China Electric Appliance Manufacturer

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1 SPECIAL EDITION Refrigeration China Electric Appliance Manufacturer The GLOBAL Display Platform for China Electric Appliance Manufacturer 2011 Overview of China Cold Chain Sector Global Refrigerator & Freezer Market Showcase Commercial Refrigeration Compressor

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4 Contents July 2011 Refrigeration 7 Overview of China Cold Chain Sector 10 Production and Sales Realized Growth; Enterprises Kept High Operation Review of China Refrigerator Sector s Development in Sales Growth Created a New high; Production Capacity Reached a New Level Review of China Freezer Sector's Development 18 Global Refrigerator & Freezer Market 22 Showcase 26 Hisense 27 Haier 28 Midea 30 XINGXING P7 Overview of China Cold Chain Sector 33 SANYO 36 Nakano 37 FuKushima 38 Shandong XIAOYA Upstream 41 Review of China Refrigerator Compressor Sector in Commercial Refrigeration Compressor 52 VIP Application is to become a New Trend in Home Appliance Insulation and Refrigeration Field 55 Embraco 57 Dongbei 59 Jiaxipera 60 Bitzer Index of Advertisements Inserted Front: Bitzer Inside Back Cover: Hisense Back Cover: Embraco P1: GMCC P3: Midea P5: XINGXING 2 CEAM - July

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6 CEAM Chief Editor: Jie Yang Associate Editor: Lizhe Zhang Editor/ Reporter(AC): Xiaofang Suo Xiaolan Fan Zheng Sun Yinghan Wang Editor/ Reporter(HVAC): Yanfang Yu Run Yang Editor/ Reporter(Upstream): Jinhua Zhang Yuxin Pang Editor/ Reporter(Refrigeration): Ping Yang Juan Wang Jingjing Li Ying Liu Editor/ Reporter(Household Appliance): Xi Wang Ling Zhang Qin Liu Art Editor: Yang Zhou Edition and Publishment: China Electric Appliance Manufacturer Address: 619B xinyijiayuan, Chongwenmen Waidajie, Chongwen District, Beijing Zip Code: Website: ChinaIOL ( Editorial Phone: / Advertisement Phone: / Fax: Beneficiary: Beijing Zhixindao Consulting Co., Ltd. Account Bank: Branch in Xuanwu District of Beijing Rural Commercial Bank Bank Account: Issue Date: 18th of each month Price: 5$

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8 PART1: Refrigeration Overview of China Cold Chain Sector Production and Sales Realized Growth; Enterprises Kept High Operation Review of China Refrigerator Sector s Development in 2010 Sales Growth Created a New high; Production Capacity Reached a New Level Review of China Freezer Sector s Development Global Refrigerator & Freezer Marker Showcase Main Manufacturers

9 Overview of China Cold Chain Sector Cold chain refers that in order to maintain the quality of fresh and frozen food, they are put into logistics network with low temperature and specialized equipments from production to consumption process. With the development of refrigeration technology and the rising requirement of the residents on food safety, cold chain logistics has been widely used in developed countries. This sector in China starts late and has low level of development; while in recent years driven by national policies, cold chain logistics improved rapidly. In July 2010, The National Development and Reform Commission issued Agricultural Products Cold Chain Logistics Plan, which put forward that by 2015 the cold chain distribution rates of fruits and vegetables, meat as well as aquatic products in China will rise to more than 20%, 30% and 36% respectively; the refrigeration transportation rates of the three kinds of products will increase to about 30%, 50% and 65% respectively and their deteriorating rates during transportation process will drop to less than 15%, 8% and 10% respectively. This policy will greatly promote the development of China s cold chain logistics sector. A complete cold chain system in c - ludes various low-temperature refri g e- r ation equipments, among which con t- rolled atmosphere storage, cold storage, showcase, display cabinet, freezer and refrigerator, etc, are food storage equipments; refrigerator truck, insulated truck, refrigeration ship, refrigerated con tainer and cooler box, etc, are food refrigeration transportation equipments; instant freezer, freezer dryer, pre-cooling equipment and fermentation equipment, etc, are food processing equipments; ice machine and beverage machine, etc, are special equipments for food refrigeration. In the following there is a brief introduction on the market situation of several main cold chain equipments(chart1): Production and processing: quick-free zing equipment and freezer dryer Quick-freezing equipment develops with the requirement change of cold chain terminal consumers on food; it has a direct influence on the quality of frozen food such as quick-freezing rice and noodles as well as meat. In recent years the sales and revenue of China domestic frozen food sector all kept growth, which also stimulated the demand for quick-freezing equipments. Currently the quick-freezing equipments manufactured in China can be divided into four categories: blast quick freezers, contact quick freezers, cryogenic quick freezers and liquid immersion quick freezers. According to statistics, the sales of quick-freezing equipments in China freezer dryer increased from 872 set in 1999 to more than 4500 sets in 2004, and by 2010 the annual output had reached 8700 sets. China food quick-freezing equipment sector has a history of about 20 years now. Although it has a degree of development, compared with foreign advanced level, there is a gap between them. China quick-freezing equipment sector lags behind in mechanization, automation and set level; the equipments have high energy consumption; there are few resea rch institutions and not many ma n u f- acturing enterprises with large scale. The main domestic enterprises inc l u de: Nantong Freezer Equipment Com pany, Yantai Moon Co., Ltd, China A er ospace Shenyang Xinyang Quick-Freezing Equipment Manufacture Co., Ltd, Shenyang Bingtian Refrigeration Equipment Co., Ltd and Tianjin Tianma Refrigeration Equipment Engineering Co., Ltd, etc. Freezer dryer is for cooling and drying, CEAM - July

10 including refrigeration system, vacuum system, heating system and electric meter control system. It can be divided into two categories according the application: the first is post-processing type freezer dryer; the second is production type freezer dryer. China freezer dryer manufacturing sector started from 1950s; at present the market is relatively mature but the growth is slow. In 2010 the sales of freezer dryer reached 213,000 sets, totaling billion Yuan, up 6.2% and 11.6% year on year respectively. There are many enterprises that manufacture freezer dryer; according to incomplete statistics, there are about 3000 or so in China and the brand concentration rate is low. The top 10 ones include Kcstech, Jiamei Cleaning Equipment, Fuyang Ride, Jiabo Purity, Dongguan Hjinlong, HANFILTER, Shida Cleaning Equipment, Shanli Purify Equipment, kelin Ai er and Zhendong Machinery. The enterprises producing medical freezer dryer are mainly Shanghai Tofflon and IMA Edwards. Freezer dryer is applied in commercial and industrial areas, with limited market scale. Driven by good economic environment and national policies, this sector is developing rapidly and has bright prospects. Transportation: refrigerator truck China s refrigerator truck sector is easily affected by policies. If the government puts strict check on refrigeration transportation or implements stimulation policies, it will offer this sector a great deal of opportunities. According to the statistics of ChinaIOL, in recent years there has been 6000 new refrigerator trucks manufactured in China; driven by policies, this number is as high as 9000 in There are more than 100 refrigerator truck enterprises, among which only 20 ones are large scale ones. Most of the market shares are taken by CIMC Vehicles, Henan Bingxiong, Zhengzhou Hongyu, Henan Xinfei and Zhenjiang Speed, etc. Due to limited market capacity, the competition is quite fierce, and the profit is lower and lower. The merger and reorganization among refrigerator truck enterprises are inevitable; therefore the market share will gradually fall in the hands of leading enterprises. Storage: cold storage The cold storage in China can be divided into cold storage, freezer storage, low-temperature cold storage and controlled atmosphere storage. In recent years this sector has developed rapidly, especially the widely used smallscale cold storage, which stimulated the development of cold chain sector. Besides small-scale cold storage, China also increased investment on building large public cold storage, keeping the growth of the volume of cold storage at about 15% annually. The regional characteristics of economic cold storage are obvious, mainly concentrating in the eastern coastal area, the Bohai Economic Zone and Guangdong and Guangxi in South China. The main distributed provinces include Shandong, Zhejiang, Liaoning, Jiangsu, Beijing, Shanghai, Tianjin, Guangdong and Guangxi. The cold storage can be divided into aquatic product cold storage, meat cold storage, fruits and vegetables cold storage as well as others by application. The volume of meat cold storage is the largest, accounting for more than half of the total volume of cold storage; aquatic product cold storage ranks second, accounting for 1/4 of the total. Fruits and vegetables cold storage is relatively scarce but also highly demanded. The cold storage state-owned enterprises with high popularity in China are Dalian Bingshan and Yantai Moon; the two enterprises take 60% to 70% Chart 1 Cold chain system structure 8 CEAM - July

11 of the total market share and their undertaking capacity and technical level are unreachable, therefore they dominate the high-end cold storage market. Foreign enterprises such as Ingersoll Rand are also optimistic about the cold storage sector in China; their investment in this market is growing year on year. There are many medium-sized private cold storage enterprises with annual sales amount of 300 million Yuan in Shanghai, Changzhou of Jiangsu, Dalian, Shandong and Dongguan of Guangdong, etc. Sales: showcase and freezer The main client base of showcase is supermarket chain, so the development of showcase sector depends on the expansion of supermarket chain. The overall scale of this sector is not large; the development is slow and the market structure is relatively stable. Showcase technology develops fast in foreign countries, therefore European, American and Japanese enterprises in Chinese market take most of the market share. The main European and American enterprises are Haier-Carrier and Hussmann; the main Japanese ones are Sanyo Cold Chain, Highly Nakano and Er Shang-Fukushima. The main customer of freezer is mainly group client, which is also called specialized client, which indudes enterprise of drinks, beer or dairy products. Those specialized clients have different requir ements on the freezer; therefore the market capacity of freezer is determined by the terminal clients. Cold drinks are mainly sold in summer, so the production of freezer has obvious seasonal characteristics, mainly in the first half of the year. Due to domestic economic growth and international economic recovery, the sales of freezer are rising year by year. The main manufacturing enterprises are Haier, Xingxing, Midea, Aucma, Hailishi, Hisense-Kelon, Baixue, Frestech and Meiling, etc, among which Haier takes the largest market share. Household refrigeration: refrigerator Refrigerator is a well-known food cold storage equipment, playing a role in the final check along the cold chain from farm to table for food quality. In recent years China refrigerator sector has maintained about 25% of growth; due to the impact of financial crisis in 2008, the development shrank slightly. China's refrigerator products are mainly supplied to domestic market, accounting for 70% of the market share, thanks to the stimulation of relative national polices on domestic refrigerator market. There are many refrigerator enterprises in China, and the domestic ones take absolute advantages in the market. Among foreigninvested enterprises, Siemens is more competitive. In the recent two years the top five enterprises according to their sales are Haier, Midea, Hisense-Kelon and Frestech. The enterprise with best performance in export market is Homa who takes lots of market share in export volume. Special Application: ice machine Ice machine sector is relatively new in China; with small scale, it is mainly used in commercial field. According to the application ice machine can be divided into household ice machine, commercial ice machine and industrial ice machine. Currently commercial ice machine takes nearly 90% of the market share, and the market share of household ice machine and industrial ice machine is small, especially household ice machine. In recent ten years the combined average growth rate of commercial and industrial ice machine has been keeping at about 20%, mainly because that their application sectors are quite broad, including nuclear power, water conservancy, hydroelectric ice machine power, construction, retail, chemistry, medicine, food, aquatic product, mine and entertainment sectors. The domestic market scale of commercial ice machine is not large; with the development of relative sectors such as tourism and catering, the market demand is steadily increasing. At present the enterprises with large output include Fujian Snowman, Ningbo Grant, Shenzhen Brother, Japanese Hoshizaki, Scotsman and Manitowoc; they takes large shares in supermarket chains, retail, food processing, hotel groups, civil aviation as well international catering groups. Due to large ice volume, industrial ice machine needs relative matching refrigeration system; because that the application requirements are quite different, it always needs circulating water, design of electriccontrolling system, prefabrication and field assembly, therefore it requires strong professional technical capabilities. Currently there are just a few industrial ice machine enterprises in China, including Fujian Snowman, Ningbo Grant and Chongqing Iceman, etc. After having a preliminary understanding of China cold chain sector, we will further introduce in detail the development of refrigerator, freezer and showcase products home and abroad, as well as the development of relative upstream component sectors such as compressor and insulation material in China. CEAM - July

12 Production and Sales Realized Growth; Enterprises Kept High Operation Review of China Refrigerator Sector s Development in 2010 With the gradual recovery of global economy, as one of BRIC, China s economy achieved a great result in 2010 and the refrigerator sector also kept high level operation with impressive achievement. Production Capacity Layout Influenced by China domestic stimulus policies in 2009, the refrigerator sector burgeoned; many enterprises began to expand production capacity, especially the refrigerator giants, among which Haier, Midea and Xing Xing increased more than 20% of production capacity and the export champion Homa even increased more than 50%. Seeing the promising future of highend market, lots of enterprises increased large refrigerator production lines; som e m e dium and small refrigerator manufacturers also built new plants stimulated by the policies. Those expanded and newly-built production capacities began to be released gradually in 2010, which pushed the total production capacity of refrigerator in 2010 increased by 16% year on year. (Chart 1) Characteristics of Production and Sales In 2010 the total output of China refrigerator sector reached million sets, up 26.4% year on year; the total sales got million sets, up 23% year on year; the exports realized million sets; the domestic sales reached million sets; the inventory was million sets. The production and sales in 2010 achieved a new level compared with (Chart 2/3) With the accelerating increase of domestic demand especially the demand of rural areas in the recent years, the proportion of domestic sales tended to be higher than that of exports. After the economic crisis in 2009 this situation was more obvious. The exports even showed negative growth. At the same time driven by the domestic policies including Home Appliance to the Countryside and Oldfor-new, the domestic refrigerator market scale was enlarged, which made the proportion deviation between domestic sales and exports more obvious. Compared with the weaker exports, the domestic sales of refrigerator in China in 2010 kept high level of growth, with annual increase of nearly 30% year on year. The biggest stimulation of domestic sales came from the policies of Home Appliance to the Countryside as well as Old-for-new whose further implementation drove the emerging and dem and update of the third and fourth tier consumer market and urban market; the frenzy of the property market before the regulation in 2010 also stimulated consumption, all of which drove the high growth of refrigerator sales. Some insiders believed that, besides the boosting of the property market, the refrigerator consumption entered replacement period and the demand for high-end products grew rapidly, which promoted the fast development of this sector. (Chart 4) As in 2009, the top five refrigerator enterprises in 2010 still were Haier, Midea, Hisense-Kelon, Meiling and Fre s tech. Those domestic brands took abs olute dominance; foreign-invested br- Chart 2 Refrigerator PSI from 2005 to 2010 (Unit: 10k sets) Year Production Sales Total Exports Domestic Sales Inventory y-o-y 26.4% 22.7% 6.7% 29.7% 107.5% y-o-y 29.9% 32.6% 4.0% 50.7% -32.4% y-o-y 4.1% 3.7% 1.2% 5.3% 86.5% y-o-y 28.9% 28.5% 19.5% 35.2% 10.3% y-o-y 23.9% 20.0% 11.9% 26.9% 24.3% Source: ChinaIOL 10 CEAM - July

