Xiaomi turns against China's largest home appliance manufacturer.

Midea and Xiaomi were long-time allies, owning shares in each other. However, when the mobile phone company started making home appliances, the relationship soured.

Xiaomi shifts its focus to home appliances, becoming a rival to its long-time ally. Photo: Bloomberg .

At its 2024 shareholders' meeting, Xiaomi's announcement shocked the entire Chinese tech industry. Chairman Lu Weibing set a goal of becoming the leader in the mobile phone sector within the next three years and among the top five car manufacturers within 10 years. However, the most surprising ambition was to be the third largest in the electronics industry.

In an interview, Phương Hồng Ba, the head of Midea, immediately responded by asking, "Midea, Haier, Gree, who do you want to eliminate?"

Xiaomi is a newcomer to the industry. However, they have become a threat to the Chinese electronics giants. The defensive wall built by the "Big 3" (Midea, Haier, Gree) is showing signs of cracking in the face of this competitor's onslaught.

From friend to enemy

In 2014, Midea and Xiaomi formed a partnership through a two-way capital agreement. This was part of a larger alliance between the long-established Chinese electronics giant and the emerging mobile phone company. However, the partnership didn't last. Signs of a rift began to appear in 2019 when Xiaomi launched its home appliance division to expand its ecosystem. This move was seen as a stab in the back for its ally.

In the years that followed, Xiaomi suddenly disappeared from Midea's shareholder list. Conversely, the electronics giant quietly sold off its stake in its partner, raking in 2 billion yuan.

Around the same time, Midea launched a smart home network and mobile application to compete with Mijia (Mi Home). However, Midea, being primarily a manufacturing company, had far inferior capabilities in integrating with internet platforms compared to Xiaomi. Unsuccessful, they returned to their core strengths, mastering the supply chain and selling high-quality products at lower prices than their competitors.

Phương Hồng Ba, Chairman of Midea. Photo: Midea.

The company launched an additional sub-brand, OOLMO, and used the Toshiba label to target the high-end market.

Meanwhile, Xiaomi continues to leverage its strengths in the Mijia ecosystem and app. However, the company relies entirely on OEMs for manufacturing, lacking initiative.

“I wasn’t going to sit idly by and watch Xiaomi take the market. Midea went downhill and I had to compete with them on price,” said Fang Hongba. The company launched its subsidiary, Huangling, which sells online only, to compete with Xiaomi’s air conditioners and cooling systems domestically.

Conversely, Xiaomi is targeting its competitors' strengths. Lu Weibing stated that the company has opened 1,000 retail outlets across China, with plans to increase that number to 5,000 next year. These offline locations directly target customers already buying Midea or Haier products.

The danger from Xiaomi

The Chinese electronics industry maintains a three-way rivalry with Midea, Haier, and Gree. However, Fang Hongba's company still holds the leading position, with a significant lead over the other two. If Xiaomi were to secure a top 3 spot in the industry, Midea would likely remain unaffected.

What is concerning is the decline of this industry in recent years. A report from Aowei Network shows that demand for electronics in the country of over a billion people has stagnated, with signs of decline in some product categories.

Unlike the mobile phone market, where prices fluctuate constantly and customers frequently switch devices, the home appliance sector has already been largely divided. Large companies avoid price wars, which only harm each other. Profit margins in the industry are also relatively thin, resulting in limited volatility.

Xiaomi has ambitions in the large-scale home appliance market, such as washing machines and air conditioners. Photo: Xiaomi.

"Everyone is happy with the current structure and accepts living in peace," said the Midea boss.

Xiaomi is notable for its financial strength and its ability to change the game through its ecosystem. This company operates outside the established structure, posing a threat to the Big 3 giants. Xiaomi's ambition lies in market share and expanding its product portfolio. The company has accepted low profit margins on each product sold, a strategy it has followed for many years. In contrast, Midea prefers a defensive approach, maintaining the existing order.

Compared to Haier, Midea only has the Toshiba brand performing well in the international market. However, this business segment lacks TVs because it belongs to Hisense. This company is lagging behind Haier, Hisense, and TCL in exports and remains dependent on the domestic market.

Meanwhile, after its success with smartphones, Xiaomi quickly expanded into peripherals, including large-scale home appliances. The company has been selling TVs in Vietnam since 2022 and is expected to expand into air conditioners next year.

Source: https://znews.vn/xiaomi-hoa-thu-with-the-largest-household-appliance-company-in-china-post1560328.html