China exported US$4 billion worth of small household appliances in 2004, an increase of 33 percent from the previous year. In terms of volume, the country shipped 677 million appliances, up 24 percent from a year ago.
The growth trend is expected to continue in 2005 as export sales have already increased 27 percent in the period January to July.
However, the industry could be headed for rough times as it deals with escalating production costs and struggles to meet the RoHS and WEEE directives of the EU.
The following are some of the trends we see in China's small household appliances export industry:
• Export prices of small household appliances are expected to increase 3 to 5 percent in 2005 as raw material costs continue to rise.
• Despite the upcoming WEEE and RoHS directives, the EU will continue to be the favored export destination for many China makers, mainly because buyers from the region are less price-conscious, giving suppliers higher profit margins. The EU currently absorbs one-third of China's exports.
• Many smaller companies, however, will shift their focus to markets other than the EU, as their limited financial capability will inhibit compliance to RoHS and WEEE.
• The key R&D focus of most companies in the next 12 months will be developing environment-friendly appliances. Suppliers will also emphasize multifunction products and new housing designs.
China's small household appliances exports are dominated by fans, electric heaters, vacuum/steam cleaners, flat irons, garment steamers, humidifiers and air purifiers. These are also the scope of this report.
The Products & Prices section in this report details the features and price ranges of these appliances. The latest trends in design and function are discussed in the R&D/design module.
The Manufacturing section explains the processes involved in appliance manufacture and how these differ in small and large companies.
The majority of small home appliances suppliers are wholly mainland China-owned private companies, but many are foreign-invested too. Fifty-seven percent of the companies in this report are locally owned while 15 percent are Taiwan invested and the rest are either owned by companies from other countries or publicly listed. Many of the large-scale factories are foreign invested or owned. The Industry Overview section elaborates on the industry composition, highlighting key characteristics of the different types of suppliers.
This report has profiles of some of the leading small household appliance makers in China. With annual turnover of US$84 million, Guangdong-based Airmate is one of the top three makers of electric fans in China. The company is expected to list on the Hong Kong stock market in 2006.
Industry Overview
Exports of small household appliances from China have been steadily rising even as the industry struggles with sharp increases in material and labor costs while preparing for the EU's WEEE and RoHS directives.
Production costs of suppliers exporting to the EU are expected to escalate after the region's directives on recycling appliances, WEEE and RoHS, come into effect. While some EU member states have already implemented WEEE provisions on producer responsibility for take-back, recycling and provision of financial guarantees, the RoHS directive will come into effect in July 2006.
According to the WEEE directive, makers need to redesign appliances so that they can be easily dismantled at recycling centers. It also requires manufacturers exporting to the EU to shoulder the recycling costs of their products, which could be higher than manufacturing costs in China since recycling centers will be maintained and operated in the EU, where salaries are much higher.
According to UK's Industry Council for Electronic Equipment Recycling, recycling costs in the EU are about 140 euros per ton. However, the council indicates that the cost of recycling small electrical appliances imported from China could be much higher because of their lower value, larger quantity and pre-treatment requirements. This, in the long run, could result in China suppliers paying a larger share of recycling costs.
The RoHS directive prohibits the use of the following materials in appliances: lead, mercury, cadmium, hexavalent chromium (used to inhibit corrosion), and polybrominated biphenyls and polybrominated diphenyl ether flame retardants (used in plastic housings of appliances).
The main challenge in producing RoHS-compliant products for China makers is finding suppliers of these materials. If domestic suppliers are unable to offer compliant materials, makers would have to resort to using imported materials, which would further increase their costs.
Manufacturers would also be required to invest in new machinery for lead-free soldering. In addition, they might have to maintain separate assembly lines for appliances that they sell to markets other than the EU, since buyers there would not be willing to pay higher prices for RoHS-compliant products. These makers would also need to have separate material stocks for the EU and other markets.
Further, once appliances have been made RoHS compliant, they would require testing, which is an additional expense.
Supplier Profile
Airmate Electrical (Shenzhen) Co. Ltd
Airmate is among the top three makers of electric fans in China. It also manufactures electric heaters, exhaust fans, humidifiers, kettles and induction cookers for the midrange and high-end markets. The company produces about 95 percent of its parts and accessories in-house.
Annual sales for small household appliances amounted to US$72.6 million. Sanyo, Toshiba and TOTO in Japan and Calor and Rowenta in France are among the company's OEM/ODM clients.
The company is expected to go public in the Hong Kong stock market in 2006.
Products
Airmate offers tower/column fans, desk fans, stand fans, wall fans, cycle fans, box fans, clip fans and industrial fans with 6- to 20-inch grilles. It also makes halogen heaters, fan heaters with coil spring, quartz heaters, convection heaters, ceramic heaters, far infrared heaters, oil-filled and halogen radiators.
High-end stand fans feature four wind speeds, five AS blades, digital speed control, built-in ionizer and LCD infrared remote control. Oscillation is horizontal and vertical. Midrange models feature two to three wind speeds, right and left oscillation; remote controller, iron or ABS housing and AS or iron blades.
Products comply with UL, CSA, GS, SEV, T MARK, SISIR and SAA standards.
Steel and copper are imported from Taiwan and plastics are from Chi Mei.
The R&D team of housing designers and mechanical, electrical and molding engineers can release 100 models of heaters and 200 designs of fans annually.
Manufacturing
The company has two factories with a combined area of 140,000sqm with facilities for molding, plastic injection, stamping, die casting, welding, painting and motor assembly. The molding plant is equipped with CAD/CAM processing equipment and a CNC molding center that can produce more than 1,000 injection, stamping and casting molds annually.
The motor workshop has six assembly lines equipped with more than 40 automatic winding machines, 10 coil and wedge inserting machines and five automatic forming machines. There is a noise test room in the middle of each assembly line, which the Global Sources team did not see in other appliance factories visited.
All this column of information contained in China Sourcing Reports is the result of original, independent and impartial research conducted by Global Sources analysts.
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