13 Chart 1 Refrigerator production capacity summary sheet in 2010 (Unit: 10k sets) Haier Hisense- Kelon Midea Meiling Frestech Homa Xing Xing Siemens LG Samsung Sharp Baixue Wanbao Panasonic Konka Toshiba TCL Aucma Region Heifei Qingdao Chongqing Guiyang Dalian Total Capacity Region Shunde Chengdu Huzhou Nanjing Yangzhou Beijing Yingkou Total Capacity Region Hefei Guangzhou Jingzhou Total Capacity Region Hefei Mianyang Jingdezhen Total Capacity Region Henan Total Capacity Region Zhongshan Total Capacity Region Taizhou Xuzhou Total Capacity Region Chuzhou Total Capacity Region Taizhou Total Capacity Region Suzhou Total Capacity Region Shanghai Total Capacity Region Changshu Chongqing Total Capacity Region Guangzhou Total Capacity Region Wuxi Total Capacity Region Chuzhou Total Capacity Region Nanhai Total Capacity Region Qingdao Total Capacity Region Qingdao Total Capacity Region Ningbo Shanghai Zhongshan Hefei Henan Chuzhou Tianjin Hangzhou Others Total Other Capacity Total Capacity Notes: 1.* indicates predicted production capacity 2. From 2009 Midea brand includs Little Swan and Hisense-Kelon brand does not include Whirlpool-Hisense Co.,Ltd Source: ChinaIOL CEAM - July

14 an ds missed the top five and only S iemens entered top ten. Haier was still the industrial leader but its domestic market share declined slightly; after the marketing integration of the three main white electrical appliance products, Midea actively responded to the demand for high-end products and its market share rose greatly; the market share of Hisense- Kelon in 2010 increased slightly, with two brands co-operating currently. With the growth of production and sales, the inventory of refrigerator in China in 2010 also showed rapid increase, partly because that the market demand was high and the enterprises increased their inventories, and partly because that with the further implementation of Home Appliance to the Countryside policy, the law of diminishing marginal utility was more obvious and the stock of the self-built channels of the enterprises also increased. From the second half of 2010 the inventory increased rapidly but the inventory of the enterprises was still under control in general. Chart 3 Change of proportion between China refrigerator sector domestic sales and exports from 2004 to 2010 Source: ChinaIOL Chart 4 China refrigerator sector concentration ratio in 2010 Exports China refrigerator exports have been in a growth trend for a long time until the global economic downturn. In 2009 China refrigerator exports showed 7.77% of negative growth but recovered in the second half of that year. In 2010 the exports increased by more than 23% and the million sets of export volume created a new record; In addition, the average export price of refrigerator in 2010 dropped by 4.8% year on year, with each set decreasing 5.8 U.S. dollars in average. The export price of semiconductor household refrigerator had the largest drop of about 21% year on year. (Chart 5) Europe and America were still the main export markets of China in The United States has been the most important export market of China and it was also the one with the largest influence to China refrigerator exports. In 2010 the United States market took 18.9% of the global market share, up more than 43% year on year. Another major export market was Italy; China refrigerator exports to Italy in 2010 accounted for 10% of the total exports, up more than 200% year on year. Besides, China refrigerator exports to Britain, Germany, Russia and Spain Source: ChinaIOL Chart 5 China refrigerator sector export volume and amount evolvement from 2005 to 2010 (Unit: 10k sets) also increased by more than 50% year on year. (Chart 6) The enterprise with largest export volume in 2010 was Homa. From 2009 to 2010 Homa expanded and consolidated rapidly its refrigerator market share; in 2010 Homa s export volume accounted for about 12% of the total, far exceeding Source: Customs General Administration other competitors, and this proportion was only 8.0% before As China s refrigerator sector leader, Haier has been reducing sales of profit-gap refrigerators and in profit-gap regions; in 2010 Haier s export volume accounted for 4.9% of the total, with average export unit price rising further. 12 CEAM - July

15 Characteristics of Product In China domestic refrigerator market of 2010, the traditional double door refrigerator still took the largest market share of 65.8%, which was followed by 3 doors refrigerator whose market share got 23.2%; single door and French door products took the smallest shares. In the aspect of domestic demand, the market of middle and low-end single door and double door refrigerator with small volume continued to shrink; double door refrigerator product with high price quality will be favored by rural market; the market share of high-end refrigerator such as 3 doors, French door and side by side combination product is increasing, especially in urban market. (Chart 7) In addition, energy efficiency and environmental protection have become the trend of China refrigerator market in the recent years. More and more consumers took energy efficiency rating and power consumption as the most important indicators to consider when purchasing. Therefore the market share of refrigerator with the first level energy efficiency will continue to rise in the future. Statistics show that in 2010 all refrigerator manufacturers launched more than 1600 models of new products, more than that in 2009, but the performances of the new products were identical, with selling points focusing on preservation, CFC-free, sterilization and mute as well as varied color and material of appearance. Among new products in 2010, double door ones accounted for more than 90%, but the enterprises turned their strategic focus to high-end refrigerator with more than 3 doors, such as Eiffel series of Hisense, Casarte series of Haier, Athena series of Meiling as well as Vandelo series of Midea. High-end products not only meet the demand of consumers, but also achieve high profit for the manufacturers. Development Prediction In early 2009, the gradual implementation of China economic stimulation polices such as Home Appliance to the Countryside, Old-for-new and Subsidy for Energy Efficiency pushed the rapidly development of home appliance sector. While from 2010 especially the second half of that year, the marginal utility of the polices diminished gradually and the demand increase stimulated by economic development and the polices became dominant. Judging from the overseas situation, IMF expects that the global economy in 2011 will grow 4.4%; while under the influence of debt crisis in Europe, Japan earthquake and the war in Libya, China refrigerator exports will continue to increase but the growth rate will not be much higher than that in the recent two years. (Chart 8) Chart6 Refrigerator export volume and amount comparison by country from 2009 to 2010 Source: Customs General Administration Chart 7 China refrigerator market scale by type in 2010 Unit: 10k sets Source: ChinaIOL Chart 8 China refrigerator market scale prediction from 2003 to 2012 (Unit: 10k sets) Item * 2012* Sales Volume Growth 38.7% -2.0% 20.0% 28.5% 3.7% 32.6% 22.7% 16.0% 12.0% Domestic Sales Volume Growth 35.3% -16.4% 26.9% 35.2% 5.3% 50.7% 29.7% 18.8% 13.0% Exports Volume Growth 45.1% 22.9% 11.8% 19.6% 1.1% 4.0% 6.7% 8.2% 8.9% Notes:* means predicted data Source:ChinaIOL CEAM - July

16 Sales Growth Created a New high; Production Capacity Reached a New Level Review of China Freezer Sector s Development Compared with the ups and downs of other home appliance markets, the production and sales of freezer have been relatively stable. With the introduction of policy of Home Appliances to the Countryside which brought benefits to refrigerator and freezer sector, the sales and production capacity of freezer all reached a new level and achieved a good result in Production Layout In recent years, the output of freezer in China has been maintaining below 20 million sets; with the gradual expansion of domestic market, this situation came to an end in According to the statistics of ChinaIOL, the output of freezer in 2011 can reach 22.5 million sets, the highest growth in recent years. The reasons for this high growth are as followings: first is the low market base; second is the stimulation from national policies such as Home Appliance to the Countryside. As special refrigeration equipment, the application of freezer in household field is more limited than that in commercial field, therefore it cannot realize explosive growth in household field but has got great improvement in commercial field. (Chart 1) Due to various factors such as transportation, resources, economy and hu man resources, currently the product ion base of freezer in China mainly concentrates in East China. Freezer production is strongly depended on relatively mature home appliance ma- nufacturing base in the aspect of manufacturing capacity, therefore Shandong, Zhejiang and Anhui are called giant freezer manufacturing provinces thanks to rich home appliance manufacturing and production capacities as well as many major production bases. The production capacity of Meiling in 2011 will reach 1.2 million sets. Meiling invested 375 million Yuan on freezer production base and is going to put another 300 million Yuan of raised funds into this project. After the first and second phases of construction, it can boast annual production capacity of 0.6 million sets of freezer with volume lower than 300L and 0.6 million sets of freezer with volume more than 300L, totaling 1.2 million sets annually. Before this project some enterprises in Jiangsu and Zhejiang region did OEM for Meiling, such as Handsam Electrical Appliances (Ningbo) Co., Ltd and Feilong Electrical Appliance Group. With Meiling s own production base going to be put into operation, the release of production capacity of the OEM enterprises will also be a problem. Characteristics of Production and Sales It is said that the output of freezer in China kept more than 30% of growth from 2009 to 2010, a major change Chart 1 China freezer production capacity scale evolvement from 2008 to 2011 (10k sets) Source: ChinaIOL 14 CEAM - July

17 compared with the market before The growth of output is partly due to the growing demand and partly because that the low price of freezer as the product on the extended production line of refrigerator seizes some market share from refrigerator. The rapid development of freezer sector in the recent two years is largely benefited from the policy of Home Appliance to the Countryside; while the second-tier brands and local small freezer enterprises are more stimulated by the policy than first-tier brands. (Chart 2) In 2010 the total sales of freezer reached million sets, up 33.7% year on year, a new high compared with 28.3% in The huge increase of freezer sales is partly due to the policies of Home Appliance to the Countryside and Old-fornew, and partly due to the growth of export market. Influenced by domestic economic growth and international economic recovery, freezer used in commercial field had some degree of development which also promoted the sales of freezer. The main clients of freezer are group ones, including drinks, beer and diary product enterprises. (Chart 3) In 2010 the sales of Hisense-Kelon s freezer increased by 74.5%, only lower than the 103% of Midea. This growth mainly came from export market. Among main enterprises, only Hisense-Kelon realized exports accounting for 50% of its total sales. Currently most main enterprises put focus on domestic market. (Chart 4) According to the statistics of ChinaIOL, in 2010 the domestic sales of freezer reached million sets, up 22.1% year on year, with growth rate lower than that in Influenced by national policies such as Home Appliance to the Countryside, in 2009 China freezer market grew rapidly; with the diminishing of the effects of polices in 2010, the development of this sector slowed down. Haier continued to keep its leading position in domestic market, but its growth rate dropped obviously. In 2010 Haier only reached a growth of 4.8%. Xingxing and Aucma followed afterwards with strong growth, especially Aucma, which maintained more than 50% of growth rate after the 64% in Midea increased by 106.5% year on year, the highest among freezer enterprises. In Chart 2 China freezer enterprise output growth from 2009 to 2010(10k sets) First-tier Brands Second-tier Brands Others Growth y-o-y 22% 45% 36% First-tier brands:haier and Xingxing Second-tier brand:top 8 enterprises excluding Haier and Xingxing 80% 60% 40% 20% 0% Source: ChinaIOL Chart 3 China freezer market scale analysis from 2005 to 2009 (10k sets) Source: ChinaIOL Chart 4 Contrast between China freezer domestic sales and exports from 2005 to 2010 (10k sets) Source: ChinaIOL CEAM - July

18 addition, Midea expanded 4 million sets of production capacity in 2011 and set up freezer business sector, which shows that freezer sector is getting more and more attention. Chinahls and Hisense- Kelon were the only two enterprises with dropping growth rate. Both freezer and refrigerator are refrigeration devices and they have something in common in production and application; therefore freezer can be replaced by refrigerator in household consumption aspect. So the main domestic market of freezer currently is in the marginal fields such as store, farmer s market as well as restaurant. Its market is relatively fragmented and the product is in low-end level. Chart 5 China freezer export market scale from 2005 to 2010 (10k sets) % % % % % Export Volume Growth y-o-y 17.6% 37.9% -8.0% 10.3% 56.7% Source: General Administration of Customs Characteristics of Exports In 2010 global economy gradually recovered but the regional gap was deepening. The United State had strong momentum of recovery but its real estate and employment fields still faced challenges. The annual inflation rising rate of Euro Zone in December exceeded the medium-term target of ECB, and the rising price index may lead to the rising of interest rate by ECB. The home appliance industry in Asia began to rebound and the profit and loss of the enterprises were various. (Chart 5/6) In 2010 China freezer exports realized 6.52 million sets, up 65% year on year. The seasonal characteristic of freezer exports is obvious; its busy season is from March to July; while from 2009, except February, the busy season extends from last November to July. As for freezer manufacturing enterprise, the production busy season concentrates in the first half of each year, especially before May. The export average unit price of freezer in 2010 was 155 U.S. dollars per set, lower than the 156 U.S. dollars per set of The export average unit price of freezer sector has been low; while with refrigerator exporting experience, the enterprises have been able to deal with profit and market share rationally. Compared with 2009, the market shares of main freezer enterprises in 2010 all had various degrees of declines. In 2009 the market shares of Haier and Xingxing were 23% and 15.5% respectively, while in 2010 the proportions dropped by 18.4% and 12.9% respectively. The market share Chart 6 China freezer exports by countries in 2010(%) 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% America Asia Africa Europe Oceania Growth of Export Volume 46.1% 64.6% 65.5% 55.4% 46.5% Growth of Export Amount 42.9% 66.8% 55.7% 54.2% 55.6% Growth of Average Unit Price -2.2% 1.4% -5.9% -0.8% 6.2% Source: General Administration of Customs Chart 7 China freezer market scale by model in 2010 (unit: 10k set; %) % % % Upright Unit Horizontal Unit Commercial Unit Total Sales Growth y-o-y 33.0% % 30.0% 20.0% 10.0% 0.0% Source: ChinaIOL 16 CEAM - July

