Recently, a product named "Mi Home Full Frequency Air Conditioner" showed up on the national 3C quality certification list, commissioned by Changhong Electric. This isn’t the first time Xiaomi has dabbled in air conditioners. Back in 2015, they collaborated with Midea to launch an air conditioner, but it ended in disaster. Dong Mingzhu, Chairman of Gree Electric, even mockingly referred to them as "two liars working together."
It's unclear if this decision will reignite Dong Mingzhu's competitive spirit.
Back then, when Lei Jun, founder of Xiaomi, and Dong Mingzhu were going head-to-head, both tried to invade each other's fields, saving a lot of advertising expenses. Many thought that Xiaomi had a golden opportunity to enter the air conditioning industry.
In 2015, Xiaomi partnered with Gree's rival,美的 (Midea), launching the "i Youth Smart Air Conditioner," claiming it was the "first air conditioner for young people." They hoped to attract younger consumers with its sleek design and smart features. Xiaomi also invested heavily in this project, showcasing their determination. However, the product ultimately flopped in the market due to exaggerated concepts, impractical features, and low power efficiency.
Take the 1.5P model of the Xiaomi air conditioner, for example. Its cooling power is only 1060W, priced at 3099 yuan, while other brands offering similar pricing have a cooling power ranging from 2200-2800W.
Users were quick to criticize: "With such low power, it’s no surprise the remote control smart home doesn't work until you're already home." "The so-called smart features aren't enough to justify spending 600 more."
Up until now, Xiaomi has never disclosed the sales figures for this air conditioner. Dong Mingzhu, who was busy fighting a patent war with the US at the time, also sarcastically referred to Tumi and Midea as the "thief group."
Over the past three years since the strategic cooperation between Xiaomi and Midea, there hasn't been much synergy in actual business operations. It seems the joint air conditioner products didn't make much of a splash. As Xiaomi introduced a series of smart products like air purifiers, rice cookers, laser projectors, balance bikes, and electric toothbrushes, this move directly affected the established players in the smart home market.
Insiders pointed out that these conflicts of interest made Xiaomi's split with Midea a necessity.
After failing in its first attempt, Xiaomi didn't give up on air conditioners. Having spent a long time with Midea, Xiaomi shifted its focus to Changhong, which is rapidly expanding in smart homes and artificial intelligence. Xiaomi hopes to leverage Changhong's technical expertise to ensure the quality of its air conditioners.
Reportedly, after acquiring Meiling, Changhong, with its over 2,000-strong technical R&D team, has several leading patented technologies, suddenly placing itself at the forefront of the white goods sector. These could help Xiaomi avoid unnecessary detours. For Changhong, collaborating with Xiaomi is also a test of its smart technology capabilities.
"Changhong has been exploring the field of artificial intelligence for a long time," said Li Jin, General Manager of Changhong, at last year's Changhong Artificial Intelligence TV conference. Some industry observers speculate that as Changhong's technological reserves in artificial intelligence start to bear fruit, it might not be surprising to see the release of artificial intelligence refrigerators, air conditioners, and other products in the future.
At the beginning of this year, Changhong and JD.com jointly released an "Artificial Intelligence Voice" air conditioner, signaling clearly to the outside world that "intelligence" has become the main direction of future development for Changhong air conditioners.
For Xiaomi, which focuses on light assets and intelligence, Changhong's strong air conditioning technology and manufacturing capabilities, along with its pursuit of intelligence, made the two a perfect match. Thus, the "Mi-Jia Full Inverter Air Conditioner" was born.
Why did it happen?
Some netizens joked about Xiaomi's move: entering the air conditioning market is like Gree entering the smartphone market. There’s no threat, and no waves can be stirred.
Is that really the case?
According to data from the Consumer Research Center, Gree holds the top spot in China's air conditioner market with a 44% share, followed by Midea and Haier. In terms of sales, China's air conditioner market saw a 4.8% decline in 2015 compared to the previous year, but it recovered in 2016. Overall, growth remains stagnant, leaving little room for significant breakthroughs.
Gree and Midea account for more than 60% of the market share.
Some analysts pointed out that Xiaomi's failure to enter the air conditioning market is far more likely than its potential success. Air conditioners emphasize core technology more, particularly their core component, the compressor. Gree and Midea, currently the top two domestic air conditioner manufacturers, have their own compressors. Even if Xiaomi collaborates with Changhong, its contribution in terms of patents and technology in this area is limited. Additionally, the air conditioning industry requires substantial manpower and material resources. Compared to Gree's "6-year whole machine warranty" slogan, the challenge for Xiaomi, which focuses on light asset management, is evident.
However, from another perspective, Xiaomi might also be the "catfish" stirring up the air conditioning market.
Insiders believe that Xiaomi's upcoming air conditioners are likely to be at least 500 yuan cheaper than similar products, aiming to stimulate user purchasing desires. This is consistent with Xiaomi's usual approach. Despite lacking an air conditioning factory and after-sales service system for now, it might still trigger a price war in the market to gain more users.
"The appearance and functionality of Xiaomi's products are all top-notch, with prices that are very affordable. Combined with its always eye-catching brand marketing capabilities, there’s a loyal fanbase known as 'Rice Rice.' Considering these factors, it’s entirely possible for Xiaomi to succeed in the air conditioning market," said Mr. Lu Renbo, Deputy Secretary-General of the China Electronic Chamber of Commerce. He believes that Changhong's manufacturing capabilities and product quality are beyond doubt. As Changhong continues to grow, Xiaomi's brand and Changhong will complement each other well.
Regarding Xiaomi's entry into the air conditioning industry, an insider from Gree said, "We welcome competition, but it won’t be easy."
Lu Zhibo believes that Xiaomi achieving initial market penetration is possible, but competing with Gree and Midea is "completely unnecessary." "Neither the scale of the company nor the current sales of air conditioners can compare Xiaomi with Gree and Midea. It's like comparing Gree's smartphones with Xiaomi's—there’s simply no comparison."
For Xiaomi and Gree's cross-industry ventures, Lu Renbo thinks Xiaomi's air conditioners are more viable than Gree's smartphones. "Gree basically has no chance at smartphones, but Xiaomi still has a shot at air conditioners."
It seems that with Xiaomi holding Changhong's air conditioners, the market will indeed become more challenging.
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