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The first three quarters report card issued black and white power "two heavy days"
Since November, many home appliance companies have released their first three quarters of 2017 financial reports. While some are celebrating, the most joyous ones are undoubtedly the "Big Three" in the white goods sector—Gree, Haier, and Midea. All three have exceeded 100 billion yuan in revenue for the first nine months of the year. In contrast, the performance of black power companies (such as TV manufacturers) has been quite disappointing, with some experiencing sharp declines in profits.
The Big Three White Goods Giants: A Strong Performance
According to public data, Midea Group achieved an operating income of 186.95 billion yuan in the first three quarters of 2017, a year-on-year increase of 60.6%. Its net profit reached 14.998 billion yuan, up by 17.1% compared to the same period last year. Haier reported an operating income of 119.19 billion yuan, rising 41.27% year-on-year, with a net profit of 5.68 billion yuan, a growth of 48.48%. Gree’s operating revenue for the first nine months was 110.875 billion yuan, up 34.51%, and its net profit climbed to 15.46 billion yuan, an increase of 37.68%.
Each of these companies has shown distinct strengths. Midea leads in total revenue, Gree has the highest net profit, while Haier stands out for the fastest growth in net profit. This performance is closely tied to their external expansion strategies and internal development models.
After acquiring KUKA, a German robotics company, Midea has transitioned into a diversified group covering HVAC, consumer electronics, and robotics. The KUKA business now accounts for roughly one-ninth of Midea’s overall revenue, and this share is expected to grow further. For 2017, Midea is projected to surpass 200 billion yuan in annual revenue for the first time, clearly driven by its aggressive expansion.
Haier has also seen strong growth across multiple product lines. Refrigerator sales increased by 34%, washing machines by 41%, air conditioners by 61%, and kitchen and toilet products by 76% in the first three quarters. It continues to dominate in refrigerators and washing machines, while air conditioning and kitchen appliances are showing rapid growth. Meanwhile, Gree remains heavily reliant on air conditioning, which contributes most of its revenue. Its return on net assets reached 25% in the first nine months.
Interestingly, there are no permanent enemies in the home appliance industry. Previously, Gree and Midea were involved in patent disputes over air conditioners. However, recently, Gree took the initiative to join forces with Haier, Midea, Oaks, Chigo, TCL, Changhong, Galanz, and Hisense to establish China’s first air-conditioning intellectual property alliance.
Black Power Companies Struggle with Declining Profits
In contrast to the success of the white goods giants, black power companies have struggled significantly. For example, Changhong reported an operating income of approximately 54.448 billion yuan in the first three quarters of 2017, up 12.27% year-on-year, but its net profit attributable to the company dropped sharply to just 167 million yuan, a decline of about 67.97%. Similarly, Skyworth saw a 20.98% rise in operating revenue to 5.143 billion yuan, but its net profit fell by 85.90% to 48.914 million yuan.
Changhong attributed the drop in net profit mainly to rising material and labor costs, which reduced gross margins. Additionally, exchange rate fluctuations led to higher foreign exchange losses, and non-recurring gains declined compared to the previous year.
Both Changhong and Skyworth have repeatedly highlighted the negative impact of rising panel and memory prices on their operations. Since the end of last year, the price of TV panels has been on the rise, and domestic TV manufacturers have gradually shifted from price wars to more stable pricing strategies. Although panel prices peaked in the third quarter of this year, they have not fallen sharply since then, and memory prices are still climbing. As a result, TV prices are being pushed upward.
This shift poses a challenge for consumers who have long been accustomed to lower TV prices. High prices may hinder the upgrade of TVs and make it difficult for TV companies to find a quick turnaround in the near future.