19 of other brands showed growth, such as Midea and Chinahls. In the aspect of export market, the export volume and amount of freezer all realized certain growth, but the export average unit prices of the continents were various. In 2010 the export average unit prices of Asia and Oceania showed some growth but other continents all dropped, especially African market, with 5.9% of decline. Characteristics of Product As a special category between refrigerator and freezer, the market of upright freezer in 2010 kept relatively high growth; in 2009 its total sales reached 1.2 million sets, and in 2010 the number was up to 1.57 million sets. As a conventional freezer product, horizontal freezer realized growth of 34.7% in 2010, a high growth rate compared with other categories. (Chart 7/8) The sales of product category with volume between 300L to 400L increased by 67.7% year on year, the highest in 2010; compared with its sales in 2009, its market share was up 2 percentage points. Although the market share of the category with volume of 160L and less increased by 4 percentage points year on year, due to large market base, its growth realized 52.9%, second only to that of the category with volume between 300L to 400L. Development Prediction In 2011 China freezer sector will face negative impacts from both domestic and international markets. In the aspect of domestic market, although the stimulation policies such as Home Appliance to the Countryside continues to be implemented in 2011, the marginal effects are diminishing gradually, coupled with the reducing of allowable loan for the enterprises due to domestic inflation, and the great dropping of the spending will of the customers which deeply affects the direct clients of freezer, the domestic environment freezer sector faces in 2010 is more and more severe. It is expected that in the next two to three years, the market growth of freezer will keep at about 15% and never realize more than 20% as in 2010; the overall growth of sales will not reach more than 30%. In the aspect of exports, the export market has been the one that many enterprises try hard to expand. While after the financial crisis in 2008, the recovery of international was not satisfactory; although the increase of consumers consumption of the United States drove the growth of its economy reaching 3.1% in the fourth quarter of 2009, the rising oil price caused by the unrest in the Middle East may undermine the purchasing power of the customers; in addition, the supply shortage due to the earthquake in Japan and its subsequent impact will also slow down the economic recovery, therefore the high growth of export market may not be realized in a long time. In the aspect of product, the entry energy efficiency level of Home Appliance to the Countryside project for freezer is the second level. In 2010 the proportion of product with the second level of energy efficiency rose to 80.6%. While expanding market share, the technology of freezer sector was also improved. The energy efficiency level of freezer in 2011 is expected to be further improved; with the fiercer market competition and higher technical threshold, some non-standard enterprises may be squeezed out of the market. Chart 8 China freezer product structure (according to volume) from 2009 to 2010 Source: ChinaIOL CEAM - July

20 Global Refrigerator & Freezer Market Global Production In 2010 the global output of refrigerator (freezer) reached million sets (deducting the double counting part due to OEM), and the products were sold in nearly 200 countries and regions. There were about 120 refrigerator manufacturing enterprises that set up plants in over 50 countries, including both developed and developing ones, which shows the characteristics of production in multiple centers and focusing on sales in nearby regions with sales all over the world as supplement. (Chart 1) In 2010 the global production of refrigerator (freezer) mainly concentrated in Asia, with total output of million sets, accounting for 69.2% of the global output. The production in Asia was mainly in China, Thailand, India and South Korea. Europe ranked second, with total output of million sets in 2010, accounting for 15.6% of the global output. The output of Africa and Oceania was the smallest. There were 19 countries with annual output of refrigerator exceeding 1 million sets in 2010, with wider and more concentrated geographic distribution. The total output of the top ten countries took 84.9% of the global output. The country with the largest output was China, reaching million sets; Thailand and Mexico ranked the second and third. The top three enterprises according to their output were Haier, LG and Midea, with combined output accounting for 24.8% of the total. (Chart 2) The layout of refrigerator (freezer) production in the world in 2010 was still transferring from developed countries to developing ones. In Asia it continued to transfer to Thailand, India and Indonesia; in America it was transferring to Mexico and Brazil; in Europe it was transferring Chart 1 Global main refrigerator (freezer) production continent distribution in 2010 (Unit: production (million sets)) Source: ChinaIOL Chart 2 Global main refrigerator (freezer) production country distribution in 2010 (Unit: production (million sets)) Source: ChinaIOL 18 CEAM - July

21 from developed regions in Western Europe to Poland, Hungary and Russia in Eastern Europe, or the European enterprises increased the purchase of OEM products from other enterprises in other countries, especially India, Poland and Russia. News of Global Enterprises Production General Electric plans to invest 432 million U.S. dollars to set up four refrigeration product design and pro duction centers in USA, so as to produce new energy-efficient refrigerators as well as other electrical appliances. In order to further increase the share of white home appliance market in emerging countries such as China, Toshiba is carrying out a plan of white home appliance R&D localization, in order to relocate R&D center to enhance significantly the R & D capabilities of plants in foreign countries such as China and Thailand. Panasonic will invest 6 billion and 2.5 billion Yen in Brazil and India respectively to set up refrigerator and washing machine plants. The new plant in Brazil will be located in the suburbs of Sao Paulo and put into operation in 2012, with annual output of 0.5 million sets of refrigerators and 0.2 million sets of washing machine. The plant in India will be built in Gurgaon of Hariana and put into operation in August 2012, with expected annual production of 0.5 million sets. In 2010 the product R&D budget of Electrolux for the plant in Nyiregyhaza in eastern Hungary was 5.2 million Euros. This plant was set up five years ago with investment of 85 million Euros; it has 3 production lines and 1350 employees and can manufacture 580 refrigerator models. BSH Group sold its business in Brazil to Latin American home appliance enterprise Mabe Company on 1st July of 2010 whose headquarters is in Mexico. The acquisition included the production facilities and distribution channels of BSH in Brazil but did not involve other Latin American markets. Mabe will take over all the businesses and employees of BSH in Brazil. Refrigerator plant Atlant in Belarus set up industrial park in Kazakhstan in 2010; this industrial park produces refrigerator and freezer, with annual production of 0.25 million sets. Global Sales The global shipment of refrigerator (freezer) in 2010 realized 168 million sets, up 17% year on year, converted into terminal sales of approximately 68.7 billion U.S. dollars. The expected shipment in 2011 can reach 185 million sets, converted into terminal sales of approximately billion U.S. dollars. It is expected that in 2013 the shipment will get more than 0.21 billion sets, converted into terminal sales of billion U.S. dollars. (Chart 3/4) The economies of most countries in 2010 got better. The falling of unemployment, increasing of consumers confidence, booming of real estate market, as well as the implementation of Home Appliance to the Countryside and Old-for-new policies in China, the preferential tax policies in Brazil, Chart 3 Global refrigerator (freezer) market performance and prediction over years (based on volume) (Unit: 10k sets) Source: ChinaIOL Chart 4 Global refrigerator (freezer) market performance and prediction over years (based on amount) (Unit: 100 million USD ) Source: ChinaIOL CEAM - July

22 the Eco-friendly Accumulated Points policy in Japan, the Energy-efficient Home Appliance Discount Plan policy with total subsidy of 0.3 billion U.S. dollars in USA, the energy-efficient home appliance subsidy plan in Thailand and the Refrigerator Old-for-new policy in Mexico, stimulated greatly the growth of refrigerator (freezer) sales in With the upturning of economy in 2011, the global refrigerator (freezer) market will continue to prosper; while due to the diminishing of the stimulation from Home Appliance to the Countryside policy in China and the cancel of preferential policies of some countries, the growth rate will drop significantly year on year. As global inflation continues, the average unit price of refrigerator (freezer) will further increase in Characteristics of Sales Market In 2010 the most important refrigerator (freezer) consumption markets were China, North America and Europe. Except Oceania with weak sales growth, other continents all realized significant increase in sales. The sales in China reached million sets, accounting for 36.86% of global total sales; Europe realized million sets. Accounting for 20.39% of the total; Asia got million sets, accounting for 18.89% of the total; North America reached million sets, accounting for 13.04% of the total; South America was million sets, accounting for 7.06% of the total. (Chart 5) The sales in Asia were significant. Not only China and India realized excellent results, other regions such as Indonesia, Thailand and Vietnam also had rapid growth. At present China is still the largest refrigerator (freezer) consumption market in the world. In 2010 the Home Appliance to the Countryside policy of China stimulated huge consumer demand in rural market, and the Old-for-new policy also drove to some extent the sales of refrigerator (freezer) in the first and second-tier market. Except in the Netherlands, Poland and Portugal that the sales of refrigerator dropped again on the basis in 2009 due to factors such as economy, the sales in other regions of Europe all recovered and began to grow. The demand from countries such Chart 5 Global refrigerator (freezer) sales market distribution in 2010 (Unit:volume (10k sets)) China 36.86% Asia 18.89% North America 13.04% Volume South America 7.06% Europe Share 20.39% Africa 2.77% Oceania 40% 35% 30% 25% 20% 15% 10% 5% 0.99% 0% Source:ChinaIOL Chart 6 Refrigerator (freezer) product market share by category in 2010 (based on volume) (Unit: volume (10k sets)) Source:ChinaIOL Chart 7 Refrigerator (freezer) product market share by category in 2010 (based on amount) (Unit: amount (10k USD)) Source:ChinaIOL 20 CEAM - July

23 as Russia had a huge increase. The home appliance market of United States as the largest refrigerator (freezer) consumption country recover ed significantly, especially the sales of large-size electrical appliances which rose greatly driven by the policy of Eco-friendly Accumulated Points. Although the home appliance consumption situation in Canada was not well, the growth momentum of the United States and Brazil drove the overall sales of refrigerator (freezer) in America. The overall sales of Africa were not bad, especially South Africa and Nigeria, realizing explosive growth. The refrigerator (freezer) market of Oceania performed poorly affected by Australia. Characteristics of the Market by Category According to the sales volume, in 2010 refrigerator-freezer took 67.8% of the market share; refrigerator took 15.2%; freezer took 17.0%. According to the sales amount, refrigerator-freezer took 75.8%; refrigerator took 11.1%; freezer took 13.1%. The average unit price of refrigerator-freezer was 457 U.S. dollars/ set; refrigerator was 300 U.S. dollars/set; freezer was 315 U.S. dollars/set. (Chart 6/7) In 2010 the total sales of refri g- e rator-freezer reached millio n sets. The sales of double-door refrigerator-freezer accounted for large parts of the total sales; the sales of 3 doors refrigerator-freezer, French door refrigerator-freezer and side by side refrigerator-freezer all continued to rise. The consumption markets of refrigerator-freezer mainly concentrated in the United States of America, Japan, South Korea and China of Asia as well as Italy of Europe, and its market share in Japan was the highest among other countries. In 2010 the total sales of refrigerator realized million sets; its main consumption markets included the United States, India and Russia. In 2010 the sales of freezer totaled million sets, and its main consumption markets concentrated in Asia, Middle East and Africa. (Chart 8) Chart 8 The main enterprises and brands of global refrigerator (freezer) market Serial Company Name Main Brand 1 Haier Haier 2 Hisense-Kelon Hisense, Rongsheng 3 Midea Midea, Hualing / Royalstar / Little Swan 4 Frestech Frestech 5 Xingxing Xingxing 6 LG LG 7 Meiling Meiling 8 Baixue Baixue 9 Sanyo Sanyo 10 Panasonic Panasonic 11 Sharp Sharp 12 GE GE/Hotpoint / Amana 13 Electrolux Electrolux / Frigidaire/ 14 Whirlpool, Maytag Whirlpool / Kenmore / Danby 1 /Maytag / Magic Chef / Roper /Amana/Owens / Kitchenaid 15 Sears Kenmore 2 / Goldstar 16 Mitsubishi Electric Mitsubishi 17 Hitachi Hitachi 18 Samsung Samsung 19 Miele & Cie GmbH & Co Miele 20 Indesit Co SpA Ariston/Hotpoint- Ariston / Stinol 21 Hitachi Ltd Hitachi 22 Dawoo Dawoo 23 Arçelik Arçelik / Beko / Altus / Awareness 24 Fisher & Paykel Active 1 Danby is one of the largest home appliance distributors in North America; it does not produce finished products, only OEM by other enterprises. 2 Kenmore is one of the brands of Sears, OEM by other home appliance manufacturers. CEAM - July

24 Showcase Production Layout China's showcase enterprises are mainly located in East China, North China and South China, among which the number in East China is the largest, mainly in Shandong and Shanghai. China showcase market is mainly occupied by foreign-invested brands, because that supermarket is originated from foreign countries and their supermarket showcase technology develops rapidly. The major Japanese enterprises among foreigninvested ones are Sanyo Cold Chain, Highly Nakano and Er Shang-Fukushima; the main European and American ones are Haier-Carrier and Hussmann. Those five enterprises generally take 80% to 90% of the market share.(chart 1/2) In recent years, supermarket retail sector has developed very fast in small and middle second and third tier cities, which stimulated the development of some state-owned showcase enterprises in those cities, such as Shandong Xiaoya Retail Equipment Co.,Ltd, Shanghai Jincheng Refrigeration Equipment Co., Ltd, Shanghai Furong Industry Co., Ltd, ZhongShan Jingli Refrigeration Equipment Manufacturing Co., Ltd and Epta ( Qingdao ) Retail Equipment Co., Ltd, etc. In export market, Shandong Xiaoya, Zhongshan Jingli and Epta brought big impact to the original enterprises of this sector. In the next few years, the competition within this sector will become increasingly fierce, while the dominant position of large foreign-invested enterprises in China domestic market will not be shaken, and the whole sector will form large-scale of industrial development driven by those large brands. Characteristics of Sales Surveying the development of China showcase sector in the recent years, there Chart 1 China main showcase enterprise regional distribution (sale amount) Source:ChinaIOL Chart 2 China main showcase enterprise production base distribution Enterprise East China South China North China Sanyo Cold Chain Dalian,Liaoning Haier-Carrier Qingdao, Shandong Highly Nakano Shanghai Hussmann Shanghai ER SHANG- FUKUSHIMA Beijing Little Duck Jinan,Shandong Shanghai Jincheng Shanghai Zhongshan Jingli Zhongshan, Guangdong EPTA Qingdao, Shandong Shanghai Furong Shanghai Source:ChinaIOL 22 CEAM - July

25 are two characteristics: first, the overall scale is not large, with about 1.5 billion Yuan of sales annually; second, the development is relatively slow, with only 1% to 5% of growth rate each year. (Chart 3/4) The financial crisis from the end of 2008 to 2009 brought some impact to the showcase sector; showcase export amount showed consecutive decline in the past two years and the export amount in 2009 dropped nearly by 30% compared with that in While driven by a series of policies Chinese government introduced, the number of supermarket in China increased rapidly, which stimulated significantly the development of showcase sector whose domestic sales amount kept some degree of growth. In 2010, China showcase sector got rid of the shadow of economic crisis and recovered, with sale amount reaching 1.7 billion Yuan and growth rate exceeding 10%. China showcase manufacturers main ly supplied to domestic market and the exports only accounted for about 10% of the total sales. The top five enterprises were all foreign-invested ones; they entered showcase sector as well as China market in early period, therefore they got higher recognition in the market. Because that product quality and installation quality of showcase are very important for supermarket, most supermarkets with popular brands usually choose reputable brands when purchasing showcase. Judging from the regional market share of showcase, East China took the largest share; with the economic development of Zhejiang, Jiangsu and Shanghai, more than 70 large foreigninvested supermarkets opened in East China, which greatly promoted the market demand for showcase. Beside East China, North and South China in 2010 also got great achievements, mainly thanks to the development of Hebei, Chongqing, Fujian and Sichuan. Some enterprises also said that the sales in those regions were optimistic.(chart 5) The distribution of large supermarkets such as Wal-Mart and Carrefour gradually became saturated; therefore they began to increase new stores in second and third tier markets, which stimulated the expansion and development of showcase sector in those cities. While the development of small supermarkets and convenience stores in third and fourth tier markets Chart 3 China Showcase sector market scale from 2003 to 2010(0.1 billion RMB) Source:ChinaIOL Chart 4 China showcase domestic sales and exports from 2008 to 2010(0.1 billion RMB) Source:ChinaIOL Chart 5 China showcase regional market proportion in 2010(according to sales amount) also drove showcase sector to enter those markets. The local supermarkets in some regions consolidated their position there by their own advantages and regional characters which also brought showcase Source:ChinaIOL to those markets. Overall, the developments of showcase sector and supermarket chain sector are closely related and the regional market development of showcase also depends on CEAM - July

