In recent years, as the boundaries between industries have become increasingly blurred, it has gradually become the norm for companies in various industries to cross borders with each other. Crossover has become a trend. The former traditional home appliance giants have also opened a diversified layout through "crossover" -- extending to non-home appliance peripheral industries, including smart home, intelligent equipment, new energy technology and other fields. China's home appliance giants have been expanding their boundaries indefinitely, but this time they have set their sights on the medical and health sector.



In fact, it is not new for home appliance companies to spread across the medical and health field. Looking at the international market, GE (General Electric), Philips (Philips) and Siemens (Siemens), collectively known as "GPS" in the medical equipment industry, all rely on home appliance business. At present, Midea, Gree, Haier, Hisense, Changhong, TCL and other six leading domestic household appliances enterprises have entered the medical and health related circuit, and launched a new competition in this field.



Appliance giants bet on medical devices



According to statistics from the perspective of the health sector, from 2016 to 2018 alone, there are about hundreds of listed companies engaged in the medical and general health industry. Specific cross-border sectors include medical services, medical devices, smart medicine and personalized medicine, among which the number of listed companies choosing cross-border medical services is the largest. However, although it has become a trend for domestic home appliance enterprises to march into the medical field, they are generally laid out in the field of medical devices, and domestic home appliance giants betting on medical devices seems to be "unexpected", but in fact it is "planning for a long time".



On the one hand, the domestic household appliance industry has gradually entered the stage of inventory competition, which needs to seek new growth points, and the high gross profit of medical devices can be used as the new growth curve of household appliance enterprises. According to the data of Aowei Cloud network, the retail sales of China's home appliance market reached its peak in 2018, achieving 826 billion yuan of retail sales in 2019, down 3.6% year on year. In 2020, affected by the epidemic, the retail sales declined 11.3% year on year, reaching 705.6 billion yuan. In the first half of 2022, the retail sales also declined 9.3% year on year, achieving 338.9 billion yuan of retail sales. It is clear that the capacity growth of China and the global home appliance market is slowing down further.



Moreover, the profitability of home appliances is not as good as that of medical devices, and the huge profit potential also encourages home appliance giants to flock to it. According to Wind, the average gross profit margin for home appliances in China is 33 percent, while the gross profit margin for medical equipment can reach more than 80 percent. It is also known that since 2013, the gross profit rate and the net profit rate of the listed companies in the medical device sector have remained above 40% and 13% respectively. In the first half of 2022, among the A-share listed companies in the medical device industry, there are as many as 72 companies with gross profit rate exceeding 50% and 31 companies with core profit rate exceeding 30%.



On the other hand, with the guidance of national encouraging policies, the medical device industry has a huge market demand and growth space, which is an opportunity for home appliance enterprises to find more rapid growth. In recent years, the state has been encouraging and promoting the innovation and development of medical devices, and in order to realize the replacement of domestic products as soon as possible, the state has continuously improved the innovation capability of domestic medical devices from three aspects: supporting product research and development, accelerating product launch and encouraging product purchase. The medical device industry in the country's strong support and the inevitable trend of localization replacement, the future will be very worthy of expectation.



What's more, the market size of the medical device industry shows an increasing trend year by year, and the home appliance giants all do not want to "dig gold" in this blue ocean. According to "China Medical Device Industry Blue Book (2021)" statistics, from 2016 to 2021, China's medical device industry has maintained a high boom. In 2020, China's medical device market scale reached 772.1 billion yuan, with a year-on-year growth of 21.76%, and in 2021, it will reach nearly one trillion yuan, with a year-on-year growth of 20.22%. And due to the repeated impact of the epidemic, the market size will further expand in the future.



Obviously, for the six domestic home appliance giants, including Midea, Haier, Gree, Hisense, TCL and Changhong, although they have many reasons to enter the field of medical devices, their layout is not weak at all. However, due to the different emphasis of the layout in the field of home appliances, the strategy of entering the medical great health track is also different.



Midea, Gree, Changhong cut from the scene



What kind of strategy to enter the game, test the choice of crossover, and from the perspective of space, Midea, Gree, Changhong layout of the medical and health field coverage is very wide. Midea has created five major solutions for medical scenes: medical technology building scene, surgery department scene, outpatient pharmacy scene, inpatient ward scene and logistics command center scene. Under the epidemic situation, Gree has arranged a number of medical and health fields, and added disinfection equipment, medical equipment, laboratory equipment and other business scope. Changhong has conducted in-depth research on life science, intelligent cold chain, family health and other fields. Obviously, almost all of these enterprises are integrated and diversified in the medical and health field.



First, the combination of industries across multiple sectors can provide hospitals and patients with more efficient, convenient and intelligent medical solutions. Hospitals have always been regarded as one of the most complex scenes, with multiple three-dimensional requirements such as inspection and quarantine, outpatient service, hospitalization, operating room and medical teaching. By integrating products with medical treatment, Midea and other household appliance companies have put forward a set of comprehensive solutions to meet the needs of different functions, so that the medical equipment, medical imaging, medical logistics, building HVAC and other links of the process to realize the interconnection, to a certain extent, save medical time, avoid doctor-patient disputes.



Second, the layout of the medical circuit for household appliance enterprises across specialties and demands can form competitiveness and open more imagination space for them. Taking a look at the international well-known medical enterprises, their medical brands include medical equipment, medical information, energy, building automation and other businesses, showing a kind of overall medical delivery, but there is still a lack of such a medical technology group brand in China. If Midea and other household appliance enterprises can provide such a comprehensive solution for the medical industry, they can form the core competitiveness and bring more profits for them.



