LG Suffers in Chinese Air Conditioner Market
Nov 2, 2005
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LG Electronics' share of China's air conditioner market has decreased almost by half, facing tough challenges from local makers led by Haier.

According to a report from market research firm GFK, LG had a market share of 3.8 percent in the period from January to August, slashed from 7.2 percent of a year ago. Sales also shrank by 33 percent from U.S. $900 million to $600 million, being ranked as eighth biggest seller in China. The world's top seller of household air conditioners was ranked fourth during the same period last year.

According to the Chinese government's forecast data for a 1-year period from September last year to August, LG's air conditioners are expected to take a 2.85-percent share in sales of air conditioners, far behind from Haier and Midea with 16.2 percent and 13.2 percent respectively.

Competition in the Chinese market has become even fiercer this year, mostly due to increased production capacity of Chinese firms. According to a report from Beijing Daily, the country's total output of air conditioners came to 80 million units during the January to June period, up 23 percent year-on-year, or 15 million more than the same period last year. However, domestic demand is estimated at around 50 million units a year.

LG said that the decrease in sales is a temporary thing, adding it will rebound soon. "We are in the middle of a strategic shift, as we are beginning to market more premium brands instead of less expensive models," said a company spokesman.

LG has been leading the worldwide air conditioner market since 2000, but the market was soon crowded by Chinese makers such as Haier. This year, Haier even made inroads into South Korea and sold thousands of less expensive air conditioners on a home shopping channel.

Facing the challenge from the firms from west, LG had said during a press conference in October that it will sell more built-in system air conditioners worldwide including China, in order to avoid tough competition in the household appliance market.

The company said it will raise the proportion of built-in system air conditioners to half of its total air conditioner sales by 2010. It plans to invest 10 percent of sales revenue in research and development and to increase the number of engineers from the current 1,100 to 2,000 by 2008. (The Korea Times)

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