26 the location of supermarket chain. Exports The exports of showcase took very small share and the export scale before 2007 was even less than 0.1 billion Yuan. Driven by the main enterprises that launched a lot of high-end products in international market in 2007, the export amount realized doubled growth. While this growth did not continue in the following years; at the end of 2008 the financial crisis sweeping all over the world inevitably caused the decline of showcase exports. In 2010, with the overall recovery of international economy, coupled with the difficulty of competing for domestic market for domestic enterprises, the enterprises paid more attention to export market. In 2010 showcase export market had substantial recovery, with sale volume up 30% year on year, but the export scale did not exceed 0.2 billion Yuan. (Chart 6) The situation of the growth rate of showcase sales volume being higher than sales amount in 2010 was more obvious among domestic enterprises. Besides influence from exchange rate, the decline of product unit price was the main reason for this situation, which showed that there was serious price war going on in this sector and the profit decreased gradually. The current growth of export market was mainly driven by foreign-invested enterprises such as Haier-Carrier and Sanyo Cold Chain. The growth of dom estic enterprises such as Shandong Xiaoya and Zhongshan Jingli was also signific ant. In export market Haier-Ca rrier became the largest winner, with gro wth of both sales volume and amount being No.1 in this sector; although its sales volume was not as many as Sanyo Cold Chain, the gap between them was smaller and smaller. The biggest export market of Sanyo Cold Chain was Southeast Asia; 40% of its exports went to Japan, therefore the earthquake and tsunami happened in Japan in March 2011 brought some impact to the exports of Sanyo. The main export market of Highly Nakano shifted from Europe to Southeast Aisa. Previously Highly Nakano only supplied to two or three big customers in Europe; after the economic crisis Europe did not fully recover, coupled with the devaluation of U.S. dollar in Europe and the profit was lower and lower, so the export market of Highly Nakano dropped year on year. The export situation of domestic enterprise Zhongshan Jingli in 2010 was better than Highly Nakano; Zhongshan Jingli achieved good results in Australian market. China showcase export country mainly concentrates in Europe and Southeast Asia., especially Japan and Malaysia. Those regions are near to China geographically so the transportation cost is low, therefore they are favored by China showcase enterprises. Chart 6 China showcase export amount from 2003 to 2010(0.1 billion RMB) Source:ChinaIOL Chart 7 China showcase export distribution in 2010(according to export amount) Source:China Customs Chart 8 Comparison on degree of showcase industry concentration (including exports) from 2008 to 2010 Source:ChinaIOL 24 CEAM - July

27 The demand from Russia and Australia was also large. (Chart 7) It is noteworthy that the export countries have different national policies; they may have requirements on environmental protection of the products, and some have restrictions on the usage of refrigerant. Therefore it is particularly important to provide suitable products to the customers based on their requirements. In addition, the development of export country also depends on local agents to develop customer relationships by offering good service. Although the entry threshold of showcase sector is relatively low but there is certain gap between foreign enterprises and domestic ones on technology and process, especially in the aspect of highend product. Therefore in order to keep a foothold in international market, the enterprises must improve technology, product quality and service as well as paying attention to national policies and relative standards of different countries. Characteristics of Enterprise Showcase sector is highly concentrated; judging from the development in the recent years, the concentration is deepening, with top five enterprises accounting for more than 80% of market share. (Chart 8) However, due to low entry threshold of showcase sector, the market competition is fierce. Judging from the sales amount of showcase enterprises in domestic market, the top two were Haier-Carrier and Sanyo Cold Chain. Haier-Carrier had been engaged in internal adjustment in previous years and its sales were not well, therefore it did not arouse much attention. In 2010 Haier-Carrier actively carried out market promotion and seized market share, so its sales in the whole 2010 increased by 20% year on year, exceeding Sanyo Cold Chain and taking the No.1 position. It can be said that in previous years Sanyo Cold Chain had been No.1 in showcase sector; from 2000 to 2002 Sanyo Cold Chain took nearly 50% of the market share, but with the rapid development of other brand in the recent years Sanyo Cold Chain s market share was diminishing. Highly Nakano, whose sales amount ranked No.3, showed stable development in domestic market in The product quality of Highly Nakano has always been excellent and stable, which won the favor of domestic customers. Er Shang- Fukushima also performed well in 2010; it had cooperation with 70% of top onehundred supermarket chains, with growth rate of about 15%, second only to Haier- Carrier. In 2010 Hussmann s performance was mediocre. After plant relocation in 2009, it started internal adjustment and paid little attention to marketing, coupled with the lack of price advantage, its showcase performance did not show much improvement. Perhaps only going through adjustment and change, its development can enter a new stage. Development Prediction Market Scale: In 2010 China showcase market obtained better development. It is expected that in 2011 this sector will also keep stable development and expand market scale, especially in domestic market. There are mainly two reasons for this prediction: first, the domestic economy is getting better and better. The year of 2011 is the beginning of China Twelfth Five-year project; based on the main national economic index got at the beginning of 2011, China has come out of the global economic crisis and the retail sector that is closely related to the showcase sector will keep stable development. In addition, China has been advocating expanding consumer demand to strengthen the push of consumption on economic development. Second, "Farm and Supermarket Linking up" policy will expand market demand. At the National Farm and Supermarket Linking up conference jointed held by the Ministry of Commerce and Agriculture, it is suggested at during Twelfth Five-year period, the Farm and Supermarket Linking up policy will be fully implemented and the sales of fresh agricultural products in the supermarket of middle and big-sized cities reached 30%, which was two times of the current sales. This requirement speeded up the opening of new supermarket and fair price shopping mall all over the country. To realize this target, the supermarket s number will be increased or the current supermarket will add cold chain terminal equipment such as showcase, and in either way showcase sector will be promoted. Third, the requirement on food safety of supermarket is more and more strict. From 1st of October 2009, the Supermarket Purchasing Environment policy made by the Ministry of Commerce started to be implemented which stipulated strict rules on fresh food refrigeration in supermarket: Fresh food and raw material ingredient must be stored in lowtemperature storage equipment, including cold storage (cabinet) and freezer. Competition Pattern: The competition in China showcase market will be more intense in 2011 but the brand pattern will remain stable. In 2010 the competition between Haier-Carrier and Sanyo Cold Chain has had new result: the leading position of Sanyo Cold Chain in showcase sector has been shaken, which will cause great concern of this company; it is expected that in 2011 the competition between this two enterprises will be fiercer. Highly Nakano and Er Shang-Fukushima mainly focus on high-end market; therefore they will not have huge influence on the current pattern of showcase market. The domestic enterprises also will not cause much change to domestic market, but they will have some impact on foreign market. Product Trend: The energy consumption of showcase accounts for about 2/3 of the total of supermarket, therefore the problem of energy efficiency gets more and more attention. The domestic supermarket is changing the extensive growth by expansion to delicacy management, and the procurement, as the most important point, will also tend to be eco-friendly, energy efficient and personalized. In May 2010 China s first Supermarket Energy Saving Standard was released in Wuhan; this standard involves electricity, water, air and material, etc, among which the energy consumption of freezing and refrigerating equipment is the main content of this standard. The research and development of energy saving product has been the focus of development of showcase enterprise. As for the current situation of price being the most important factor, eco-friendly product with high cost may not win the favor of the customers in short term. CEAM - July

28 Founded as Qingdao No.2 Radio Factory in 1969, Hisense has now developed into a group corporation which has two listed companies (Hisense Electric Co., Ltd. (600060), on the Shanghai Stock Exchange, and Hisense Kelon Electrical Holdings Company Ltd. (000921), on the Shenzhen and Hong Kong Stock Exchanges), owns three famous trademarks (Hisense, Kelon and Ronshen), and provides a wide range of products and services including multimedia, home appliances, communications, information technologies and real estate. Hisense Kelon Electrical Holdings Company Ltd. (the Company ) and its subsidiaries (collectively referred as Hisense Kelon ) are currently one of the largest manufacturers of household electrical appliances manufacturing enterprises in China. Headquartered in Shunde District, Foshan City, Guangdong Province, Hisense Kelon, as one of the first refrigerator manufacturing enterprises, commenced refrigerator production in The sales volume of Hisense Kelon s refrigerators and air-conditioners has been among the highest in China for many years. In particular, Hisense Kelon s refrigerators have embraced the biggest market share for a decade. At Hisense, the emphasis is placed on innovation and quality. The company has a global R & D network of more than 2000 engineers and has a national-level R & D Center, a post-doctoral research workstation, and a state-of-the-art multimedia technology laboratory. It has been the recipient of several recognitions and awards in the name of innovation, technology, design, and quality management. In addition, Hisense has partnerships with IBM, Hitachi, Whirlpool, and AMD for the development and marketing of air-conditioners, refrigerators, and information technology. Over the past years, Hisense Co. Ltd has grown rapidly and it will continue to focus on such sustainable and profitable growth in the global market. Hisense enjoys providing new experiences and values to its customers all around the world. Through fulfilling its commitment to continually deliver innovative products and services, Hisense will enhance its global presence in the multimedia, household appliance, mobile communications, information technology and real estate industries. Hisense International Co., Ltd ADD: 17, Donghaixi Road, Qingdao, , China Tel: , Fax: Http: // marketing@hisense.com ADD: 08 Ronggang Road, Ronggui, Shunde, Guangdong, RPC Tel: Fax: Http: // marketing@hisense.com 26 CEAM - July

29 Founded in 1984, the Haier Group has been dedicated to innovation and creating a world famous brand over the past 26 years. Originally a small collective plant on the verge of bankruptcy, it has now grown into an international group which has more than 70,000 employees around the globe and realizes a turnover of billion yuan in Haier has risen to be the world s No.1 brand of consumer appliances. In addition, it was selected as one of the world s Top 10 innovative companies issued by USA Newsweek s website. Haier aims to create a world famous brand in the age of the Internet, which features satisfying the personalized needs of users in a short time. What such a business needs is largescale customization rather than massive production. Taking this opportunity provided by the Internet, Haier addressed this challenge and actively explored and practiced the Win-win Mode of Individual-Goal Combination. Through Inverted Triangle organizational innovation and End to End ZZJYT construction, it realized the transformation from selling products to selling services and fostered differentiated and sustainable competitive advantages. Trend-leading R&D advantages The Haier s patent applications total over 10,000- ranking first among Chinese home appliance firms. Haier takes the lead to make breakthroughs in international standards. It participated in the drafting of 51 international standards, 27 of which have been issued and implemented. The company boosts the export of the entire industry chain through standard output. Zero-distance virtual and practical network combination Haier has enormous marketing network advantages in China. In full combination with the Internet, it developed the competitiveness of catering to the demand of consumers in the quickest time via zero-distance virtual and practical network combination. Virtual network refers to the Internet, which forms customer loyalty through online communities; Practical network refers to the marketing network, logistic network and service network, which helps realize the quickest delivery. Therefore, a lot of world-noted brands commission Haier to manage part or all of their sales in China. In the meantime, Haier utilizes their channels overseas to sell its products. With resource exchanges, Haier speeds up the pace of entering the world market. Zero inventory with on demand manufacturing and delivery Giving up the traditional product-oriented development pattern, Haier adopts the user-oriented large-scale customization of on demand manufacturing and delivery, realizing zero inventory and zero accounts receivable. On the basis on working capital zero loans, Haier s cash conversion cycle reaches minus 10 days. In future developments, to meet demand in the era of the Internet, Haier will place emphasis on U-Home integration, try to control the say on patent standards, further improve global marketing networks and create more user resources. Meanwhile, the company will integrate worldwide R&D, production and sale resources with the 3 in 1 localized mode so as to create an international brand. While devoted to its development, Haier actively fulfils its social responsibilities, assisting in the building of 129 hope primary schools and producing the 212-episode children s science cartoon Haier Brothers. Haier was the sole consumer appliance sponsor for the Beijing 2008 Olympic Games. Haier Group Company ADD: NO.1 Haier Road Hi-tech Zone Qingdao China Zip Code: Tel: FAX: Http: // CEAM - July

30 Midea Group, established in 1968, is the largest white home appliance enterprise in China; In 2001, Midea entered refrigerator sector massively and actively supported and fostered the development of this sector from a strategic height; In 2004, Midea acquired Hefei Rongshida and Guangzhou Hualing to expand production capacity; In 2005 Midea invested 1.5 billion Yuan to set up Hefei refrigerating and cleaning home appliance industrial park to complete its white home appliance layout; In 2007 Midea invested 1 billion Yuan to build refrigerator compressor production base in order to create refrigerator industrial chain; In 2008 Midea acquired Jingzhou production base, further expanding production line; In 2009, by technical innovation, production expansion, network improvement as well as a series of strong market promotions, Midea seized top position in high-end market and devoted every effort to forge ahead toward the target of entering top two of refrigerator sector. In 2010, Midea Refrigerator Division had become one of the largest refrigerator production base and export base, and had five manufacturing bases in Hefei, Guangzhou and Jingzhou, with a total of 33 production lines; with the operation of technical transformation and production expansion projects, the total production capacity of Midea Refrigerator Division in 2010 exceeded 10 million sets and will reach 18 million sets in In 2010 Midea Refrigerator operated four well-known brands including Midea, Royalstar, Hualing and Little Swan; the value of Midea brand reached billion Yuan, ranking No.6 among the most valuable brands in China. Facing fierce market competition, Midea Refrigerator adheres to technical innovation, self-transformation as well as developing through technical update, setting up a national enterprise technical R & D center. In 2009 its R & D center and experiment center were officially put into operation, therefore the technical research and development capacities of Midea reached a new level. Meanwhile, Midea Refrigerator seized development opportunities to increase investment on high-end refrigerator field by cooperating with internationally renowned design firm and investing 400 million Yuan to set up high-end refrigerator production base, laying a solid foundation for full participation in high-end market competition. Midea, with nearly ten years of rich experience in refrigerator sector, has gone through numerous self-transformations and improvements, laid a solid foundation and accumulated strong technical back ground to go forward towards the goal of creating a better life for mankind with brand-new power. Midea Group Jolin Zhou Overseas Support Department Refrigerator Marketing Midea TID Tel: Mobile: hfzhoulin@midea.com.cn 28 CEAM - July

