Brand new world for 'Made-in-China'

A stand markets TCL Corp at an exhibition in Beijing.[Wu Changqing/China Daily]

'Made in China' gains credibility, as makers of home appliances expand

Chinese home appliances and electronics are increasingly gaining popularity among European consumers because of their price advantages and innovation.

Leading the way are major home appliance brands Haier and Hisense, television makers TCL and Changhong, and electronics producers Huawei, Lenovo and TP-Link.

But while Chinese high-tech products have long been stocked on store shelves across Europe, the difference with this new wave is that the aforementioned Chinese companies are not simply looking to fill a niche - they are taking on the mass market.

Experts say the wider acceptance of Chinese appliances and electronics in Europe signifies a fundamental shift in public opinion toward the "Made-in-China" stigma.

There are several reasons why these major Chinese companies are expanding into Europe: A saturation in China of companies making the same kinds of products and the decades of experiences that companies such as Haier and Hisense have had as original equipment manufacturers for large European companies.

OEMs typically produce a part or system that is used in another company's end product. Haier, whose headquarters are in Qingdao, Shandong province, supplied refrigerator parts for the British brand AGA Rangemaster.

Rene Aubertin, chief executive of Haier's European operations, says the experience manufacturing parts for brands in Europe helped the company understand the continent's consumers.

In 2010, the maker of televisions, refrigerators, freezers, washers and dryers, smartphones and tablets began focusing on its own line of products in Europe after taking a 2004 dip in German waters with its low-cost products.

"We wanted to focus on our own branded products and gain market share through our designs, high product specifications, quality and innovation," Aubertin says.

To tackle the dominance of Bosch and Siemens, the largest manufacturer of home appliances in Europe, and the Swedish appliance maker Electrolux, Haier has gone to great lengths to innovate.

"Innovation is one of our core values," Aubertin says.

The Haier American refrigerator, for example, is one-meter-wide, making it the highest-capacity fridge on the European market. The Haier Intelius line of washing machines has the highest energy efficiency rating according to European energy efficiency standards.

On Appliance Online, the UK's leading online retailer (ao.com), a fridge from Haier costs about 400 pounds ($600), as opposed to a Bosch fridge that can cost up to 700 pounds.

Haier Europe, whose headquarters are in France, has subsidiaries in Belgium, Britain, Italy, Poland, Russia and Spain. Sales for the 2014-15 financial year reached $550 million, 10 percent more than in the previous year. It has a workforce of about 400.

Fifteen of its engineers work in a 1,000-square-meter research and development center in Nuremberg, Germany, to fine-tune designs for its dishwashers, refrigerators and freezers. It also has an R&D center in Lyon, France.

Haier says sales of its TVs rose 15 percent in the first half of last year compared with the first half of 2013.

Another Chinese company making innovative strides in its products is Chinese electronics maker TCL. In fact, Didier Juin, COO of TCL Europe, uses the term "affordable innovation" to describe how the company approaches its products.

"We do not pretend to be a leader in innovation. You could say our intention is to be 'fast followers', " Juin says.

TCL Europe focuses mostly on the design of its products. Its line of touch-screen televisions, for example, comes in a range of bright colors, such as pink, green and blue, targeted at buyers in the 25-35 age range.

The subsidiary has an R&D center in France that ensures that TCL products brought to the European market meet appropriate regional requirements and certification, which for TCL qualifies as innovative measures. The R&D team also collects data about user experience and shares them with the R&D team in China.

Like Haier, the Chinese white goods manufacturer Hisense has also made progress selling its electronic products in Europe.

In the UK it has been successful with its refrigerators due to their high-tech features, low cost and reliability. Fridges from Bosch Siemens or Samsung, for example, are generally priced about 100 to 200 pounds more than fridges from Hisense.

And like Haier it was once an OEM, producing parts for many international brands including the British brand Fridgemaster.

Louis Hou, managing director of Hisense UK, says the company has grown quickly because of its product quality and its understanding of the UK customer.

It has succeeded in its overseas expansion because it has followed three paths: starting out as an OEM for Western brands; creating partnerships with international distributors to drive sales of Hisense's branded products; and managing its branding and sales with its own team of employees.

In 2009, Hisense restructured its European business to focus on establishing subsidiaries in countries across the continent to market and sell its electronics and appliances.

According to Appliance Online statistics, Hisense refrigerators are the third-biggest revenue generators in the refrigerator sector.

Another successful approach for Chinese appliance makers has been building factories in Europe. Haier has a factory in Italy, TCL has one in France and consumer electronics company Changhong has a factory in the Czech Republic.

Lian Yongping, general manager of Changhong Europe Electric, says moving production to Europe was the only way to establish a foothold in the market without worrying about trade barriers.

Changhong chose the Czech Republic for its factory site because of its central location in the continent, its industrial capability, stable investment environment and skilled but relatively low-cost labor.

"Local workers are highly skilled, but salaries in manufacturing are lower than in countries such as Germany."

The country's industrial capacity allowed Changhong to establish a regional supply chain to manufacture its televisions. Lian says the country's foreign investment regulations help companies make long-term investment plans.

Changhong established its European operations in 2005 and they began production two years later. At the time, the company made only 100,000 TVs a year globally, almost all of them OEM sets for European brands. Today, the number of Changhong's OEM orders is about half its entire production of 800,000 TVs.

Juin says having a factory in Europe provides flexibility when supplying regional markets. "From Poland we are working very closely with our customers and tightly managing their inventories. You therefore need to be able to react fast - shipping time is an issue," Juin says.

Haier built a factory in Italy in 2005, and it now employees 100 people. Aubertin says Haier is now looking for new opportunities in Central and Eastern Europe.

TP-Link, whose headquarters are in Shenzhen, Guangdong province, that makes a wide range of networking products, from routers to Internet-protocol cameras, began its international expansion in 2005.

TP-Link initially sold its products to Europe through distributors, but later established subsidiaries in a number of European countries to manage regional sales, says Eric Wang, head of TP-Link's Western Europe division.