Overcapacity is plaguing China's home appliance industry

In recent years, the transformation and upgrading of the home appliance industry has been a hot topic in the industry. China's household appliances industry, which is undergoing rapid changes and development, is facing pressure to eliminate backward production capacity, accelerate technological innovation and increase brand awareness. Among the problems, overcapacity has been a lingering nightmare for the home appliance industry in recent years.

Appliance industry is caught in a low growth cycle

Data from the Ministry of Industry and Information Technology show that from January to October this year, China's home audio-visual industry grew at a low rate, with sales value up 4.4% year-on-year, down from 0.4% in January-September and 4.1% lower than the industry average. According to the statistics of Ovid Consulting, the global color TV market shipped 101 million units in the first half of the year, of which China produced 65 million units, accounting for 64%, but in fact China's color TV production capacity has accounted for 80% of the world.

Dong Min, general manager of Ovid Consulting Black Power Division, told reporters that at present, China’s household electrical appliance production capacity has not survived the elimination of the fittest, but is in a state of extensive expansion, resulting in excess production due to overcapacity. "According to data monitoring, the number of inefficient models in the first half of this year accounted for more than 60% of all models." Dong Min said.

Not only is black electricity, but also the white market is not optimistic. Take the air-conditioning market as an example. According to the data disclosed by the National Information Center, the 2015 cold year (ie August 2014 to July 2015), the national air-conditioning sales volume of 40.46 million units, compared with the same period last year decreased by 5.40%, sales The year-on-year decrease was 10.5%. Since 2013, the industry has fallen into a negative growth trend for the first time. With the obvious slowdown in market growth and the narrowing of seasonality, the "price-for-price" strategy of enterprises has had little success, and has continued to press heavily into the channels, resulting in a high inventory of channels.

In addition, according to the statistics of internet financial information service providers, as of September of this year, of the 62 listed companies that reported earnings in the household appliance industry, there were 23 year-on-year declines in net profit in the first half of the year. In addition, net profit growth slowed down. There are 34 homes.

China's home appliance industry, which has a sales scale of a trillion yuan, is now struggling with the slow growth cycle.

Where does the problem of excess capacity come from?

What caused the excess capacity in the home appliance industry and high inventory levels?

According to Lu Jiebo, deputy secretary-general of the China Electronic Chamber of Commerce, the current capacity of China's home appliance industry is not merely a surplus, and it is precisely a question of huge excesses. This problem not only exists in the white-electricity industry such as air-conditioner washing machines, but also in the black-box field such as flat-panel TVs. The current rapid product iterations and price declines in the home appliance sector are the subsequent effects of excess capacity.

"On the one hand, the dividends of the state's subsidy policy on the home appliance market have ended in the past few years, leading to a portion of consumer demand being overdrawn ahead of time. On the other hand, home appliance companies have also experienced deviations in their judgments on the market," said Lu Renbo. Domestic home appliance companies have focused too much on the investment in production capacity in previous years, and a large amount of capital investment has gone to the “visible” thing in the construction of production lines and factories, but they have not timely focused on technological research and development and product innovation. Lead to a large number of low-end product backlog. At the same time, some companies lack brand building capabilities, leading consumers to not buy it.

The most external performance of overcapacity is that products in the market are iteratively very fast. Dong Min stated that taking the color TV industry as an example, due to the overcapacity of enterprises, product managers are constantly developing new products in an attempt to quickly attract consumers' attention and achieve the purpose of increasing shipments. “At present, product profit is mainly based on hardware, and the sales scale of hardware is the starting point of product design. However, the products that serve for the promotion will have the problem that the differentiated design is not refined and slick, and the product line is continuously extended, ignoring the real consumer. Demand, consumers are increasingly tired of such products." Dong Min said. As a result, there have been problems such as waste of resources, low efficiency, decline in product prices, and decline in corporate net profit in the color TV market.

Senior industry observer Luo Qingqi said that the real problem in the home appliance industry is actually not the overcapacity but the effective capacity. On the one hand, the huge production capacity does not have to match the consumer demand as an inefficient production capacity. On the other hand, the consumer demand has not been well met. In the traditional sense, this is overcapacity, but in essence it is the mismatch between capacity and demand brought about by changes in the market situation.

How to get out of the mire

The current home appliance industry is in the dual impact of the economic recession and the rapid spread of the Internet. On the one hand, the global economy is in a recession, and this economic recession has a larger scale and a deeper degree, inhibiting consumer demand for home appliances; on the other hand, The rapid spread of the Internet amplifies the voice of consumers, and consumers have a stronger say in the choice of products. Both of these factors have led to drastic changes in consumer demand. If companies cannot adapt to this change quickly, they will find themselves in a difficult situation.

“The biggest problem is also the biggest opportunity. The way foreign countries previously dealt with the economic crisis was to force brakes, such as cutting down production equipment. Now we can solve such problems by playing the creativity of the entire people.” Luo Qingqi said, “Currently, China Many favorable policies have been introduced at the macro level. For example, by promoting 'double innovation' to stimulate new momentum, companies need to quickly switch their business models at the micro level, allowing users and stakeholders to participate in production and operations, and from the needs of consumers. The starting point is to make consumers become the leaders of product ideas so as to avoid the phenomenon of ineffective production capacity surplus."

In fact, at the manufacturing level, the country is accelerating its transformation and upgrading through policy influence.

The recently introduced "13th Five-Year Plan" proposes to implement industrial-strength-based projects, carry out quality brand promotion actions, support enterprises in aiming at international benchmarking and technological transformation of the same industry, and comprehensively improve product technology, process equipment, energy efficiency and environmental protection. More emphasis will be placed on the use of market mechanisms, economic instruments, and the rule of law to resolve excess production capacity, increase policy guidance, and improve the corporate exit mechanism. The “Made in China 2025” plan, which was introduced in May this year, also proposes nine strategic tasks and priorities such as improving the national manufacturing innovation capability, promoting the deep integration of informatization and industrialization, and strengthening industrial infrastructure capabilities, and clarifying smart manufacturing and industrial strengthening. , green manufacturing, high-end equipment innovation and other five major projects.

The introduction of a series of policies has actually indicated the direction for the development of the company. In terms of transformation and upgrading and elimination of outdated production capacity, enterprises should seize this policy opportunity, strengthen their own innovation capacity building, and fully invest in product innovation and technology research and development, get rid of backward production methods, and use their own strength to build a world-renowned "China." Brand."