31 HC-666WE HC-702WE CEAM - July

32 Xingxing Group Co., Ltd. is a big enterprise with combination of production, research and development and investment, including electrical home appliances, computer products, photoelectric science and technology, financial investment, development of real estate, shopping and consumption. Using modern enterprise management; regarding managing as the foundation; the technology as the guide; humanity and culture as base. The enterprise successively passed through the approval of ISO9001, ISO14001 and OHSAS18001; It also gains the honor of Observe Contract & Keep Promise and China Light Industry Enterprise of Quality & Benefit; Quality control award of Zhejiang Province, Main high technological enterprise of Zhejiang Province and one of the first batch enterprises with good credit all over the China. Xingxing household appliances industry is one of the backbone industries of enterprise. At present there are more than staffs. It can yearly produce 1.25 million pieces of chest freezers, 150 thousand pieces of showcases, 2 million pieces of refrigerators, 300 thousand pieces of water dispensers, 200 thousand pieces of air-conditions and dehumidifiers. Xingxing Group Co., Ltd. is one of the biggest production base of chest freezer in China, The volume of production and marketing of Xingxing brand chest freezer tops the front of other companies in this industry, Successively it gains more than 100 honor titles such as china resound brand, national consumer-satisfying products, golden bridge award of national salability brands, recommended products of china consumers association, china specially recommended products of domestic electrical appliance association. Xingxing refrigerator is also the inspecting exempted product, and part of models of the water dispensers also get certificate of the American energy consumption star. Xingxing electrical home appliances have been exported for many years and many model of products have gotten approval of CSA, CE, UL. Xingxing has been focusing on series of housing refrigeration appliances products through rapid development in past 18 years, total capacity and sales volume jumped to the first rank and became firm foundation of Changjiang (River) delta housing appliance manufacturing industry. Xingxing has been modeling and challenging number one, pursuing to realize the perfect number one, was honored China Famous Brand, China Famous Product, China Products Free From Audit, China Most 50 Competitive Private-Owned Brand Enterprises, forging the leading brand in China housing appliances industries. Advanced and upgraded industry standard Valuing technology. Xingxing Group built Province level technology center, formed by multiple science, industries professional specialists and R&D, participated in National 863 Project, National Torch Project, National Product Invention Plan, and other high technology project etc. Xingxing also established branches together with China Science and Technology Researching Institution Computer Researching Dept., China Housing Appliance Researching Institution, has been conducting the newest researching achievement, extended technology leading advantage with comprehensive cooperation with international leading company as well. Xingxing has been practicing Go Abroad, valuing domestic and international market as well, established omnibearing and multi-storey sales agent network, 50% plus products sold well all around the world, established strategic partner relationship with Sony, Kodak, Motorola etc. Xingxing has been striving to conduct taking people as the foremost, growing with harmony enterprise conception, proposing Industry devoting to the nation, never feeling good enough profession conception, endeavoring to provide global consumers the most comfortable and qualified products and services. Xingxing will realize great-leap-forward development and succeed in forging first class international enterprise with the spirit of China Xingxing is Chinese People s Confidence through continuous challenging and promoting itself. Xingxing Group Co., Ltd. ADD: 1 HONGXI ROAD JIAOJIANG TAIZHOU Tel: Fax: Zip Code: Http: // 30 CEAM - July

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35 Dalian Sanyo Cold Chain Co., Ltd. is situated in the beautiful coastal city-dalian, Well known as the Pearl of North. It is the Chinese biggest manufacturer founded by Sanyo Electric Co., Ltd., Dalian Bingshan Group and Sojtz Co., Ltd., specialized in developing and manufacturing supermarket showcases, commercial kitchen equipments, convenience store facilities, air cooler for cold room and bio-medical equipments. Since the foundation of Sanyo Cold Chain in 1994, our products have been the first in market share for many years in succession. We ve obtained the certificates of certification of ISO9001, ISO14001, OHSAS18001(for occupation health safety system) and CCC successively, the level-Ⅲ electro-mechanic installation qualifications and permit for production of medical appliance. In addition, we ve been awarded the honorable titles of Advanced Technology Enterprise, Hi-tech Enterprise, AAA-Credit Enterprise, Double-Excellent Foreign-Invested Enterprise of Dalian and China, Top 50 big Tax Payer of Dalian, Most faithfulness and credit customer recommended by the bank of Dalian City in , May 1st Labor Certificate of Merit in Dalian and etc. With the high responsibility to the society, we regard Creating fresh life as our Business Essence and keep improving in producing new, environmental protecting, energy saving products, which contributing to the energy saving society in design, green purchase of parts, CP insulation and new refrigerant. With our Business Aim of satisfying customer, we break through the thinking limit from the single equipment supplier to comprehensive solving scheme provider. We not only take the simple products, output and production as our goal, but create new techniques, provide new services, pursue perfect quality so as to create new business essence and stride forward from production to creation. Dalian Sanyo Cold Chain goes with the world trend by strict management mode of Humanization, standardization, digitization. Today, faced with rapidly developing world economy, Sanyo Cold Chain won extensive acceptance, trust and high comments of customers with enterprising attitude toward work and powerful comprehensive strength. In the future, Sanyo Cold chain is preparing all the time with our key capability to being the No.1 brand in the cold-chain industry Give us a chance and we ll help you to get hold of endless business opportunities; Give us a support, and we will help you to realized your dream of fresh keeping! To condense fresh vigor, to create permanent quality, Sanyo Cold Chain offers a nice future. Dalian Sanyo Cold-chain Co., Ltd. ADD: No. 6, Songlan St., Economic Dev. Zone, Dalian, Liaoning, China Zip Code: Tel: Fax: chenxiaohui@dalian-sanyo.com.cn CEAM - July

36 Dalian Sanyo 34 CEAM - July

37 Dalian Sanyo CEAM - July

38 Shanghai Highly Nakano Refrigerators Co., Ltd is a Sino-Japanese joint venture invested by Japan Nakano, Shanghai Highly Group and Japan Chatani Industrial Co., Ltd. in Shanghai in 1994, with the aim to provide service in the food distribution field in China and Southeast Asian countries. Our business scope includes product development, designing, manufacturing, installation and maintenance. We offer round-the-year round-the-clock maintenance services to the customers to make them feel at ease in using our products. Our products are not only widely accepted in China, but also in Southeast Asian and European markets. With the certificates of ISO9001 and ISO14000, we ensure every customer feel safe in using our products. Besides, we began to sell products with CE certificates in 2006, and our company has been authenticated as the High-tech Enterprise by Chinese government in To make more contribution to the development of low temperature distribution industry, we bring out a brand new series LOHAS to all our customers. Brief Introduction of Shanghai Highly Nakano Refrigerators Co., Ltd ADD: No.955,Chuanqiao Road,Pudong New Area,Shanghai Zip Code: Tel : Fax : sales@highly-nakano.com Http: //www. highly-nakano.com 36 CEAM - July

39 Being a joint venture established by Beijing ER SHANG (GROUP) Co., Ltd, and the FUKUSHIMA Co.,Ltd(Japan) specializd in producing showcases, the BEIJING ER SHANG- FUKUSHIMA MACHINERY ELECTRIC CO.,LTD. was open to business on November 19th The Company is mainly involved in production of commercial showcases for frozen and chilled foodstuff, prefabricated cold storage with main products over one hundred kinds and has successfully passed ISO international quality system certification. Based on advanced equipment, perpect production process and modern management systems worked out in combination with specific conditions of the Company, products turned out thereform have reached first rate standards in the country both in performances and appearence. The company had increased its investment for the third time. By that time the Company shall possess an even bigger size of production and higher technical standards to ensure excellent product quality and develop an even brighter product brand. The company is mainly involved in production of showcases of frozen and chilled foodstuff, which also possesses the designing and installing capability of large, middle and small scaled showcases with the main products of over 100 kinds, and the annual capability has been up to 10,000 sets. The showcase manufacture equipment of the our company all introduced from the industrial technology of Japan FUKUSIMA, which organizes the manufacture strictly according to the Japanese industrial standards. FUKUSIMA industry is one of the three professional commercial refrigeration equipment manufacturers, which is well-known with the exquisite technology, luxury and beautiful appearance and excellent credit. Under the guide of the Japanese experts, our company has systematically digested and absorbed the imported management, technology, installation, etc, which has possesses the integrative capability of product design, manufacture, quality test, project installation and after service. The manufacture equipment, technique software and technical drawing of our company are imported from Japan, the domestic manufacture management is in the charge of the vice GM of the Japanese party, which leads over 30 senior and middle professional technicians, adopts the Japanese imported test equipment in the engineering technology and quality test, checks on according to the Japanese management mode and guarantees the quality of the showcase products. For the special board material, adopt the Japanese material, adopts the rustproof disposal in the surface, and the coherence has been improved greatly compared with the domestic congener products. For the heat insulation inside of the case, adopts the Poly Urethane Resin, adopts Japanese imported vesicant to mould and the heat insulation effect is excellent. The surface of the case adopts the anti-static environmental coating, high-temperature firing solidifying molding technique, the adherence force is excellent, solid and durable, which is different from the common spray-coating mode in the market, and makes the appearance luxury and imposing. The color can be chosen freely by the users, harmonious with the shopping environment of the modern plaza, which does not only possess the excellent refrigerating function, but also the excellent decorative effect. In the choosing of the electric components, for the key components, adopts the imported components, for instance the temperature controller, expanding valve, cold wind screen fan, etc. BEIJING ER SHANG-FUKUSHIMA MACHINERY ELECTRIC CO.,LTD Factory ADD: Beijing huairou economic and technology development zone in hexi a street YanQi 8 Business ADD: Beijing fengtai south fourth west road 188 headquarters building no. 11 area 10 6 layers Zip code: Tel: Fax: flj_yyb@126.com CEAM - July

40 It is situated in the beautiful Spring City-Jinan, SHAN DONG XIAOYA RETAIL EQUIPMENT CO., LTD. Which is located the Hi-tech development zone and is the development and production base that Xiaoya Group invested much money and established. It produces and sells Xiaoya showcase, shelf, parallel connection units and so on. The company covers square meters, so far, it is one of the largest scaled manufactures to produce refrigeration showcase and shelves in China. The company takes advanced equipment from Italy, Japan and Switzerland. It is controlled by data and computer, operates easily and degree of automation is high. The product is used the all-in-one design with first class technology and quality. The appearance is special and luxurious, it is the best choose for modern supermarkets, chain stores, department store and convenient stores. The company adopts advanced technical management and QC, have high standard for quality, at present, All our products have been CE certified. Our factory is now approved by ISO 9001:2008 and ISO 14000:2004. Take the advanced inspection and test equipment so that build the internationally first-class quality inspection line and test room. The company has developed the assessment rules, established and improved the scientific and strict quality assurance system according to ISO9001:2008. At present, the showcases have entered the supermarket and passed the examination by the War-mart, Lotus Supermarket and RT- Mart. The products are also sold to America, France, Italy, Russia, Australia, Britain, and Southeast Asia when they are selling in China. It strives for survival with quality and pursues development with science and technology, in conformity with the purpose of improving the modern shopping environment and the living quality of people, we would like to devote our efforts with customers together and construct a healthy shopping environment with first-class products, the top quality and the best service. E6 GUANGPING Purpose: The different temperature ranges can be set according to the different demands: 0-2 for marine products and fresh meat. 3~5 for dairy products, such as beverage, milk products, sausages and cooked foods. 6~8 for fruits and vegetables, etc. Two basic specifi cations: 2500mm and 3750mm. Can be jointed together to suit your length requirements. They are equipped with a head showcase when the cabinets are used back to back. 38 CEAM - July

41 E6 ST.PAWL Purpose: It is used to display and sell all kinds of frozen foods, ice cream, the marine products and so on, when the temperature is -18~-21. Three basic specifi cations: 1875mm (three doors), 2500mm (four doors), and 3750mm (six doors). Can be jointed together to suit your length requirements. E6 INDIANA Purpose: It is used to display and sell all kinds of frozen foods, ice cream, the marine products and so on, when the temperature is -18~-21. Two basic specifi cations: 2500mm and 3750mm. Can be jointed together to suit your length requirements. E6 ALASKA Purpose: It is used to sell and display kind of meat, cooked foods, milk products, and cold drink and so on, when the running temperature is 0~5. There are two style: self-contained and remote, four basic specifi cations: 1250mm, 1875mm, 2500mm and 3750mm, can be jointed freely, can choose the 90 corner cabinets. SHANDONG XIAOYA RETAIL EQUIPMENT CO., LTD. ADD: No.51 South Industrial Road, Jinan , China. Tel: Fax: Http: // CEAM - July

42 PART1: Upstream Review of China Refrigerator Compressor Sector in 2010 Commercial Refrigeration Compressor VIP Application is to become a New Trend in Home Appliance Insulation and Refrigeration Field Main Manufacturers

43 Upstream Review of China Refrigerator Compressor Sector in Current Situation of Production Capacity Data showed that the production capacity of China refrigerator compressor sector in 2005 and 2006 kept slight growth, at about 40 million sets, with little change; in 2007 it reached 77.7 million sets, up 66.4% year on year; in 2008 it totaled 110 million sets, up 41.7% over 2007; in 2009 it realized 115 million sets, down 4.1% year on year. The main reasons for the rapid growth in 2007 and 2008 were as follows: with the rapid development of China economy and the income rising of urban and rural residents, the demand for improvement of urban middle and high-income groups as well as the popularity demand of township residents began to increase; while due to the economic crisis that broke out in October 2008, the expansion of refrigerator compressor sector in 2009 was limited, with only 4.1% of growth. As the economy of the countries gradually stabilized and China began to boost economic growth by stimulating consumption, the production capacity in 2010 increased by 8.6% to 124 million sets. The growth momentum in 2011 did not drop even on the high base; the production capacity in 2011 reached 156 million sets.(chart 1) The refrigeration compressor giants in 2011 all started expansion significantly; Huangshi Dongbei increased its production capacity to 26 million sets; Jiaxipera rose to 16 million sets; Guangzhou Wanbao grew to 15 million sets; Huayi Compressor continued to expand production scale by operating in the capital market following the successful Chart 1 Production capacity evolvement of China refrigerator compressor sector from 2006 to 2011 (10k sets; %) Production Capacity Y-O-Y 70% 60% 50% 40% 30% 20% 10% 0% Source: ChinaIOL Chart 2 Proportion of production capacity of the enterprises in 2011 Source: ChinaIOL CEAM - July

