased by 12.4%, making it the second fastest-growing region in terms of business growth.
At present, the development of Chinese brands in Southeast Asia is still that the production capacity is far greater than the brand recognition. According to the observation of Thai consumer Mai, for the consumption of home appliances by middle-class and above families in Thailand, they still prefer Japanese and South Korean brands first. "In occasions where a large number of air conditioners need to be purchased, such as the school where I work, Chinese brands will appear more."
It is not difficult to find that although Chinese enterprises' overseas layout in Thailand and the broader Southeast Asia region is already very in-depth, there is still a long way to go in terms of brand recognition.
Provided by 36Kr