According to IHS iSuppli's China research, after two years of rapid growth, China's white goods market entered a period of adjustment in 2012, and it is expected that shipments of air conditioners, washing machines, refrigerators and microwave ovens in the domestic market will decline. Only inverter air conditioner shipments will increase slightly, which is expected to increase by 11% over last year.

But the good news is that exports of white goods will remain stable or grow slightly this year. Inverter air conditioners will also grow in the domestic market in 2012, with shipments increasing from 26 million units last year to 28.8 million units. The export volume of inverter air conditioners will increase from 6 million units last year to 6.2 million units. By 2016, China's overall inverter air conditioner market will grow to 60.9 million units, as shown in the figure below.

From 2013 to 2015, Chinese white goods shipments in both domestic and export markets will grow moderately.

As the Chinese government continues to accelerate the urbanization process, the rising urbanization rate in China will become another important factor driving the growth of the white goods market. It is expected that by 2020, more than 10 million people will settle in cities every year. This large-scale population migration will promote the sales of white goods.

Government subsidy project ends

Another reason for the white goods entering the adjustment period is that the Chinese government's subsidy program ended in December 2011. The plan provides subsidies for trade-in consumers, accelerating the growth of the domestic market between 2009 and 2011. However, most consumers buy new appliances because of lower prices, not because they favor new features. Since the government has not launched a new subsidy program, it is expected that consumer buying activity will slow in the first half of 2012.

More challenges

To remain profitable, Chinese white goods manufacturers will face more challenges this year, including weak domestic demand and high inventories. Since most white goods manufacturers failed to achieve sales targets in the second half of 2011, manufacturers reduced production in the fourth quarter to drive down inventory levels. Therefore, IHS iSuppli predicts that the growth rate of manufacturers in the domestic white goods market in 2012 will decline, or even show negative growth.

Manufacturers are also adjusting new product development strategies to reduce product costs and maintain profitability, hoping to increase shipments of low-cost products in order to maintain market share when market conditions are difficult. At the same time, white goods manufacturers are striving to improve their design capabilities, which may help them diversify their products and increase profits. To this end, designers focus on optimizing existing products and designing new products with higher profit margins.

Semiconductor suppliers provide low-cost products, which is also a necessary condition for the diversification of hardware platforms and software design. Increasing the value of high-end products in the next five years is a long-term strategy for Chinese white goods manufacturers. In short, leading semiconductor suppliers are working with white goods manufacturers to create high-end products and provide customized chip services to the latter. Suppliers can profit from this collaborative relationship between the two parties and maintain or expand their market share.

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