44 Upstream operation of its 600 Project at the end of In 2011 the further issue program of Huayi Compressor Co.,Ltd in capital market has got the approval of SASAC of Sichuan Province. Changhong, as one of the main shareholders, participated in this subscription with 300 million Yuan. The total fund raising is expected to be no more than 1.1 billion Yuan, among which 322 million Yuan will be used on setting up supper efficient inverter compressor production line with annual production of 5 million sets, 400 million Yuan for building highly efficient commercial compressor production line with annual production of 6 million sets, 78 million Yuan for the construction of Huayi Compressor Technology Research Institute which focuses on product development and the rest 300 million Yuan for the supplement of the company s liquidity. It can be seen that this expansion of Huayi targets highend highly efficient inverter compressor market and commercial compressor market which has great potential. In September 2010, Embraco Snowflake EM4 production line was put into operation, which increased its production capacity of refrigerator compressor from 6.6 million sets in 2009 to 8.6 million sets, among which there was inverter compressor production line with output of 1 million sets. At present the inverter compressor of Embraco is No. 1 in this sector and in 2011 it will keep the current production capacity and product structure. Based on the production capacity proportion of the enterprises, Huangshi Dongbei ranked the top, reaching 17%. (Chart 2/3) 2 Characteristics of Production and Sales The Production and sales of ref rigerator in 2010 all exceeded 0.1 billion Yuan; the production increased by nearly 30% year on year and the sales rose by 27.5% year on year and the two kept basically balanced. In 2010 the inventory realized 4.89 million sets, up 104.8% Chart 3 Production capacity changes of some enterprises in 2011 Enterprise Production Capacity Huangshi Dongbei Huangshi Dongbei plans to invest on building Dongbei Industrial Park in the Gold Mountain Development Zone of Huangshi City and set up a new compressor production line with annual production of 3 million sets there as well as moving the existing production lines after updated and transformed to this industrial park. The annual production capacity of Huangshi Dongbei will reach 12 million sets. The total investment for this project is about 326 million Yuan, among which 283 million Yuan is for construction, million Yuan for interest and million Yuan for supplement of floating capital. Huangshi Dongbei is likely to continue expansion in Huangshi, reaching 40 million sets of total production capacity. Embraco In 2010 Embraco improved production efficiency through transformation of production line, increasing production capacity to about 8.6 million sets without extension of the plant. Its production capacity is expected to remain unchanged in Huayi Huayi Compressor announced that its further issue program drew up at the beginning of this year has got the approval of SASAC of Sichuan Province. Changhong, as one of the main shareholders, participated in this subscription with 300 million Yuan. With Changhong being as the helm, the production expansion of Huayi Compressor will be on the agenda. Based on the further issue program announced previously, the raising fund will be invested on setting up new super efficient inverter compressor production line with annual output of 5 million sets and highly efficient commercial compressor production line with annual output of 6 million sets. Prior to 2010, the company's annual production and sales volume reached million compressor units, both reaching the highest level, becoming the first domestic industry, the world's second largest manufacturer of refrigerator compressors. Samsung It is said that Samsung has built refrigerator compressor production base in Suzhou and its production capacity is expected to reach 4.5 million sets in 2011 and 13.5 million sets in Hangzhou Qianjiang The second phase of compressor production project, as the Key Project of Zhejiang Province and Eco-friendly and Energy Efficient Compressor Project, covers 252 acres and is going to put into operation at the end of 2011, with daily production of 60,000 sets and annual production of 15 million sets. It is expected that the total production capacity of this enterprise in 2011 will realize 17 million sets. Source: ChinaIOL 42 CEAM - July

45 Upstream Chart 4 China refrigerator compressor sector operation data from 2008 to 2010(10k sets) Year/Item Output Sales Inventory Sales-output Ratio % Growth y-o-y 29.90% 27.47% % 0.80% % Growth y-o-y 21.83% 22.51% -6.64% 0.80% % Growth y-o-y -2.30% -1.80% 17.90% 0.60% % Source: ChinaIOL Chart 6 refrigerator compressor exports contrast from 2006 to 2010(10k sets) Year Item Export Volume(10k sets) Export Amount(10k USD) Average Unit Price(USD/set) 2010 Number Growth y-o-y 47.61% 63.38% 10.40% 2009 Number Growth y-o-y 2.6% 3.1% 0.4% 2008 Number Growth y-o-y -6.1% 5.9% 12.7% 2007 Number Growth y-o-y 62.0% 70.4% 5.2% 2006 Number Source: China Customs year on year. Affected by the economic crisis erupted in 2008, the refrigerator compressor sector dropped to some extent; driven by the proactive consumption stimulation policies of the government in 2009, the production and sales of this sector rose year on year once again. On the basis of steady economic recovery of 2009, the output and sales in 2010 all exceeded 0.1 billion sets; the sales-output ratio in 2010 reached 98.6%, which was lower than that in last year due to the expansion plans of lots of refrigerator compressor enterprises, but the output and sales kept basically balanced.(chart 4/5) In 2010 the inventory increased significantly, mainly because that the general expansion of the enterprises as a way to seize market share but the demand growth was slower than the production growth, which definitely caused the rising of inventory. The output and sales of refrigerator compressor in 2010 Chart 5 Refrigerator compressor production and sales growth comparison in 2010(10k sets) Source: ChinaIOL CEAM - July

46 Upstream rose first then dropped; since April this sector declined in operation but started to recover from November. China began to carry out structural transformation of the economy and transformation of economic growth mode; consumption issue was highly focused than ever. In 2010 the output of China refrigerator compressor totaled million sets. According to usual practice, the period from March to August is the traditional busy season of this sector, and the output in April can reach the peak of the whole year. While in 2010 the output kept stable compared with last year; driven by the consumption stimulation policies of China, the overall output was higher than that in previous years and there is little gap among months. high-end market. Embraco Snowflake s compressor exported to Japan in 2010 reached 385,000 sets, up 722% year on year, most of which supplied to the Sharp s compressor product-vcc series. With the leading edge in technical research and development, Embraco Snowflake launched inverter compressor products in both domestic and export market. (Chart 8) The data above shows that in 2010 China exports to Europe stagnated, mainly because that the economic outlook of most European countries was uncertain and the people s consumption level was not as high as before due to Europe s sovereigndebt crisis mentioned above; while Europe is till the main export continent of China. There are home appliance giants such as BSH,Electrolux, Indesit, Arcelik, Fagor, Candy, Vestel and Gorenje in Europe, which have great demand for components; besides, European market has high requirement on the energy efficiency and environmental protection on compressor which offers external driven force to the technical research and development of China refrigerator compressor sector. The product exported to South American market mainly uses R134 which is not eco-friendly, therefore the exports to this region dropped gradually. In 2010 the exports to Asia continued to increase, reaching 57% of the total, which is as same as that in 2007; the reasons for this growth are as follows: Asia is the most 3 Exports The global economy had got out of the haze of economic crisis in Although the Europe s sovereign-debt crisis followed affected in some degree the compressor sector of China, the situation was much better than that in 2008 and In 2010 China refrigerator compressor exported million sets, up 47.6% year on year; the export amount totaled million U.S. dollars, up 63.4% year on year, higher than expected. The average export unit price in 2010 realized 33.9 U.S. dollars/set, up 10.4% year on year, which is due to the rising of upstream raw materials prices and also indicates that the export product structure of China is further optimized and the high-efficiency models are gradually accepted by foreign market. At the same time, due to the rising of brand value, the bargaining power of Chinese enterprises is also growing. (Chart 6/7) It can be said that with the industrial transfer of global refrigerator compressor sector in recent years, China has become the largest refrigerator compressor production country. The global demand for refrigerator compressor heavily depends on the output of China and therefore the continuous growth of Chinese exports is inevitable. At present Jiaxipera and Huangshi Dongbei are still keeping high growth of exports to European markets. Jiaxipera has been awarded in two consecutive years of the outstanding supplier award by Siemens and it is gradually entering European Chart 7 China refrigerator compressor export evolvement from 2006 to 2010 Source: China Customs Chart 8 China refrigerator compressor export region distribution from 2006 to 2010 Source: China Customs 44 CEAM - July

47 Upstream populous continent; its economy develops rapidly; the rising of emerging markets such as India and Indonesia ensures the exports of middle and low-end products of China. Data shows that in 2010 Turkey was still the country with the most imports of compressor from China, totaling million sets, up more than 37%. Although the export proportion to Turkey dropped slightly in 2010, it still ranked No.1 according to its imports from China. Turkey has special geographical location and background. After the EU enlargement, the Eastern European cou ntries that newly entered EU have advantages in geography, culture and labor, which are hard to resist for laborintensive industries in Western Europe, therefore they become the first choice for the relocation of the Western European enterprises. In the home appliance field, this trend is more obvious. Besides, some multinational companies shifted the production bases as an important means to avoid trade barriers. Turkey crosses Europe and Asia and it is also a member of EU. Some home appliance giants set up plants in Turkey, making use of the advantages such as labor as well as entering EU market which is more self protective through Turkey. Data shows that besides Turkey, Russia and Japan were also large importers in The exports to Russia reached nearly 1.21 million sets, up 114% year on year; the exports to Japan totaled 546,000 sets, up 342.5% year on year. The rapid growth of exports to Japan was largely because of Embraco s large number of supplies of inverter compressor to Sharp, which showed that Japan s demand for high-end compressor product has began to shift to China. capacity is mainly for R600a small highly efficient products, and Huayi are also expanding R600a refrigerator compressor production to adjust product structure and improve market competitiveness. R134 is another widely used refrigerant among China refrigerator compressor enterprises; the market share of R134 compressor products is large in Middle East and South America and in short time the its share will not fall too much; in 2009 the share realized 20.6%, down 5.5% year on year. COP is an important index for evaluation of energy efficiency. Data shows that in 2010 the proportion of products with COP<1.5 took 30%; 1.5<COP<1.8 products accounted for 58%; COP>1.8 products took only 8%, which indicated that there were mainly products with medium and low-end energy efficiency According to refrigerant: in China market and the development potential of highly efficient products was quite large. In 2010 the low-efficiency refrigerator compressor (COP<1.5) in China accounted for 30%, down 4% year on year; the medium-efficiency products (1.5 COP<1.8) took 60%, up 2% over 2009; the high-efficiency ones (COP 1.8) got 10%, also up 2% year on year, and this type of products of Embraco accounted for as high as 44%. The data above shows that the product structure of Embraco based on energy efficiency has obvious advantages and is conducive to face market completion in the future. Besides, the small highly efficient models of Jiaxipera, such as NB series, also get high approvals from insiders. Highly, Huangshi Dongbei and Huayi will also put forth efforts on development and production of highly efficient products. Chart 9 Refrigerator compressor product structure in 2009 and Characteristics of Products The proportion of products using R600a as refrigerant in 2010 reached 79%, up 1% over With the active promotion of European environmental organizations, the application of R600a will become the trend. At present there are many refrigerator compressor enterprises in China mainly focusing on R600a compressor products, such as ZB series and N series of Jiaxipera and EM series of Embraco, which have got a lot of attention. In the 600 Project of Huayi, the newly increased production According to energy efficiency: Source: ChinaIOL CEAM - July

48 Upstream 5 Development Prediction Environment of Domestic and Export Market China refrigerator compressor market in 2011 will grow steadily. In 2010 the production and sales of this sector all exceeded 0.1 billion Yuan, achieving a historic breakthrough. The reasons for this growth are as follows: first, the industrial policies such Home Appliance to the Countryside implemented in China broadened rural market; second, the international refrigerator compressor sector is gradually shifting to China; half of the compressor supplies in the world is from China and China also boasts the most stable and broad market in the world. Currently China s economy is ru n - n i ng well; the economic growth pattern is being adjusted to be based on consumption; the favorable policies such as Home Appliance to the Countryside continue to be implemented, all of which ensure the optimistic market forecast of refrigerator as well as other white home appliance products in While with the diminishing of the influence from the policies, it needs time to see whether the consumption power of rural market after several years of expansion can keep strong or not. In addition, the real estate market is restricted continuously by policies, which is also a hidden trouble for white home appliance market. In 2011 there are many uncertainties in external environment, among which three ones will hinder the recovery of global economy. First, Japan s earthquake will affect greatly the refrigerator compressor sector, especially inverter compressor sector which has great demand. At the same time the toxic assets in Europe and America are not completely wiped off; the financial institutions are unwilling to lend money, which reduce the initiative of personal investment, and the effective stimulation created by government investment is offset to a certain extent. Second, U.S. consumers have changed con s u mption patterns and increased savings ratio; while the replacing consumption group has not appeared in the world, therefore the global demand will be affected. Third, the large number of bankrupt companies lowers the level of global capital stock and output, and the high unemployment also hinders the recovery of global trade. Within the next 3 to 5 years, the global market will lack new economic growth points brought by technical innovation; the new energy and raw materials are only the replacements for existing ones, while low-carbon economy puts more emphasis on longterm sustainable development rather than short-term rapid growth. The costs of new energy and raw materials are higher than the existing ones and the industrial scale is far from enough to sustain the strong growth of global economy. The year of 2011 is the beginning of the Twelfth Five-year Plan of China and various industrial polices come out one after another, among which a basic one is to promote domestic demand, change economic growth pattern and raise the consumption proportion in GDP. In view of this, the white home appliance sector represented by refrigerator will be benefited; therefore the outlook of refrigerator compressor sector is gratifying in the next 5 to 10 years. In 2010 many enterprises expanded production due to the situation of demand exceeding supply often appeared in 2009, which means that the production cannot keep up with the pace of sales. So in 2011 the production of the enterprises will be more vigorous and the output is bound to reach a new high. 2 Product Technical Development Di re ction The current technical development trend of refrigerator compressor is towards environmental protection, energysaving, small size and high efficiency. As one of the appliances with high energy consumption, refrigerator s demand for energy-saving and env ironmental protection is extremely urgent. At present the international community is more and more aware of the problems such as energy shortage, environmental pollution as well as global warming, and all countries are seeking ways to develop energysaving and eco-friendly and new energy industries; the climate summit held in Copenhagen in 2009 also put more focus on this issue. Refrigerator, as a major consumer product, runs 24 hours per day, which consumes a lot of energy; therefore its main upstream component compressor needs to be more energy efficient. A number of technical-advanced foreigninvested enterprises have launched inverter or linear products in the market. In addition, the rising of raw materials costs makes the product smaller and more efficient. All of the factors mentioned above rely on technology. No matter in global market or China domestic market, inverter compressor performed not well; it seems that the enterprises still regarded it as a proof to their R & D ability and enrichment to their product structure. Inverter compressor indeed represents a future development trend of refrigerator compressor. In 2010 Embraco still put focus on its third generation of VCC intelligent inverter compressor and thus took most market share of China inverter compressor market as well as exporting in large number to Japan. In addition, Embraco just released a new technology which can make linear compressor operating in variable capacity and oil-free and it can save 30% of energy. The ZBC-VY series of Jiaxipera is famous for its wide refrigeration capacity range and high efficiency. The production capacity of inverter compressor of Highly still keeps at about 2 million sets, and its C series inverter compressor s COP can realize 2.0. Hangzhou Qianjiang has been focusing on low-efficiency products, but is also planning to seize more market share in inverter compressor sector; its newly launched VFC inverter series, with 600a as refrigerant, also realized COP of 1.9. It can be said that all enterprises, regardless of their technical R & D levels, are trying to take a place in inverter field. The overall development of China refrigerator compressor sector tends to be smaller in size and highly efficient. Enterprises such as Jiaxipera, Guangzhou Wanbao, Huangshi Dongbei and Hangzhou Qianjiang have been developing in this field all the time. The ZB and N series of Jiaxipera, with R600a as refrigerant, have been the flagship products of this enterprise. The production equipment and technology of Highly come from ACC; the latest small highly efficient model of Highly is HH series. At present Hanghzou Qianjiang has phased out compressors with R12 as refrigerant, and is promoting new eco-friendly compressor products with R600a and R404a refrigerant; its WS series compressor changes the clients of Qianjiang from the ones in retail market as well as a small parts of enterprise clients to mainly a first-tier refrigerator and freezer brands. 46 CEAM - July

