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‘Chinese manufacturers are not afraid of competition’

As China’s HVAC industry continues to pursue an international expansion strategy, many companies are now heavily investing in R&D to reinforce their position as leaders in the global market.

| | May 18, 2017 | 10:33 am
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Adaptation is essential to evolution, and no market has embodied this idea better than China’s HVAC sector, which continues to showcase an aggressive move towards innovation and efficiency.

At the moment, China’s cooling sector is moving towards new and unexpected directions. Peck Zhao, Senior Specialist of Marketing at Midea, says that the main trends within the industry include, “extending the business, expanding the market and identifying opportunities for mergers and acquisitions”.

Even though the products we develop are for a global market, different regions have different habits, and the government has different regulations

For the most part, VRF technology has found a solid footing in China, and has experienced a spike in demand. Zhao puts the spotlight on the technology’s growing popularity in contrast to splits, saying that in the previous year, the Chinese AC market dropped by approximately 10% by local currency RMB and VRF increased by 10%, mainly as a result of the mini VRFs sold through retail channels. Zhao adds that the market is particularly in favour of mini VRFs with many people viewing the compact version of the technology a preferred option to address residential needs.

Dick Xhi

Dick Xhi, Regional Director, Middle East Africa at Hisense/Hitachi, believes that the space-saving feature of VRF technology is the reason for its growth in the market.

Beijing, apartment space is very important,” he says. “It’s USD 10,000 per square metre, and if you design multiple outdoor units, it can consume multiple square metres. If you save one square metre you save USD 10,000.” Shi adds that within the VRF industry, there has also been a shift with regard to the type of consumers. “In China, there is a new situation: VRF is moving from B2B business to B2C business,” he says,”and individuals purchase VRFs instead of splits. In China, unlike the GCC [region], you have the option to install splits or VRF technology.”

The technology’s versatility is also driving its increase in demand, as it has been found to be successful in a wide-range of project. Zhang Wenqiang, Senor Vice President of Quingdao Hisense /Hitachi, elaborates a wide-range of projects. Zhang Wenqiang, Senior Vice President of Qingdao Hisense/Hitachi, elaborates that in China, “a lot of successful projects in highrise buildings use VRF, such as government buildings, schools, hotels, hospitals and offices”.

Zhang Wenqiang

Chillers, too, are also trying to capture the market, especially for high residential buildings. It has also proven to be the preferred solution for infrastructure projects. One such example is the recent project of Midea, where they provided 24 chillers with a capacity of 40,000 tonnes to Guangzhou Baiyun International Airport, four of which are Variable Frequency Direct Drive (VFDD) centrifugal chillers. Another factor that is shaping the business strategy of manufacturers is compliance with energy-efficiency regulations set by the government. Zhao says: “The standards that cover VRF products are getting higher every year. It’s challenging, but we are not afraid. Chinese manufacturers are not afraid of competition. It is because of competition that we grow faster.”

Peck Zhao

Leading Chinese manufacturers are confirming their commitment to expanding their businesses beyond their country’s borders, leveraging their creativity and flexibility in order to capture international markets. Zhao provides his insight on the matter: “China is still the largest air conditioning market. So, we still largely rely on the Chinese market. But now, because the Chinese market is going down, manufacturers are looking to extend their businesses in rising markets, such as the UAE, India and Indonesia. This is especially relevant to the GCC region, where air conditioning is a basic requirement.”

The global move comes with its own set of challenges, as manufacturers have to wrap their heads around a new set of regulations and a new customer base. In this regard, Wenqiang says: “Even though the products we develop are for a global market, different regions have different habits, and the government has different regulations. It takes more resources to adjust the products to suit individual needs and market requirements.”

In a constantly shifting scenario, many companies have aggressively invested in R&D in order to keep up with long-term growth strategies. Hisense/Hitachi is one such company. As it tries to further penetrate the Middle East market, Wenqiang affirms the company’s move to launch products that can address the ambient temperatures and conditions in the Middle East. He adds that they have dispatched R&D engineers to various countries across the region to do the necessary research.

It’s very difficult to make a revolution. We hope to keep investing in R&D and looking for new ideas. More opportunities can come with more imagination

The focus on R&D among manufacturers is not only driven by their desire to create products that will address the needs of new markets they are trying to enter, but it also largely stems from their efforts to use the insight they have gained to bring about a change in international public perception. Homegrown companies continue to battle with the wariness some people have towards China-made products. However, this appears to spur companies to come up with more efficient and innovative technologies. Zhao cites the recent launch of Midea’s new V6 VRF as an example of the company’s commitment towards utilising R&D to not only create new products but also to improve existing technologies. He says: “We want to lead in the market, not follow. We want to set the standard. It’s very difficult to make a revolution. We hope to keep investing in R&D and looking for new ideas. More opportunities can come with more imagination.”

This desire to improve upon existing models and upgrade traditional products is reflected in China’s business strategy, as the market aligns itself with companies that showcase competencies that can complement their own capabilities. Zhao narrates the company’s strategic alliance with Clivet, an Italian HVAC company specialising in chillers and heat pumps. “We want to combine both of our strengths,” he says. “Our strength is volume production; their strength is in high-quality products and being ‘made in Europe’.”

Zhao highlights that the move signals the international shift of the company’s production bases, which already include India, Egypt and, now, Europe.

Indeed, Chinese companies remain resilient in the face of challenges, and the spirit of innovation and adventure continues to drive brands to aim to be global leaders in the industry, in an attempt to redefine the meaning of ‘Made in China’.

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