The core of this article
1, Haier Zhijia in the market value of the U.S. Group and Gree Electric lagged behind, to make up for the road there are two: one is the privatization of Hong Kong shares of the Haier appliances; the second is to the transformation of the smart home ecosystem, to seek new valuation of space;
2, compared to millet and Huawei on behalf of the two smart home ecological mode of closed and open, Haier Zhijia in the middle state of "
3, Haier Smart Home, as a home appliance enterprise in transition, the development of smart home does not have the advantages of the entrance and connection end, the independent ecological is not applicable.
Many families buy the first big appliances, is Haier's products, Haier's products have long been into the tens of thousands of households.
But in the capital market, Haier's presence is less than Gree and the United States. Even if it is the earliest known, it is the first Chinese home appliance industry to enter the world's top 500 companies.
Compared to old rivals Midea Group and Gree Electric, Haier Group's Haier Zhijia has been pulled away from a significant gap in market capitalization. At present, the market value of Haier Zhijia is only 185 billion yuan, more than 200 billion yuan behind Gree and more than 440 billion yuan behind the United States.
In recent years, the smart home wind mouth is gradually approaching, traditional home appliance enterprises have been transformed, a new round of home appliance leading card race is underway, Haier also pay more attention to the construction of home ecology.
In 2019, the original "Qingdao Haier" was renamed "Haier Zhijia", which reflects Haier's determination to turn to the smart home, and is even more radical than the United States and Gree.
Haier has gone through 36 years, why "talk about the youth crazy"? Haier has embarked on the road of transformation of Haier Zhijia, can look forward to value revaluation? From home appliance manufacturing to home ecology, Haier Zhijia's leap can be successful?
As of the opening of November 16, 2020, the United States Group's market value of more than 630 billion yuan, while the market value of Haier Zhijia is only about 185 billion yuan, behind the former more than a Gree.
From the historical reasons, Haier Group's Haier Zhijia and Haier Electrical two listed subjects have existed side by side for a long time. the A-share Haier Zhijia's business segment is mainly carrying refrigerators, air conditioners and other home appliances business; Hong Kong shares of the Haier Electrical mainly includes washing machines, water heaters and other businesses, with a market capitalization of about 106 billion Hong Kong dollars. However, even if the A-share and Hong Kong shares of the two subjects added, Haier and Gree and the United States of America's market value is still a large gap.
In fact, the three companies can be said to be equal in terms of business conditions. 2015-2019 Midea Group in terms of operating income have maintained the lead, Haier Zhijia and Gree Electric is relatively close. 2015 since Haier's gross margin are higher than the United States, 2019 also exceeded Gree, for the highest of the three.
What really separates the market capitalization of the three companies is their net profit. Over the past three years, Haier has averaged a net sales margin of 5.8%, compared to 13% for Gree and 8% for Midea. The high expense ratio has a direct impact on Haier's equity value, and in 2019, Haier Wise's selling and administrative expense ratios were 16.8% and 5.0%, respectively, higher than those of Midea and Gree.
In order to enhance the value of the enterprise, Haier completed two important initiatives in 2019: first, the privatization of the Hong Kong shares of Haier Electrical Appliances; the second is to change the name to "Haier Zhijia", from home appliance brand to eco-brand transformation.
Haier Zhijia privatization of Haier Electrical Appliances, in order to solve the two places listed on the dispersion of resource allocation, the interests of the unity of many problems. Changjiang Securities home appliance analyst Guan Quansen believes that if the privatization program successfully landed, Haier's minority profit and loss, capital efficiency and expense ratio will be improved; Haier in the business of divesting low-profit links (industrial Internet business Khaos), high-end, complete sets and the logic of the Internet of Things is expected to accelerate in the digital transformation help, to achieve the "open-source and reduce expenditure ".
In the integration of internal resources at the same time, to the smart home into the more current Haier to establish a competitive advantage in the market chips. As Haier Group Chairman and CEO Zhang Ruimin said, "the product will be replaced by the scene, the industry will be covered by the ecological", Haier Smart Home is to provide users with a single product to the complete set, and then to the smart connected ecological products.
How to build the most favorable smart home ecosystem is the biggest challenge in the current transformation process for Haier Zhijia, which started with traditional home appliance manufacturing.
