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issue: October 2007 APPLIANCE Magazine
China Report
China Becomes the Global Manufacturing Center of Refrigerator Compressors |
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by Viloet Han, China Correspondent
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In the first half of 2007, the demand for refrigerator compressors in China increased rapidly. Observers estimate that in this period, approximately 33 million refrigerator compressors were sold in China. This figure equals the total demand for refrigerator compressors in China in 2006.
Why is the demand for refrigerator compressors rising so dramatically? First, as China’s economy grows, the country’s consumption of refrigerators is increasing. Second, refrigerator exports to other countries are increasing rapidly. Chinese customs statistics show that 5.7 million refrigerator compressors were exported in the first half of 2007—a 75% increase over the same period last year.
A growing number of international refrigerator manufacturers purchase Chinese refrigerator compressors or plan to do so in the future. One company, Electrolux, says that it intends to buy large quantities of compressors in China.
Chinese factories are increasingly producing for the export market, resulting in a dramatic growth in foreign sales. For example, most LG refrigerator compressors made in Tai Zhou, Jiangsu, are exported. Dong Bei, a domestic manufacturer of refrigerator compressors, indicates that the company’s export volume has been increasing rapidly in the past two years. In 2006, Dong Bei exported 940,000 refrigerator compressors. In contrast, from January through June this year, the company exported 11.8 million compressors.
ACC, a foreign-funded compressor company in Tianjin, has also paid more attention to changes in the export market. A company spokesman notes that ACC will use the mother company’s overseas resources to expand its export business.
With current capacity of around 65 to 70 million refrigerator compressors, China can meet half of the world’s needs. Nevertheless, most refrigerator compressor companies in China are considering expanding production. With profit margins of only 3%, most domestic manufacturers believe that they can increase profits only by upping production. However, some observers worry that bolstering investment or production is likely to cause overproduction of Chinese refrigerator compressors and eventual price wars.
