Shulou(Shulou.com)06/02 Report--

Midea shares held by foreign investors through QFII/RQFII/ Shenzhen Stock Connect accounted for 27.95% of the company's total share capital, an all-time high, just 0.05% from the 28% "purchase restriction line".

We know that the three red lines of foreign ownership in China are 26% (warning point), 28% (suspension of buying point) and 30% (compulsory reduction point).

According to the requirements of the CSRC, the proportion of shares held by individual foreign investors in a listed company through qualified foreign institutional investors shall not exceed 10% of the total number of shares of the company; the total proportion of A shares held by all foreign investors in a single listed company shall not exceed 30% of the total shares of the listed company.

Once the total foreign shareholding ratio reaches 28%, the Shanghai and Shenzhen Stock Connect will suspend buying and can only sell. Of course, foreign investors can continue to buy through the accounts of the Shanghai and Shenzhen stock exchanges. After more than 30%, all foreign investors will be closed and can only sell. The excess part is based on the principle of buying and selling first, until the shareholding ratio is less than 30%.

With the gradual landing of various opening measures in China's financial sector and the continuous influx of foreign capital, the explosive purchase of A-shares by foreign investors is becoming more and more frequent. At the same time as Midea was bought out, the proportion of foreign investors held by China Test also hit an all-time high of 26.37 per cent.

However, in terms of Meimei's development over the past year and the current situation, Mei's situation can be described as "a mixture of ice and fire", with obvious internal shortcomings and external capital. This is both an opportunity and a challenge for beauty, which depends on how to deal with it in the future development.

The prospect of beauty is beautiful, but the reality is difficult.

At the beginning of 2018, Midea formulated the development strategy of "global science and technology group company". Since then, "global operation + science and technology group" has become Midea's "enterprise dream". However, at present, Midea's global operation has not yet become a reality.

Midea accounted for nearly 50% of overseas revenue in 2016, but that doesn't mean Midea has become an international company. The fact is that Midea's independent brands from overseas markets have very low revenue, not to mention profit contribution. In this respect, Haier is the best home appliance company in China. At present, Haier is the most influential Chinese household appliance brand in the world.

In 2019, in a "Top 50 Chinese Brands going abroad" published by BRANDZ, the United States ranked 49th in the influence of Chinese overseas brands, which is a far cry from Haier's ranking No. 7 and far below Gree's No. 29 ranking.

It can be seen that Midea's influence abroad is much lower than that of Haier and Gree. At the same time, it also reveals that Midea's "global operation" development still has a long way to go.

So, what will happen to the development of beauty in the section of "Technology Group"?

Since 2016, Midea has increased his investment in scientific research year after year and is determined to transform into a science and technology enterprise. According to Midea, Midea's R & D investment is likely to exceed 12 billion yuan in 2019, which is currently the largest R & D investment in China's home appliance industry.

Realistically speaking, an enterprise that attaches importance to R & D and innovation will have a good future. This can be confirmed by the development of Huawei.

But there is another side to the truth. Continuous R & D investment has not fundamentally changed Midea's product status quo. For example, many netizens say they don't think the beauty of today is much different from that of five years ago at the product level. Moreover, judging from the high-end brand COLMO launched by Midea in 2019, the product is not as good as expected.

At the 2019 Annual meeting of Midea Management held at the beginning of last year, Fang Hongbo said that the change in Midea in 2018 was greater than that in the decade from 1998 to 2008. "Winter is inevitable, and beauty should be faced well," he said. For 2019, he said, "Don't talk about goals, just pursue high-quality growth."

From Fang Hongbo's words, we can understand what beauty is going through. But 2019 has passed, and we don't know what Midea's "high-quality growth" will be. The only certainty is that Midea still has a hard way to go on the road to "global operations" and "technology groups".

The deficiency of high-end brands hinders the future of beauty

It has been said that the greatest feature of beauty is that it has no obvious advantages and no obvious shortcomings. But I do not think so, at least now Midea compared with other domestic household appliance enterprises, the shortcomings have been highlighted, and may also affect the future development of the United States.

Midea has always called itself "National Home Appliances". This brand positioning determines that Midea is only attractive to the middle-income group, but not to the high-end consumer class and young people who advocate Internet thinking.

However, from the perspective of Midea's development layout and strategic adjustment in recent years, Midea has also made a lot of improvements in this respect, but from the point of view of the products launched, except for higher pricing and the addition of some simple AI performance, there is not much difference between Midea and ordinary household appliances in other aspects.

If you ask Midea what is the most eye-catching move in 2019, it must be the launch of two own brands in succession: COLMO and BUGU.

In October 2018, Midea launched the high-end brand COLMO at Mont Blanc, the highest peak in Europe. According to the beauty explanation, COLMO means "climb" and is dedicated to serving 1 per cent of the world's people. It is obvious that the COLMO products launched by Midea mainly focus on the high-end brand market.

But in fact, Midea launched this series of products, and has not been recognized by users. Moreover, under the fact that AI has become a platform technology for all brands of household appliances, it will not have any characteristics to promote a platform technology that is almost indistinguishable.

From the current Midea's development strategy of "global technology group companies", if we want to better enter the international market and establish a firm foothold, we must have our own high-end brand as a support. And now Midea's development in this area is indeed immature, and the influence of high-end brands also needs to be improved.