49 Upstream Commercial Refrigeration Compressor There are a wide range of products in commercial refrigeration field, such as refrigerator, freezer and wine cooler, with small cooling capacity of several scores of watts, and cold storage with large cooling capacity of thousands of watts. Therefore the compressor used in this field is also various. The compressor can be divided into four categories: hermetic reciprocating compressor, semi-hermetic reciprocating compressor, hermetic scroll compressor and semi-hermetic screw compressor. Hermetic reciprocating compressor: the cooling capacity of most hermetic reciprocating compressor ranges from several scores of watts to hundreds of watts, and even thousands of watts. It is mainly used in household refrigerator (the cooling capacity of refrigerator compressor generally is 300w or less and no more than 500w). Hermetic reciprocating compressor in commercial use includes freezer and small commercial refrigeration equipment, such as freezer, showcase, wine cooler, vending machine, ice machine, etc. Semi-hermetic reciprocating compress or: semi-hermetic reciprocation com pressor is widely used, with cooling capacity of stand-alone unit from 3kw to 100kw; it can have multiple heads parallel-connected, and therefore its cooling capacity can reach 3kw to 1000kw. It can be used in various working conditions including low-temperature ones. It has the largest market scale. The stand-alone unit is less and less used, and the parallel-connected unit becomes more and more popular. In the future it will be squeezed out the market by scroll and screw compressors. Hermetic scroll compressor: the cooling capacity of scroll compressor is from 0.75kw to 15kw (excluding special modes), and most of them range from 3kw to 5kw. The application of hermetic scroll compressor in refrigeration market is relatively limited, mostly used in small household air conditioner and commercial air conditioner system. Restricted by technology and cost, this product is rarely used in working conditions with temperature lower than -5, but under conditions with temperature higher than -5 it has a great advantage in cost. Semi-hermetic screw compressor: the stand-alone unit of this product has cooling capacity ranging from 30kw to 1500kw. The output of screw refrigeration compressor which can be used in cold storage, artificial ice rink and water chiller takes about 1/3 of the total output. Doublerotor compressor accounts for about 80% of the market share, mainly used in middle and large refrigeration equipments and under various conditions including lowtemperature ones. The market of semihermetic screw compressor is growing, so is the market of open-type screw compressor used for large-scale industrial refrigeration. Characteristics of Domestic Market In 2010 China refrigeration sector developed rapidly; influenced by the stimulation policies on downstream cold CEAM - July

50 Upstream chain, the market demand for commercial refrigeration compressor grew gradually, and more and more enterprises increased investment on commercial refrigeration compressor field. In 2010, the sales of China commercial refrigeration compressor totaled million sets, three times of the total sales in 2009; the apparent consumption reached million sets, up 25% year on year. The reason for the rapid growth of domestic total sales was that in October 2009 set up a new production line in Wuqing, which made its total sales of the commercial refrigeration compressor in 2010 realizing million sets. In addition, the sales of other brands such as Bitzer, Copeland, Sanyo, Xueying and Beifeng in 2010 also had various degrees of growth. (Chart 1) In the aspect of market share, China commercial refrigeration sector did not have mainstream manufacturing enterprises, mainly relying on imports to meet domestic market demand. Although there were domestic brands such as Xuemei, Xueying, Beifeng, etc, and some enterprises which had leading position in air compressor or air conditioner compressor market such Hanbell and Fusheng also began to enter refrigeration field, foreign-invested brands still took dominant position in domestic market. According to the statistics of ChinaIOL, in 2009 both the domestic sales and exports of China commercial refrigeration compressor increased signi ficantly; in 2010 the domestic sales of commercial refrigeration compressor reached 314,000 sets, up 18% year on year. In addition, the exports of domestic commercial refrigeration compressor in the first time exceeded imports, reaching million sets; the hermetic reciprocating compressor of Danfoss exported 1.07 million sets in 2010, up 445.9% year on year. While at present China domestic compressor enterprises still do not have the strength of exports. In recent years, major refrigeration compressor enterprises home and abroad are all optimistic about China market. World s leading compressor manufacturer Copeland increased investment in China; Bitzer of Germany, BOCK of Germany and Dorin of Italy all set up brand companies or plants in China to expand the sales of refrigeration compressor. In addition, Danfoss also put a whole industrial chain including research and development, procurement, production and sales in China in order to meet the demand home and abroad. (Chart 2) Characteristics of Imports and Exports From 2007 to 2010, China commercial refrigeration compressor sector did not form concentrated production scale and most of the products were imported to meet market demand. With the acceleration Chart 1 China commercial refrigeration compressor total sales and domestic consumption evolvement (10k sets) Notes: total sales (sales of products manufactured in China) equal domestic sales plus exports Domestic apparent consumption equals domestic sales plus imports Source: ChinaIOL Chart 2 China commercial refrigeration compressor domestic sales and I/E evolvement from 2007 to 2010 Source:ChinaIOL 48 CEAM - July

51 Upstream Chart 3 China commercial refrigeration compressor import and export data from 2007 to 2010 Item Product Hermetic Reciprocating Semi-hermetic Reciprocating Exports Hermetic Scroll Semi-hermetic Screw Total Hermetic Reciprocating Semi-hermetic Reciprocating Imports Hermetic Scroll Semi-hermetic Screw Total Hermetic Reciprocating Trade Balance(Exports- Imports) Semi-hermetic Reciprocating Hermetic Scroll Semi-hermetic Screw Total Source: China Customs Chart 4 China commercial refrigeration compressor main import brands and balance sheet by country Brand Brazil Slovakia Germany France Thailand Japan Spain USA Indonesia Singapore Italy Slovenia Tekon Aspera Danfoss KK Sanyo Copeland ACC Bitzer Maneurop Panasonic Dorin Frascold Carrier Source: ChinaIOL CEAM - July

52 Upstream of enterprise nationalization process, the imports of domestic commercial refrigeration compressor relatively decli ned. Since in 2009 Danfoss set up production line in China, the domestic commercial refrigeration compressor exp orts grew rapidly. In 2010 the exports totaled million sets, exceeding imports in the first time and realizing trade surplus. While products such as semihermetic screw compressor and hermetic scroll compressor still relied on imports; the advanced production technology was monopolized by foreign enterprises. The domestic compressor enterprises such as Xuemei, Xueying and Beifeng mainly produced semi-hermetic reciprocating compressor. (Chart 3) Currently the hermetic reciprocating refrigeration compressor used under medium and low temperature is widely applied in commercial field such as cold storage, refrigerated transportation, refrigerated processing and showcase, etc. Among major manufacturers, foreign-invested ones include Bitzer, Copeland and Sanyo, and domestic ones include Xuemei, Xueying and Beifeng, etc. Bitzer's supply of this product is the largest, followed by Sanyo. With the acceleration of enterprise nationalization, the imports will be smaller and smaller. Enterprises such as Danfoss and Embraco all accelerated their nationalization process in the recently two years to follow up the development of the market. (Chart 4) With the rising of people s living standards, China refrigeration sector has entered a period of fast development. Since China jointed WTO, many international brands entered China and take high market shares. In 2010 China commercial refrigeration compressor imports showed recovery growth. Brazil, Slovakia, France, Thailand and Germany were the main commercial refrigeration compressor import countries, accounting for 90.46% of the total imports. (Chart 5) The main brands of commercial refrigerator compressor imports were Tekon, KK, Danfoss, Copeland and Bitzer, etc. Tekon had plants in Brazil. India, France and the United States, its plant in Brazil mainly produced commercial compressor. In 2010 the imports of Tekon commercial refrigeration compressor totaled 233,000 sets, up 83.1% year on year. In the recent years the market share of KK of Thailand in China increased year on year, so did the imports. The performance of Danfoss products was excellent and it has high brand acceptance, therefore Danfoss has been in the leading position of commercial refrigeration compressor sector. China Danfoss commercial ref rigerator compressor was mainly imported from Slovakia and Germany; Copeland's product was mainly imported from Germany, France and the United States, and its imports in 2010 showed huge growth, nearly two times of that in In 2010 the imports of Bitzer Chart 5 China commercial refrigeration compressor import original countries and proportion contrast Source: ChinaIOL Chart 6 China commercial refrigeration compressor apparent consumption evolvement from 2007 to 2010(10k sets) Notes: domestic apparent consumption=domestic sales+ imports Source: ChinaIOL 50 CEAM - July

53 Upstream dropped slightly year on year, while due to good reputation and excellent quality, it still had a foothold in China market. Characteristics of Product It is said that China refrigeration sector takes 24% of the whole refrigerating industry, far lower than the proportion of international mature markets, therefore the market potential is huge, especially medium and low temperature refrigeration equipment market, which has bright development prospects in agriculture, fishery and animal husbandry industries. In recent years, the market demand of China for commercial refrigeration compressor kept at 1 million to 1.3 million sets, and the sales of various products all showed degrees of growth. (Chart 6) Semi-hermetic reciprocating compress or is the model launched in the market in the earliest period and still widely used; therefore it can take nearly half of the market share in this sector for a long time. In 2010 this product market demand rose significantly, with sales reaching 95,400 sets, up 25.6% year on year. By good reputation and excellent quality, foreign brands such as Bitzer, Copeland, Sanyo and Dorin took relatively high market share in China; in 2010 the apparent sales of Bitzer realized 34,500 sets, accounting for about 36.1% of market share, foll owed by Copeland and Sanyo. The imports of Dorin got the largest, reaching 60%. After years of accumulation and product development, Beifeng, Xuemei, Xueying and other domestic brands have formed strong brand influence and market appeal. In recent years, by high reliability, easy operation and maintenance, good balance, adaptability as well as good capacity control, crew compressor has been expanding to medium-capacity market, and began to be widely used in various refrigeration equipments. In 2010 the apparent sales of semi-hermetic screw compressor in China reached 1,700 sets, up 20.5% year on year. Crew compressor sector is technologyintensive, with complicated and highly precise production process. At present the main crew refrigeration compressor brands in domestic market are Bitzer, Fusheng, Hanbell, Refcomp and Sanyo, etc. The product of Bitzer is totally imported from Germany to meet domestic market demand; Fusheng, Hanbell and Refcomp all has air conditioner and screw compressor production lines in China; Sanyo imports compressor head then assembles into complete unit in Dalian plant; Refcomp also imports components then assembles for sale. Currently China hermetic reciprocating compressor sector does not form concentrated production scale, mainly relying on imports to meet market demand. With the acceleration of enterprise nationalization, the imports will decline. In 2009 Danfoss hermetic reciprocating compressor plant in Tianjin was officially put into operation, which not only reduced the imports from Germany, but also broke the embarrassing situation of the exports. With small size, light weight, high efficiency, low vibration and high reliability, hermetic scroll compressor is gradually recognized and accepted in refrigeration market. Its cost in middle and high temperature field has more advantage over reciprocating unit, but the application rate in shopping malls and supermarkets of China is obviously lower than developed countries, therefore its market prospect is broad. In 2010 China hermetic scroll compressor apparent sales reached 99,200 sets, up 17% year on year, and the market share of Copeland got about 95.5%. In order to meet the rising market demand, from October 2010 Danfoss increased the introduction and investment of commercial scroll compressor production lines to improve product competitiveness. Development Prediction With the increasing concentration and saturating of market capacity of refrigerator compressor sector, more and more compressor enterprises pay attention to commercial refrigeration compressor sector; in addition, the rapid development of downstream refrigeration sector also stimulated the development of commercial refrigeration compressor sector. According to the prediction of ChinaIOL on market capacity in the next five years, the market demand for commercial refrigeration compressor will keep rising and change the situation of relying on imports to meet market demand. The growth of semihermetic screw compressor market will be higher than the average growth of this sector, and may take the place of semi-hermetic reciprocating unit with parallel connection of multi-head. It is expected that in 2015 the annual market demand for commercial refrigeration compressor in China will reach about 2 million sets. Chart 7 China commercial refrigeration compressor market scale prediction(10k sets) Source: ChinaIOL CEAM - July

54 Upstream VIP Application is to become a New Trend in Home Appliance Insulation and Refrigeration Field Vacuum insulation panel (referred to as VIP) is the most advanced and efficient thermal insulation material in the world, which applies the principle of vacuum insulation. Under vacuum condition, its thermal conductivity is quite small; therefore it is widely used for refrigeration insulation. The main application in home appliance sector is in refrigerator and freezer (Figure 1). VIP Come into being There are two factors that affect the energy consumption of refrigerator and freezer: the first is the refrigeration system optimization design; the second is the thermal insulation performance of the box. In the refrigerator with particular refrigeration system, the insulation perf ormance of the box directly affects its energy con s- umption; although increasing the thickness of thermalprotective coating can save some energy, it increases the size of refrigerator and consequently reduces the space. As for the thermal insulation materials with same thickness, the smaller the thermal conductivity, the better the insulation effect. Therefore finding a thermal insulation material with smaller thermal conductivity becomes the best choice for raising insulation performance of refrigerator and freezer. The traditional thermalprotective coating of refrigerator is polyurethane insulation material with actual thermal conductivity within the range of 0.03 to W/ m k which is close to the theoretical limit; it is very difficult to reduce the thermal conductivity of polyurethane. Therefore one of the key factors of lowering energy Figure 1 VIP application in refrigerator consumption of refrigerator is to find a thermal insulation material with smaller thermal conductivity. (Figure 2) VIP Structure VIP is a kind of plate that puts core material with good insulation performance into barrier and seals it after being vacuumed. It is generally com posed by barrier, core insu lating material and getter. Barrier is like a pocket, which requires good air retarding ability and is strong enough to protect vacuum chamber; the core insulating material is commonly porous and its primary roles are to support the structure to avoid collapse and prevent heat radiation; the main function of getter is to absorb the residual air inside VIP to maintain a certain degree of vacuum. (Figure 3) 1) The core insulating material chooses porous ones, such as powdered silica, aer ogels, open-cell polyu ret h ane, etc; it main function is to support the structure to av oid contraction and collapse when working for the internal pressure of VIP is generally 0.13~130Pa. 2) This structure can restrain air thermal conduction and thermal convection. Acc ording to heat transfer theory, when the aperture of porous core material and the mean free path of air molecules are similar, the thermal conduction and thermal convection occurred during the collision among air 52 CEAM - July

