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Home appliance companies hope to plug into China
( 2002-10-08 09:57 ) (1 )

Foreign electric appliance giants are localizing in China following the vigorous growth of China-made products in the international market.

China's top economist Wu Jinglian warned domestic makers of home electric appliances that international companies have completed their restructuring in China and are set to battle against local makers.

Over the past few years, Chinese makers of electric home appliances have had the upper hand when competing with world giants by offering lower prices.

But recently, many international companies have completed adjustments in accordance with the local market and are using their increasing brand recognition and expanding their manufacturing capacity in China.

Zhang Zhongwen, vice-chairman of Matsushita Electric (China), best known for its National and Panasonic brands, said the company is speeding up localization in China particularly in light of its membership into the World Trade Organization.

"To succeed in China is a key condition for Matsushita's success in the global market," he said.

Zhang's company is now stressing lowering cost and providing products with more diversified grades in China.

The company is also speeding up its technology transition to the Chinese market and has established three research and development (R&D) centres in Beijing, Suzhou and Shanghai each, Zhang said.

"We also plan to open two more companies here in two years," Zhang said.

Meanwhile, the company is closing some factories in Japan and the United States and shifting them to China.

Lee Sang-hoon, chief public-relations officer for South Korean giant LG Electronics (China), said LG is expecting to open a world-class R&D centre in Beijing this month.

"We have realized (the importance of) localizing human resources and decision making, and we are moving to local R&D," he said.

When LG began increasing its global reach, the company focused on China since it was a very important market for them, Lee said.

He said LG might merge or co-operate with local companies if it plans an expansion in China in the future.

Michael Liu, managing director of Electrolux (China), said his company will continue to expand production capacity and product range in China.

Electrolux entered the Chinese market in 1997, and achieved an annual revenue increase of 130 per cent from 1997 to 2001. Beginning with their single product of refrigerators, Electrolux has developed a whole series of electric home appliances from air-conditioners to washing machines and kitchen appliances.

Realizing the importance of local decision-making in China has allowed the company to create quick adjustments to market changes, Liu said.

"The decision-making is not only at our Chinese headquarters, but also at our subsidiaries," Liu said.

Due to increasing market demand, Electrolux is also considering moving its US-based air-conditioner factory to China.

Herbert Lutzke, vice-president of BS Home Appliances Co Ltd, owned by Siemens, said the company will stick to a long term strategy in China.

However the 155-year-old company has seen difficulties at the beginning of its entry into China.

A joint venture company with Little Swan in Wuxi has seen a four-year loss totalling 50 million yuan (US$6 million) since 1995.

"But we insisted (that) investment in China is (the) right decision and now the factory (is) one of the best washing machine makers in China," Lutzke said.

Lutzke said Siemens will not change its tradition of offering high-end products in China even though lower-priced products are more popular.