Air-conditioning duo from price war to patent war fierce competition and diversification

In my country's air-conditioning market, Gree and Midea have faced off against each other, occupying half of the country, and have dominated the home appliance arena for nearly 20 years. The story of the rivalry between the two heroes is colorful, open and secret, and one link is linked. Although the heads of the two companies have never exchanged fire directly face-to-face in public, the patent litigation between the two companies has never stopped. In late June alone, the two companies filed four air-conditioning patent infringement lawsuits against each other, and the total amount of claims was nearly 100 million.

Gree and Midea have different systems: one is a state-owned enterprise, in which small shareholders jump out of the rut of state-owned major shareholders and open up a new world; one is a private enterprise, where the shopkeeper and the owner always live in harmony, avoiding the weakness of family businesses. If 10 years ago, there was no comparison between the two, but now the United States is catching up and catching up with Gree. The results of 2015 show that Gree's total revenue and net profit are both lower than those of Midea. Gree's revenue is 97.745 billion yuan and net profit is 12.532 billion yuan; Midea's revenue is 138.44 billion yuan and net profit is 12.7 billion yuan. . In 2016, Midea's revenue continued to overtake Gree, with a total operating income of 159.8 billion yuan, a year-on-year increase of 15%; Gree's total operating income in 2016 was 110.113 billion yuan, a year-on-year increase of 9.50%. But in terms of profits, Gree has the advantage.

In all fairness, Gree and Midea follow two different models in terms of technological innovation, focusing on the robotics business, while Gree follows the path of independent research and development, hoping to master core technologies and not put their jobs on others' pots. This way, the spirit is commendable, but in terms of catching up speed, technological maturity, and quality stability, it is still in the exploratory stage and needs to be tested in practice. Midea, on the other hand, is taking the fast and fast path of merging mature companies, implementing the principle of “bringing it in”. Its technologies and products have been tested by the market, and it is in a leading position in the world. Form large-scale sales. In 2016, Midea spent 29.2 billion to acquire KUKA, a world-renowned robotics company, which is a big deal. If there is no accident, in the development of robots, Midea has already grabbed ahead of Gree in the technology market by realizing corner overtaking through mergers and acquisitions.

The competition between Gree and Midea is also reflected in the increase or decrease of its owner's equity in his own company. Not long ago, Gree Electric announced successively that Dong Mingzhu, the company's chairman and president, continued to increase his holdings of Gree shares. On May 16, Midea Group issued an announcement showing that Midea’s actual controller, He Xiangjian’s family, was quietly reducing its holdings of Midea Group’s shares. The increase and decrease of this stock show that Dong Mingzhu and He Xiangjian have the same interest appeal and different market confidence. Both have the same interest demands, both are pursuing their own interests to maximize their own interests, and both are to increase their control over the company. However, from the comparison of Dong Mingzhu and He Xiangjian's stock increase and decrease, it is also possible to vaguely see the difference in their confidence in the industry's market.

Dong Mingzhu has been singing all the way in recent years, whether it is betting with Xiaomi chairman Lei Jun (Weibo), increasing wages for employees, or madly spending 1 billion to build new energy vehicles, and even paying high dividends to shareholders, which proves that she Market confidence in Gree. She keeps increasing her holdings of Gree Electric Appliances, intending to send a signal to the outside world: no matter how complicated and confusing the macro economy is, Gree will go forward without turning back.

Compared with Dong Mingzhu's increase in Gree's holdings, He Xiangjian's reduction in Midea's may be a worry that the home appliance industry is likely to usher in a turning point in the second half of the year. On the one hand, upstream raw material companies have experienced supply-side reforms after overcapacity, and now the supply has not increased significantly, so the prices of related raw materials have risen significantly, which has put a lot of pressure on the cost of the home appliance industry. On the other hand, the real estate control measures are becoming more and more strict, and the home appliance industry is an industry that lags behind the real estate cycle. The current real estate transaction has gradually fallen into a downturn. There's bound to be a slowdown. It is precisely out of this concern that He Xiangjian quietly reduced his stake by 0.5%, which can be regarded as asking for directions.

Gree and Midea, who were originally rivals, have increased and decreased the stock of their own company this time, and the undercurrent of the secret fight is even more interesting. Dong Mingzhu increased his holdings first, and He Xiangjian decreased his holdings later. The signals sent one after the other in time are very subtle. This may be another psychological game of the market.

There is a saying that "peers are enemies" and "one mountain cannot hold two tigers". Right now, the white goods industry has hit the ceiling and the market is becoming saturated. In 2014, the retail scale of my country's air-conditioning market was 157.5 billion yuan, an increase of only 0.6% over 2013. In 2015, the retail scale of the air-conditioning market not only did not increase, but instead decreased by 4.8% to 137.4 billion yuan. Although the heat wave in the summer of 2016 was rolling, the retail sales of air conditioners rose to 160.6 billion yuan, but based on the overall market structure, such market activity is difficult to last.

Obviously, if the competition between the two companies is still in the traditional air-conditioning industry, apart from the earth-shattering price war and the patent lawsuit, there is no good way to defeat the opponent, and it will only hurt both sides. It is also based on this reflection that the two giants are expanding into the smart industry supported by the mobile Internet. In contrast, Midea's small ice-washing appliances are booming, and the robotics business is also doing well. However, Gree mobile phones have not yet formed a competitive advantage, new energy vehicles consume huge amounts of money, and the progress of diversification and expansion remains to be seen.