The white paper on the development of China's smart home industry shows that China's smart home penetration rate was only 4.9% in 2018, significantly lagging behind the 32% in the United States and more than 20% in European countries. Compared to China's huge population base and consumer demand, smart home can be considered a blue ocean market in China.
Starting in 2015, as the smartphone market gradually becomes saturated, many smart hardware manufacturers began to open up new growth points, and there was a boom in investment and financing in the smart home market.In 2015, the number of financings in China's smart home market surged from 94 in 2014 to 174, and the total number of financing events in 2015-2019 reached 747.
The massive influx of capital has accelerated market competition.
Smartphones, the Internet and home appliance manufacturers are the three main types of players in the smart home field. Smartphone vendors have a natural entry device with a huge user base; Internet vendors have the advantage of online channels and a variety of products for users to choose from; and home appliance companies have a wealth of experience in hardware manufacturing, with a prominent brand effect.
Whether to choose a relatively closed and independent ecosystem or to integrate into a completely open platform is the same problem that all kinds of smart home market participants need to face***.
In the market competition, the number of device connections of the dominant domestic leaders Xiaomi and Huawei already has the potential to start in scale. in the first quarter of 2020, Xiaomi's number of smart device connections (excluding cell phones and PCs) exceeded 252 million units, while Huawei's current number of device connections is about 220 million. The two also happen to form two representative models of relatively closed and open in terms of ecological construction.
Xiaomi to smartphones as the entrance, with the ecological chain of play laying AIOT hardware devices, with the ecological chain of products to obtain the Internet of Things traffic. The model of its ecological chain is: shareholding not holding, **** enjoy the supply chain.
This relatively closed ecological chain model brings the advantage of cost-effective and unified standards. The products are sold by the millet unified, reducing advertising costs, channel costs, and at the same time suppressing their own and ecological chain hardware profit margins, creating the ultimate price-performance ratio. Xiaomi smart devices are also controlled by a unified operating system, Mijia App, with a unified design style.
Huawei has adopted a more open model, focusing on the unification of communication protocols, without participating in hardware production. Huawei launched the HiLink platform, played a third-party "non-competitive" role to build the interconnection platform, and chose to cooperate with home appliances, home furnishings and other enterprises to help their transformation.
Huawei's model has the advantage of providing strong technical support to lower the entry threshold of traditional home appliance companies; at the same time, it has a clear business boundary, which is conducive to attracting channel resources, and does not compete with hardware manufacturing enterprises. However, due to the unification of communication protocols in the early investment required a long time, Huawei is currently connected to the number of devices temporarily lagging behind millet, but in the future is expected to achieve faster growth.
Haier Smart launched its own "U+ Smart Living Platform" in 2014, and now has nearly 20 million users worldwide. Compared to Huawei and Xiaomi, Haier's ecological model is closer to "semi-open + semi-closed".
For Haier Zhijia, which is in transition, to create a unique ecosystem with comprehensive coverage or to join a fully open device connection model, which direction will it go in the future?
The attraction of a closed model is huge for big players that are at the leading edge of the industry. If a company is able to realize the comprehensive coverage of the entrance end, the connection platform, and the smart hardware, it will hope to gain monopoly advantage in the smart home market and ensure high profit margins.
For home appliance companies like Haier, Midea and Gree, their strengths are in hardware manufacturing and high national brand effect. Therefore, the intelligent upgrade of hardware equipment is often the first step for home appliance companies to enter the field of smart home.
From the hardware foundation, Haier Smart Home has a greater potential to build its own exclusive ecology.
According to the annual reports of Haier Zhijia, Midea Group and Gree Electric in 2019, compared with air conditioning, which reaches a share of 42% and 69% in the main composition of Midea and Gree, respectively, Haier has a more even distribution of refrigerators, washing machines, air conditioners and kitchen and bathroom products, and a more comprehensive coverage of life scenes.
Diversified product structure, for Haier to implement the "one-stop whole-house customization" product strategy to lay a good foundation of hardware.
So can Haier extend from the application device side to the entrance and connection side, and adopt the "ecological chain" style of play like Xiaomi to fight for market share?
Haier Smart Home started building its own smart home platform as early as 2014, but compared to Xiaomi, its shortcomings at the entrance are still very obvious. In today's highly popularized smartphones, Xiaomi and Huawei can easily add smart home entrances to their devices, but home appliance companies lack the foundation for such traffic entrances.
