On October 31, 2017, the National Bureau of Statistics Service Survey Center and the China Federation of Logistics and Purchasing released the China Purchasing Manager Index (PMI). According to the data, China’s Manufacturing PMI for October stood at 51.6%, a decrease of 0.8 percentage points from the previous month, but still maintained an average level for the year, indicating continued expansion in the manufacturing sector. Among the five sub-indexes, the production and new orders indexes remained above the 50-point threshold, while the raw material inventory, employee, and supplier delivery time indexes were below it.
Overall, a PMI above 50 indicates growth in the manufacturing sector, while below 50 suggests contraction. As a key pillar of the industry, the home appliance sector was in an acceleration phase during this period. With major festivals like Singles’ Day, Double 12, and the Spring Festival approaching, dealers began restocking early, leading to sustained increases in upstream production and new orders.
Will the color TV market successfully meet its annual targets during this recovery phase? In the first half of the year, the market was quite turbulent. However, with a sharp drop in TV panel prices in August, the sector entered a peak season in September. Companies like Sharp are aiming to sell 14 million TVs this year. Data from the 43rd week of 2017 showed that Sharp’s online sales surged by 715.6% year-on-year, while offline sales dropped by 23.7%. During this year’s Singles’ Day, Sharp’s pre-orders exceeded 200 million yuan.
Hou Daowen, General Manager of TCL Multimedia’s China Business Department, noted that TV inventory during the Singles’ Day period reached three times the daily reserve volume, creating significant challenges. Production and stock preparations had already begun during the National Day holiday. The rise in orders from major manufacturers inevitably led to increased consumption of raw materials and components.
As the first half of the year ended, domestic TV manufacturers continued to stock up, resulting in inventory levels higher than normal. This stocking turned into excess inventory, prompting manufacturers to reduce purchases in the following quarters to manage overstock. Upstream panel shipments began to decline, though supply remained stable due to ongoing capacity releases. By the second quarter, panel prices started to fluctuate, and supply-demand dynamics gradually shifted. With reduced inventory in the third quarter, the weak domestic TV industry saw some improvement, and the profit margin of less than 1% began to reverse. The fourth quarter is seen as the final opportunity for domestic TV brands to meet their annual sales goals.
In the refrigerator industry, output in the fourth quarter is expected to continue rising. From January to September 2017, China produced 74.144 million household refrigerators, a 13.3% increase compared to the same period last year. In September alone, output reached 8.466 million units, up 14.2% year-on-year. Industry analysts predict that output will continue to grow in October, with the full-year projection reaching 94.495 million units. This growth reflects strong demand, high production indexes, and declining raw material inventories.
Anhui and Guangdong provinces are the main drivers of national refrigerator production, with many white goods manufacturers such as Midea and TCL located there. Anhui’s refrigerator output reached 300.87 million units in 2017, a 5.44% increase year-on-year. Despite the perception that the domestic refrigerator market is deteriorating, it has shown steady growth in recent years, albeit at a slower pace. Companies have become accustomed to rapid growth and are now adjusting to a shift from price competition to value-based competition.
In the air-conditioning industry, despite the challenges of overstocking, manufacturers are focusing on smart production upgrades. Some brands even skipped equipment maintenance in August, signaling potential overproduction. Strong channel resources and dealer enthusiasm for product supply continue to drive factory orders. While both production and order indexes remain high, they also accelerate the depletion of upstream inventory.
Meanwhile, the kitchen appliance market has experienced rapid growth since 2014, driven by consumer upgrades. From January to August 2017, the market size reached 61.8 billion yuan, a 16.1% increase year-on-year. It is estimated that the market will reach 96.8 billion yuan by year-end, with the fourth quarter contributing significantly. This growth will further stimulate upstream raw material orders and inventory consumption.
Despite the booming market, fierce competition is intensifying, and the industry is undergoing reshuffling. A few major players are emerging as leaders, shaping the future of the kitchen appliance market.
The home appliance industry remains one of the most representative sectors of China's manufacturing industry, reflecting the overall health of the economy. With large-scale markets for TVs, refrigerators, air conditioners, and kitchen appliances, the sector continues to drive manufacturing PMI growth, offering a clear view of China's economic trends. As the industry prepares for key promotional periods in the third quarter, the manufacturing PMI base remains strong, and although the production and new orders indexes dipped slightly after a three-month rise, they still outperformed the same period last year. According to Zhao Qinghe, a senior statistician, the current trend shows a slowdown in production and demand growth, but high-end and consumer goods manufacturing continues to expand. Driven by supply-side reforms, the industry PMI remains in a positive range, reflecting broader economic activity.
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