It is a war between the titans that broke out in China among the domestic technology giants: it is fought with M&A blows, tens of billions, bankruptcies and low blows. And since these are global players, the dispute will soon concern us closely. TCL, the first Chinese and third largest TV manufacturer in the world, in January 2021 tried to seize, through an unfriendly online judicial public auction, all the capital of Guangdong Homa Appliances (turnover 8 billion dollars), of which it already owns 20%. The surprising thing is that Homa is the world's largest refrigeration contractor and that no one outside of China knows about it. TCL (turnover over 11 billion dollars) continued to increase its stake by spending a first tranche of 152 million dollars through the Hong Kong secondary market, repeatedly asking to reunite the board to replace the top management and receiving many refusals , until in April it managed to appoint a new chairman of the board, Hu Dianqian, and a number of other top executives.
This operation is just one of many that are stirring up the world of Asian technology multinationals. At the origin of everything, as the Japanese newspaper pointed out Nikkei Asia, the fact that the accounts of the big Chinese never add up as they once did and for five weighty reasons: by now saturated domestic market, excess production capacity, constantly falling prices of Made in China, substantial cracks in the balance sheets following the pandemic and sharply declining demand for the medium and low range, the core business of production Chinese. The Chinese market, however, above all wants high-end goods and in fact, while the sales of medium and low-range appliances have been collapsing for some time, those of quality, originality and design appliances are growing by double digits.
MADE IN CHINA, LOW APPEAL
For the first time, reliable data on saturation rates in urban and rural households have been released and they are very high: for every 100 households in China, there are 122,8 televisions, 102,5 refrigerators, 148,3 air conditioners, 99,2, 72,2 washing machines, 98,2 computers, 81,7 water heaters and 2020 range hoods. The rural saturation index is very close to these percentages (source: National Bureau of Statistics of China). Furthermore, overall consumption of consumer electronics and household appliances fell by 11% in 2019 after 13 also went badly. And since the "brown" products (TV, PC, TLC, games, etc.) fared worse, with a -XNUMX%, the multinationals of the sector, such as TCL, have decided to diversify activities, buying small and medium-sized companies in the most diverse sectors, in particular in the "white" sector and in healthcare.
But analysts are sceptical, because it is not by shopping and diversifying that balance sheets and profits will rise again and because, according to the Global Times, the unit prices of the devices made in China, already very low, will not be able to go up in the short term. An example for all categories: the TVs of the Chinese giant TCL cost half of those of Samsung and LG because – claims the English Omdia – the image of made in China has been synonymous with medium-low quality products for too long. At the origin, the fierce price war and counterfeiting, which Chinese contractors have waged relentlessly for decades to compete for orders from European, American, Korean and Japanese brands. And even at home, today made in China is synonymous with entry level products.
Homa, founded in 2002 and the world's leading refrigeration contractor, has a turnover of over 8 billion dollars and specializes in the design and production of refrigerators, at extremely low prices, for the major world brands. He delivers finished products and has been collaborating for years with an Italian engineering, communication, design and digital technology company, the Varese-based Studio Volpi. The Chinese company exports more than 80% of production, one share - second Huajing Research, a specialist in market research – far superior to that of most Chinese companies.
If you look at the catalogs of large and small majap producers, the cold pages show very similar models precisely because a good part of these come from the Homa factories (the top and very high range versions are an exception). A series of financial speculations by the largest shareholder - who later left the company - then put a giant that was growing by double-digit percentages into crisis and which, due to its high export quotas, had long been in the sights of competitors.
BILLION DARE M&A
Diversification is becoming the watchword for the Chinese hi-tech giants. In March, Hisense (household appliances and air conditioning), which is launching high-end televisions in North America under the Toshiba brand, has acquired a controlling stake in Japanese auto parts company Sanden Holdings, which is currently in difficulty. Hisense had already taken total control of Gorenje in 2018, the fourth largest European manufacturer of large appliances. Not only that: the same company plans to buy the Siemens traffic light division and other road traffic control systems for almost a billion dollars.
Midea Group, on the other hand, has recently acquired 29% of the Chinese medical equipment maker Beijing Wandong Medical Technology, after having acquired the German manufacturer of industrial robots Kuka in 2017. It has also entered the automotive industry (buying companies specializing in the production of alternative energy vehicles), elevators and other fields, through the control of Hecang Xinneng, Lingwang Elevator and other smaller companies.
As for the world number one in household appliances, Haier, has decided to strengthen its biomedical sector, while Gree Electric (air conditioning) launched a new company in the health sector with large financial resources. Only one sector is off limits to everyone, that of entertainment, dominated by the superpower of the Internet, the untouchable Tencent Holdings.
AND FOR THE FIRST TIME, EVEN THE TOP MANAGEMENT CHANGES
The change in strategy of the technology giants could not fail to have effects at the top of the company. This was seen with the announcements made at the Appliance & Electronics World Expo (AWE) 2021, the main Chinese exhibition event for home appliances which takes place in March in Shanghai. Indeed, the founder of Haier, Zhang Ruimin, resigned in November, the undisputed architect of the company's worldwide success, who never wanted the group to adopt too aggressive commercial policies, preferring to acquire historic brands in the medium-high range and very high.
China White Power bosses Gree, Midea and Haieryuan also left the scene. He had resigned, but then the president of Hisense was confirmed again. The real problem, however, according to many Western journalists, is the Chinese management, impeccably prepared from a technological point of view, but decidedly lacking in those qualities of flexibility and knowledge of the various world markets which will become fundamental in resisting the next big changes.
