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issue: May 2009 APPLIANCE Magazine

International Report - China
Design for the High End in China

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Huang Min, China correspondent

LG is designing washers to meet the specific needs of Chinese consumers—and that doesn’t mean taking a low-price approach.

With the launch of eight rotary washing machines designed for China’s high-end market, LG hopes to become one of the top three washing machine brands in China by the end of 2009.

LG Electronics China Holding Co. was determined to develop products specifically for the Chinese market. Kwon Taek-Ryul, president of LG Electronics China’s washing machine factory in Nanjing, says LG spent several years conducting in-depth market surveys. The company interviewed thousands of consumers, and visited more than 200 households in Beijing, Shanghai, Guangzhou, and other large cities to learn about people’s clothes washing methods, habits, and concerns.

What LG learned shaped the design of its next-generation washers for the Chinese market. The results identified a few health issues that might arise during the wash cycle. Because most washing machines on the market do not have independent disinfection cycles and separate disinfectant input containers, the study found, most people mix disinfectants with the detergent, thereby preventing the clothes from soaking in the disinfectant for 20 or more minutes as recommended. In addition, detergent and disinfectant residue represents a potential threat to children and individuals with sensitive skin. The study also found that most people are not in the habit of cleaning the interior of washing machines regularly. After nearly two years of research, LG launched three new lines with features aimed at addressing these issues: a steam disinfection cycle, independent disinfectant soak cycle, cleaning indicator light, and a rinse cycle designed to remove detergent residue.

In February 2009, LG held a press conference at its Nanjing plant, unveiling eight washing machine models from those new lines designed around the theme of “Healthy Living.” It was rare for the company to introduce new products with such fanfare, the last time being the release of its steam washers back in 2006. LG had high hopes for the sales of those new models. In a time when most appliance companies were bracing themselves for a slow 2009 ahead, Woo-Sung Chung, CE vice president of sales at LG Electronics China, says with confidence, “We expect sales of LG washing machines to increase to 30% in 2009 and break into China’s top three. We hope to be number one within two years.”

LG’s confidence is based on the strong sales numbers posted, both globally and domestically, by its washing machines in recent years. Media reports have shown that in the third quarter of 2008, LG’s rotary drum washing machines grabbed 40.6% market share in the United States, making LG the leader in the segment for the seventh consecutive quarter. In addition, LG washing machines were second only to Whirlpool with US$1.3 billion in global sales in 2008, putting the company in second place worldwide, ahead of Bosch, Samsung, Haier, and Siemens, according to Sung-Jin Cho, president of LG’s washing machine division based in South Korea.

What is noteworthy is that LG used to rely on low-price strategy to gain a foothold in the washing machine market. However, it was only after the firm had shifted its focus to the high-end market that it began to see sales figures soar. Cho says that LG plans to challenge for the top spot in the global washing machine market by 2010.

LG’s global strategy to target the premium market is consistent with its activities in China. While many Chinese appliance companies are scrambling to take advantage of the government program that subsidizes appliance purchases in rural areas, LG did not even participate in the bidding process, focusing only on developing the high-end market.

The firm’s sole washing machine facility in China, LG Panda, is a joint venture founded in 1995 between LG Korea and the Panda Electronics Group, with LG owning 70% of the shares. After several expansions, it can currently produce 2.5 million rotary and wave-wheel washing machines annually.

Woo-Sung Chung doesn’t seem to be worried about the current financial crisis, and is confident that LG’s washing machine division can meet its goal of growth to 30%. “Market demand for washing machines has expanded beyond just clothes washing, and this has led to an increase in demand for high-end washers. We are targeting middle- and high-end consumers and trying to meet their needs,” Chung says. In 2008, LG washing machine sales in China were approximately 900 million RMB, with rotary machines accounting for a slightly smaller percentage than wave-wheel machines. LG expects the sales in China to reach 1.2 billion RMB by 2010, with rotary drum taking the lead over wave-wheel washers. By 2012, LG hopes to reach annual sales of 2.0 billion RMB, with sales of primarily rotary drum washers.

With the launch of eight rotary washing machines designed for China’s high-end market, LG hopes to become one of the top three washing machine brands in China by the end of 2009.



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