55 Upstream Figure 2 VIP molecules can be reduced effectively, so is the VIP thermal conductivity. 3) VIP core material itself is porous, so its contact area is relatively small, which can decrease effectively the heat transfer occurred during thermal conduction. 4) VIP is nearly vacuum inside so the main way of heat transfer is heat radiation; therefore when producing the core material, infrared opacifier can be added into the foaming agent to reduce the heat transfer caused by heat radiation. The barrier is mainly for insulating the interior of VIP to maintain vacuum inside. In order to ensure the long-term stability of the thermal insulation of VIP, the barrier has to meet certain requirements on moisture permeability and air permeability to prevent the penetration of water vapor, oxygen and nitrogen into the interior and ensure vacuum. In addition, the barrier has to be strong enough to protect the vacuum environment inside from being jeopardized. 5) It can be said that the barrier directly affects the service life of VIP. The getter is a must for the core material itself cannot absorb gas; it generally includes getter and desiccant. The core material and barrier will release gas when used due to the vacuum inside, and the thermal insulation effect and service life will be influenced seriously if not getting rid of the gas. VIP Advantage Figure 3 Cross-section structure diagr am of VIP 1. Shape Compared with previous foaming materials, VIP boasts a very small thermal conductivity; based on the same thermal insulation effect and using space, the product using VIP has thinner thermal-protective coating, smaller extravolume and lighter weight, therefore it is especially suitable for the products with higher requirement on energy saving and structure. In the past VIP was mainly used in the military, marine and medical incubators. Now, with the cost reduction of core insulating material and expansion of mass production scale, VIP has been widely used in refrigerator, freezer, refrigerated truck, cold storage and refrigerated container, etc. In addition, it is also introduced into other fields such as aerospace, food industry and wall insulation. In the near future VIP will CEAM - July

56 Upstream probably replace PU as the main thermal insulation material used in refrigeration equipments. 2. Environmental Protection A few years ago, PU was widely used in thermal insulation field. The foaming agent used during the production of PU can consume ozone in the atmosphere and destroy the global environment, therefore it has been restricted. Currently cyclopentane and cyclo-isopentane, as alternative foaming agents, has high thermal conductivity so their thermal insulation effect is not satisfactory; in addition, these alternatives are in compliance with environmental prot ect ion, they consume more energy. En v i ronmental protection and energy con servation are two major themes in the world today, so the research and development of new thermal insulation material that is eco-friendly and excellent in insulation performance has been the target all the time and the demand for new ecofriendly and energy efficient thermal insulation material is higher and higher. 3. Energy Efficiency VIP, as a lighter and thinner thermal insulation material, can save lots of energy and is pollution-free, recyclable and mass-produced. In the future, if taking rigid polyurethane foamed by ordinary cyclopentane as core thermal insulation material, it can be widely used in refrigeration equipments such as refrigerator to further reduce energy consumption and production cost. It is a revolutionary alternative thermal insulation technology that can be realized and it conforms to the CFC-free trend. According to the experimental results that if using VIP material, household refrigerator can save more than 10% of energy; while based on heat transfer principle, refrigerator and cold storage can save about 20% to 30% of energy using VIP material, which shows that its economic benefit is considerable. In the future the trend of home appliances is lighter, thinner, recyclable, energy efficient and is more practical. The reduction of the energy consumption of these products is significant to the sustainable development of the world. Previous and Nowadays Market Situation of VIP VIP technology has been relatively mature in foreign countries; the refr igerated truck of Theissen Vacuum Insulation Company located in nort hwestern Germany used VIP material and the refrigerator products of some enterprises in Japan, the United States and Turkey also applied this material. VIP can significantly improve the thermal insulation and energy-saving effects of refrigerated truck, refrigerator, freezer and cold storage; in addition, it can also be used in building protection structure. The research on VIP in China was a little late but has got certain results in this field. The application of VIP is mainly in the thermal insulation structure of refrigerator; for example, it has been used in the refrigerator products of Haier and Frestech. As for the manufacturers, the production cost of VIP is a little higher, but it plays a positive role in easing energy shortage. The benefit brought by the application of VIP in the long run is quite considerable; it is expected that its application will be expanded after the introduction of stricter energy consumption standards. As for the cost of VIP, in early days, its price was a little higher, reaching 400 Yuan/square meter; in 2005, the price dropped to 320 Yuan/square meter; with its mass production in 2009, the price fell to 250 Yuan/square meter. With the large-scale manufacturing of many enterprises home and abroad, especially the technical transformation of various sections of the production process, price will no longer be the factor that hinders the application of VIP. In the future the price will even drop to about 100 Yuan/ square meter. At present there are two enterprises that take VIP as core business in China: one is Suzhou Hongda Fangyuan, who targets the whole industrial chain, from raw materials to finished products; another one is Fujian Super-tech, who has large investment on VIP. According to the communication between the author and the personnel of Fujian Super-Tech, VIP will be widely applied in home appliance industry in the future. The advantages of home appliances using VIP are very obvious; for example, the combined usage of VIP and polyurethane foam will reduce greatly the thickness of refrigerator s insulation coating and increase significantly the capacity with the volume and energy efficiency level unchanged. In 2010 the price of VIP reached about 200 Yuan/ square meter. Currently the price is 120 to 140 Yuan; with larger production scale, it can also fall to about 100 Yuan. The material of Super-tech has been used successfully by famous home appliance enterprises and got high approvals. In addition, the export market of VIP has been opened and nearly 70% of the products are exported overseas. The cost performance of VIP material of domestic enterprises is much higher than foreign enterprises. At present the application of VIP in China has not been enlarged. The refrigerator enterprises still use the original mold with fixed thickness of the refrigerator s wall; only after the enterprises replace the mold by the one with thicker wall that the application of VIP will be wider and wider. Therefore it needs some time for the promotion of VIP in home appliance industry of China, while the insiders are optimistic on the development of VIP. The author also learned that at present the VIP price of Hongda Fangyuan is about 120Yuan/ton, and its exports account for half of the sales. Hongda Fangyuan supplies to many well-known home appliance companies. The price of VIP is mainly affected by glass wool and flame wool, which are the raw materials of core insulating material and account for 50% of the cost; while Hongda Fangyuan is manufacturing glass wool, therefore it has certain advantage in cost among others. VIP Future Research shows that, if the thermal conductivity of VIP in the future drops to 2.5mW/m.K and its price falls to 100 Yuan/square meter, its combined cost is similar to polyurethane material and it can be widely used in home appliance industry. With the continuous development of VIP technology as well material science and technology, in the near future the manufacturing enterprises can produce various special-shaped VIPs, such as round, cylindrical, curved, perforated and notched ones, which will promote its application in more fields and its market expansion. 54 CEAM - July

57 Upstream Created in 1974, Embraco established dominance in the Brazilian refrigerator market by supplying customers with domestically made compressors while competing with expensive imported compressors from abroad. The company was able hold its share of the market and grow, its success was so great that in the 1990 s Embraco began to extend its horizons which led to its extraordinary expansions to Italy, Slovakia,China and Mexico. With a strong foothold in the hermic compressor market, Embraco employs over 9000 men and women worldwide. Its annual capacity reaches the heights of 30 million compressors, making it a true leader in its sector. The products range from simple electric components to fully completed and integrated cooling systems for household use as well as for commercial use. The quality of the products is what truly matters for Embraco, customer satisfaction is our first priority. With the development of the VCC (Variable Capacity Compressor ) compressors, Embraco is one step closer to achieving its long lasting dream of creating a greener tomorrow. With the development of the VEMC9C series for household use and the VNEK series for commercial use, Embraco has made a significant step in reducing energy consumption with the VCC technology. The traditional on/off compressors also received the upgrade, with the EMD series for household and the EMT series for commercial use, Embraco considerably raised the standards for compressor efficiencies in the market. Product one: EMD32CLT Category Household Refrigerant R600a Series EMD Model EMD32CLT Volt/Frequency 220~240/50 Displacement 5.96 W 85 Capacity Kcal/h 73.1 performance COP Height 171 W/W 2.12 kcal/wh 1.82 CEAM - July

58 Upstream Product Two:VEMX 9C @4500 Cap. (W) Power (W) COP (W/W) Noise db(a) Product Three:VNEK609GK Application Model Volt/Frequency Min Capacity Max Refrigerant Displacement (cc) M/HBP (6) LBP (2) VNEK 609 GK VNEK 609 GK R-404A VNEK 212 GK VNEK 206 GK 115V 50-60Hz/220V 50-60Hz VNEK 213 GK R-290 VNEK 207 GK Embraco The World Leader of Hermic Compressors ADD: 29 Yuhua Road, Area B, Beijing Tianzhu Airport Industrial Zone Beijing, China Zip Code: Tel: Fax: CEAM - July

59 Upstream Huangshi Dongbei Mech-Electrical Group Co., Ltd is a large-scaled professional coporation in researching, developing, producing and selling refrigeration compressors. It was established in In 1994, it was reunited to be a group company And now the group is consisted of 7 share controlling companies, there are 6000 staffs including 600 technicians. The headquarter was located in the scenic spot of the well-known Dongfangshan hill and it invested two new factories in Wuhu city of Anhui province and in Daye of Huangshi city. The main product of the group is refrigeration compressor; simultaneously, it also researches and produces refrigeration equipments such as juice dispenser, ice maker, ice cream machine as well castings, solar energy products and fiber communication component. As an excellent enterprise in Chinese light industry, one of the top 85 skeleton enterprises in hubei province, one of the top 50 manufacturers in China, one of the high-tech enterprise in huangshi and one of the top ten taxpayer, Dongbei group has been awarded many praises, such as national precursor in light industry, former of spot management in Hubei province, firstrank civilized unit in Hubei province. Dongbei group is the only enterprise that was awarded in the GEF project for energysaving compressors, it was awarded the China Top Brand and two Top Brand of Hubei province. Since 2005, the capacity of manufacturing and sales of compressor is the top one in domestic market in this line, and DONGBEI brand was award as the most competitive brand in the market by State Department of Business. LH76CY Height :173MM Model Power Displacement Cooling Motor Type Cooling Capacity COP(With PTC) ASHRAE CECOMAF ASHRAE Run Capacitior Start Capacitior Attestation hp cm μ F μ F LH76CY 1/ S ESCR VDE CEAM - July

60 Upstream Model Power Displacement Cooling Motor Type Cooling Capacity COP(With PTC) ASHRAE CECOMAF ASHRAE Run Capacitior Start Capacitior Attestation hp cm μ F μ F QD135YU 1/ S RSCR VDE QD135YU Height :193MM D40CY Height :151mm Model Power Displacement Cooling Motor Type Cooling Capacity COP(With PTC) ASHRAE CECOMAF ASHRAE Run Capacitior Start Capacitior Attestation hp cm μ F μ F D40CY 1/14 4 S RSIR VDE Huangshi Dongbei Mech-Electrical Group Co., Ltd ADD: NO.5 Wuhuang Road,Tieshan,Huangshi,Hubei,China Zip Code: Tel: FAX: trade@donper.com 58 CEAM - July

61 Upstream Jiaxipera Compressor co., Ltd is a manufacturer of environment-friendly, energy-saving and high efficient refrigerator compressor. It is the first national high-technology enterprise, also the head of China refrigerator compressor industry standard revision units and Chinese appliance standard council refrigerator compressor standardized working group. It was founded in December, 1988, located in Jiaxing, Zhejiang Province, which has beautiful scenery. With total assets of nearly 3 billion RMB, Jiaxipera right now has 2600 staff among whom 400 are specialized technicians in various fields. It has one provincial-level R&D center, one compressor research institute and the annual capacity is more than 18 million units. In the past 20 years, Jiaxipera has always followed the business principle of Responsible for staff, Responsible for enterprise, Responsible for society, adhered to the management concept of people-oriented, sincere development, advanced technology, global competition. With its superior quality and excellent service, it has won high reputation from the customers. The products sell well both at home and abroad. Jiaxipera has established good cooperative partnership relations with famous refrigerator companies both at home and abroad, like Haier, Hisense, Midea, Meiling, Frestech, BSH, Electrolux, Indesit, Liebherr, Samsung, Toshiba, Beko, Fagor and so on. Jiaxipera mainly produces high-efficient and super highefficient compressors with R600a and R134a refrigerants. It has ZB, N, J, T and frequency-variable series with various power supply system, total 120 models referring products. ZB series are high-efficient compressors with large cooling capacity, applied to the large volume, high-end refrigerators like side-byside and multi-doors refrigerators, etc. Their COP are leading in the nation, listed in the national key new product and national torch plan by the Ministry of Science and Technology; N-series miniaturized and high-efficient compressors are the main products of the company, the highest COP can reach 2.05W/W, having good matching performance with the refrigerators and are widely used in the environment-friendly, energy-saving and high efficient refrigerator market. T-series compact compressors are the new generation of miniaturization products released at the end of 2010, with the advantage of light weight, small volume, efficiency, low noise, high reliability and so on, meeting the need of 250 liters or less than 250 liters energy-saving refrigerators. R600 DC frequency-variable compressors fill up the blank of domestic technology, having the advantage of wide range refrigerating capacity and high efficiency, among which the COP of VN-Y series has reached the international advanced level. Jiaxipera Compressor co., Ltd ADD: No.588,Yazhong Road, Jiaxing,Zhejiang Zip Code: Tel: Fax: jiaxipera@jiaxipera.com CEAM - July

62 Upstream Introduction of Bitzer China Bitzer has two companies in China Bitzer Compressors (Beijing) Ltd (BCB) and Bitzer Refrigeration Technology (China) Co., Ltd (BRT). Bitzer Compressors (Beijing) Ltd. (BCB) is a wholly-owned subsidiary established in Products include semi-hermetic screw compressor. It is expected that screw assembling line will be transferred to Bitzer Refrigeration Technology (China) Co., Ltd (BRT) in September Then BCB will be machining workshop providing housing for BBR and BRT. Bitzer Refrigeration Technology (China) Co., Ltd (BRT) is a wholly-owned company established in Its first investment reaches up to 22 million Euros. Products include semi-reciprocating compressor and transportation AC compressor. Made by Bitzer is not only the quality standard Bitzer Group maintains worldwide, but also the key reason why Bitzer is a big success. By doing so, users in China even Asia-Pacific can enjoy high-performance Bitzer products at sound prices. During China Refrigeration 2007 in Guangzhou, Refrigeration compressor, AC compressor and Transportation AC compressor were all shown here. Besides, three technical seminars were held, regarding Bitzer semi-hermetic screw compressors, Bitzer Semi-Hermetic Compact Screw-CSW Series and Bitzer reciprocating compressors. This fair provided a good chance for Bitzer to communicate with customers and yielded good results. Bitzer China information Bitzer Refrigeration Technology (China) Co., Ltd. (BRT) ADD: No.20, Fouth Road of Jinghai, Beijing Economic&Technological Development Area Zip Code: Tel.: Fax: info@bitzer.cn Bitzer Refrigeration Equipment Co. Ltd. Beijing (BBR) ADD: No. 23, Ban Bi Dian Street Tongzhou District Zip Code: Tel.: Fax: info@bitzer.cn Bitzer Compressors (Beijing) Ltd. (BCB) ADD: Guang Yuan Dong Street Tongzhou Industrial Development Zone Zip Code: Tel.: Fax: info@bitzer.cn 60 CEAM - July

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