In order to make up for the weakness of the interactive entrance, Gree has tried to "get a piece of the pie" from the smartphone market. 2015, Gree's first-generation cell phone came out. In the processor, camera, version are inferior to other cell phone manufacturers, it is still priced at 1600 yuan, it can be imagined that consumers do not buy. Subsequently, its second and third generation of cell phone sales are only tens of thousands of units, and did not make much of a breakthrough.
In the pattern of white-hot competition among several leading domestic cell phone manufacturers, home appliance companies want to seize the smart home market share through the traffic entrance of smartphones, which can be said to be difficult.
Beyond the entrance, building a smart home connectivity platform is also a direction that many companies are aiming for. Haier's "U+ Smart Life" platform can take on the heavy responsibility of unifying the home ecosystem?
As a matter of fact, the advantage of home appliance companies is not in the connection side. At present, the smart home industry has not yet realized the unity of the communication protocol, and in the connection mode, Wi-Fi, Bluetooth, Zigbee and longer-range NB-IoT mode will still co-exist, resulting in different brands of products can not be compatible, or can only be in their own "small ecosystem".
Connectivity platforms
The unification of connectivity platforms is very attractive, but the probability is that it will not be a company from the home appliance industry that will be able to complete this work in the end. Home appliance companies lack the technical accumulation in the field of communication chips, big data and cloud computing, it is more suitable to seek external cooperation mode in the connection platform, data processing.
In addition, as the demand for smart homes becomes more and more diversified, smart home solutions will no longer be limited to the interconnection between home appliances, but may also be closely related to security, community services, car networking and other external scenes. In the future, the unification of communication protocols and connectivity standards will become the trend, and the "small ecosystem" will eventually be integrated into the "big ecosystem".
For Haier, returning to "smart hardware" is the best choice to maintain its competitive edge.
Excessive "connectivity" and "light hardware" is a misnomer for home appliance companies like Haier in transition. If you just connect more devices together and unify the control, what consumers have is not a smart home, but just a "multi-function remote control".
TCL Home Appliances Group CTO believes that the smart home can not be limited to remote control and voice recognition of such simple interaction, but more need to automatically sense the environment and people, self-learning, self-adjustment.
AVC and Tencent Home Appliances joint survey data shows that users are currently interested in smart home as high as 95.2%, but 87.5% of users are dissatisfied with the current situation of smart home.
In the case of smart hardware products that do not enhance the consumer experience, the implementation of a closed ecological model is more likely to be counterproductive.
Samsung's acquisition of SmartThings required the purchase of a SmartThings hub in order to enjoy its technology. But this kind of closed smart home system, once not ready, becomes a means of "kidnapping" users.
Xu Yansong, general manager of Gome Intelligence, believes that the smart home industry products are C-oriented, but the delivery is often done by the B-side of the enterprise, so consumer demand can not be fully matched.
For consumers, they often prefer multi-brand product combinations when choosing home products.
Epilogue
Haiqing Li, chairman of Hailin Energy Conservation, pointed out, "Now consumers buy products from different companies, and have to install apps from different companies. The essence of the smart home is to be convenient, but the platforms are incompatible with each other and actually bring trouble."
Intelligent home appliances and other industry linkage, so far only a beginning, ecological "centrist" state, obviously difficult to maintain for a long time.
Compatible with other home appliance brands, integrating the product into a more open ecosystem may be a better choice for Haier Home Automation.
Acknowledgments
I can't include all the content due to space constraints, but I would like to thank the many professionals who provided valuable insights and rich case studies during the writing of this article, and I would like to express my special thanks to the following (in no particular order):
Li Haiqing, Chairman of Hailin Energy Conservation; Xu Yansong, General Manager of Gome Intelligent; TCL Home Appliances Group CTO, Haier Cloud Kitchen business operations, CK Securities analyst Guan Quansen
References:
1. "Three questions about Haier Zhijia: privatization opens a new journey," Huachuang Securities, Gong Yuanyue
2. "The smart home industry has entered a cul-de-sac," Huffington Post, Zeng Rangling
3. Dialogue with Haier U+: Three Core Technologies How Haier Smart Home Builds a New Ecology of Smart Home", Flush Finance
4. "2020 China's Smart Home Eco-Development White Paper - From Whole-House Intelligence to Spatial Intelligence", CSHIA Research