In addition, the creation of an integrated medical technology group, so that the various businesses complement each other, also helps home appliance companies to improve the valuation. Take Siemens as an example. IT was only a telegraph company at the beginning, but now it is a world-renowned medical device giant that can provide customers with comprehensive medical products and solutions in imaging diagnosis, clinical medicine, laboratory diagnosis, medical IT and other aspects. Once a home appliance company such as Midea becomes an integrated medical technology group with revenues comparable to Siemens', its valuation will also rise significantly.



Haier, Hisense and TCL break through with their products



Unlike Midea, Changhong and other home appliance giants seeking development with comprehensive layout, Haier, Hisense and TCL seek to break out from the subdivision circuit. For example, Haier Group, which started from medical refrigerators and refrigerators, set up a core research and development institution in the field of cryogenic refrigeration in 2005, Haier Bio-Medical, focusing on the field of cryogenic storage equipment. In the same year, Hisense, which is good at display technology and image processing technology, is committed to creating visualization equipment products. TCL, which is competitive in digital image processing technology, also entered the medical image diagnosis business in 2009.



With more than ten years of layout in the medical field, Haier, Hisense and TCL have accumulated profound accumulation in medical equipment and made remarkable achievements. Focusing on the subdivision track of biomedical cryogenic storage, Haier Biological has gradually established a full product line covering -196℃ to 8℃, replacing imported brands and gaining a firm foothold. Hisense has now formed a global business map with 29 industrial parks and production bases, 20 research and development centers, covering more than 160 countries. TCL Medical has gradually built up a chain of full medical image products such as DR, ultrasound, magnetic resonance, CT and DSA. The reasons why these three can have such achievements are self-evident.



On the one hand, the support of its productivity advantage has laid a solid foundation for its rapid entry into the medical device field. After years of development, Haier, Hisense, TCL and other home appliance giants not only have a deep accumulation in technology research and development, user base, reputation, supply chain channels, sales network and other capacity, but also have made great breakthroughs in artificial intelligence, data analysis, sensing technology, image analysis and other technical fields. Based on these accumulation, It can maximize its advantages by focusing on the medical device field which is highly related to its main industry.



The strong and unique technical advantages of Haier, Hisense and TCL greatly facilitate their control of the core technology of medical devices. Cryogenic refrigeration, image processing, display and other technologies are of great help to the research and development of medical instruments and equipment. Relying on these technologies, Haier, Hisense and TCL have enough confidence to choose independent research and development for medical device technology. Once these home appliance enterprises independently master the core technology of medical devices, they will cross the threshold of high technology and form their own technical barriers, which means that they have the opportunity to share the spoils with international giants.



On the other hand, from the subdivision of the track into the game, the advantage of differentiation can further promote the pace of its geographical expansion. The low-end market of medical devices has long been a "red sea", while the middle and high-end market is still a "blue sea". In addition, most of the market shares of domestic medical devices are still occupied by international brands such as Philips, GE and Siemens, and they control the pricing power and the right to speak. Haier, Hisense and TCL make efforts to subdivide the circuit and make more accurate market positioning. Only by entering the higher-end "blue Ocean" market with more segmented and professional products can we shorten the gap between international high-end brands.



Gold mining in health care is not easy



In fact, it is in line with the development trend of The Times for domestic household appliance enterprises to carry out self-transformation. However, any transformation will have certain risks, especially in the field of medical and health care. Even if there is a strong capital, it may not be 100% successful. At present, no large domestic appliance manufacturers have achieved great success in this respect. Obviously, the domestic home appliance giants represented by Midea, Haier and Gree are not progressing smoothly in the diversified layout of the medical and health field as expected.



For one thing, although the medical and health market is vast, but there are not a few players in the beach this track, for domestic household appliance enterprises, it is not easy to share. In fact, in addition to home appliance giants such as Midea, Gree and Haier, industry giants such as BAT, Evergrande, Country Garden and Wanda have already entered the game. The strength of these giants can not be underestimated. Moreover, international giants represented by Philips, Siemens and General Electric, which have been deeply engaged in the medical device market for many years, are in the forefront. At present, most of the ultra-high-end medical device market in China is occupied by these foreign brands, with a market share of more than 70%, almost in a long-term monopoly position.



Second, it is difficult to break through the technical barriers of medical devices in a short period of time, and it takes a long time to invest from product research and development to the market, so it is difficult for home appliance enterprises to cross the boundary. Medical devices cover a wide range of areas, many segments, and most of them have high investment, long cycle, high certification threshold, long effect time and other characteristics, obviously this is completely different from the short-term return of household appliances sales market. In addition, in the aspect of exclusive medical devices, there is still a certain threshold for entry. Although there is the possibility of technological integration between home appliances and medical devices, there is a real industry gap after all, and home appliances enterprises still need to pay certain learning costs.



In the past three years, compared with the foreign "GPS" in the same transfer of their home appliance business, domestic home appliance giants are sticking to the main business while laying out a new track. How to coordinate the development of medical and main business has become their biggest challenge. Ge, Philips, Siemens and other home appliance companies have successfully transformed to the big health and medical sectors by stripping off their home appliance businesses. Domestic household appliance enterprises, on the other hand, expand diversified fields while sticking to the main business, which can effectively guarantee the stable profits of enterprises, but the resources are not unlimited. Once they continue to develop the main business, the capital, technology, talent and other resources needed by the medical innovation business will be reduced accordingly.



In a word, the environment of the medical field is completely different from that of the home appliance industry. It is not easy for domestic home appliance enterprises without operating experience in the medical industry to get on the special train of "medical and great health". They also need to break through the barriers of technology, brand and sales. Obviously, for Midea, Gree, Haier, Hisense, Changhong, TCL and other home appliance giants, the industrial upgrading and cross-border development from home appliances to medical equipment has a long way to go, and what they can do is to carry out reasonable reform while taking care of themselves.

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