The deployment of smart home lags behind

In recent years, with the promotion of science and technology and the landing and popularization of technology, many pain points of smart home have been effectively solved, such as high-speed data transmission, fast and stable connection, timely response to user needs and so on. Therefore, in the near future, the experience of smart home to users will be greatly improved.

And, with the development of 5G and AI, and the gradual promotion of the application of the Internet of things, the smart home market will become a new growth point in the field of home appliances. Judging from the actions of the Internet giants and mobile phone brand manufacturers in 2019, they all seem to be deeply aware of this new trend.

In March, Huawei released the Hilink platform, highlighting its "cloud management edge core" comprehensive solution ability, and put forward the "enable three-piece set" to achieve the ecologicalization of the Internet of things and directly address the interconnection problem.

In June, Xiaomi released six new household appliances and set up a home appliance management department, which Lei Jun personally went to the expedition; through Aliyun and Tmall genie, Aliba Baba also seems determined to enter the smart home of the future. SUNING has released more than a dozen household appliances, which is also the embodiment of his offensive intelligence department.

The logic and path of these giants across industry boundaries is clear, from smart home appliances to capture smart home scenarios and new user traffic portals.

In fact, these giants have led the industry to enter a new track in the domestic smart home market. The main competitors are no longer limited to household appliance enterprises, and the competition pattern has become clear, forming three camps represented by BAT, Huawei and Xiaomi.

Representing Internet and technology enterprises, the commercial camp of domestic home appliance manufacturers represented by Midea and Haier, the operator camp represented by mobile communications, and the e-commerce platform camp represented by JD.com and SUNING. It is understood that in 2019, Midea carried out a series of "operations" on its Internet of things platform in order to deeply lay out smart homes, from low-level technology construction, application software integration, and user experience to talent team construction. And launched a unified user APP-- beautiful house.

According to data, as of the end of June last year, Meiju app had been downloaded 30 million times and the number of daily active users reached 3 million, but Midea still lags far behind Huawei and Mijia in terms of smart home deployment.

The installed capacity and activity of Meiju applications in home appliances and smart home industries are still not at the top. In addition, in the smart home area of Apple App Mall, Meiju is also second to Mijia.

Therefore, in order to solve the pain point of connecting the smart home appliance distribution network, Midea can only cooperate with Huawei, Ali, SUNING, JD.com and other Internet of things platforms to achieve docking and jointly explore the prospects of the smart home industry.

Originally, Midea could rely on years of accumulated technology, products, channels, scale advantages, and previous transformation experience to compete for the leading players in this field, but because the deployment was too late, it could only share a piece of the "pie" with other giants.

Why are those that are bought and sold out beautiful?

As a multi-layout household appliance enterprise, in addition to television, Midea's other household appliances cover a full range of products. But you will find that air conditioners can't beat Gree, refrigerators and washing machines can't beat Haier, and kitchen electricity can't beat Mrs. Fang and Emperor Hua. Therefore, it is difficult for us to give Midea an appropriate "label", and Midea does not seem to have any obvious advantage compared with Gree, its biggest competitor.

So, why is it beautiful and not Gree or other domestic household appliance companies that have been bought by foreign investors?

1. The platform has high operation efficiency and strong competitive strength.

In recent years, Midea's innovative strength and commercial influence are spreading from China to the world, and has established his own new pattern of global innovative enterprises.

Midea ranked 312th on the 2019 Fortune 500 list. This is the fourth year in a row that Midea has been on the Fortune 500 list, and the ranking is also rising year by year.

The steady increase in business value and influence is the result of Midea's promotion of lean management and excellent operation of the whole value chain in the era of the Internet of things, which of course enhances the competitiveness of Midea.

Through the C2M model to meet the personalized needs of customers, a digital system that enables the reform of channels, inventory management, and the integration of new technologies such as artificial intelligence, big data, cloud computing, and the information system International 632 Project, which covers 15 overseas production bases, 24 sales operation institutions and 20 R & D centers around the world, to achieve efficient operation of the Internet.

According to the 2018 annual report, Midea's own funds increased 15 per cent year-on-year to 78.3 billion yuan, cash flow from operating activities increased 14 per cent to 27.9 billion yuan, while the gross profit of the main business reached 28.8 per cent, an increase of 2.6 per cent. This is due to the excellent and effective operation of Midea.

At the same time, it also made Midea's brand-new industrial Internet platform M.IoT, making Midea the first complete industrial Internet platform provider in China that integrates independent industrial knowledge, software and hardware.

2. Effective corporate governance structure

Someone once compared beauty to a student who did well in every subject, but did not do well in every subject. It is obvious that this is "complaining" that Mei has no outstanding advantage. In fact, Midea's outstanding advantage is in terms of soft power, that is, the advantage of corporate governance structure.

This is one of the reasons why most investors are optimistic about beauty.

If you compare the beautiful led by Fang Hongbo with the Gree led by Dong Mingzhu, you will find that there is a significant difference between the two: most of the investments made by Midea under the leadership of Fang Hongbo have logic to follow, while those led by Dong Mingzhu, Gree Electric Appliances, often make investment decisions like "one hammer in the east and one hammer in the west", without any rules and regulations.

For example, in 2016, Midea's acquisition of Kuka is entirely based on Midea's position to develop into a technology group in the future, as well as the rising labor costs in China and the increasing demand for product standardization. The action taken by machines to replace manpower is a general trend. This is much more pragmatic than Gree making mobile phones.

Not only that, but Midea also has an advantage over Gree at the leadership level. In terms of age, Fang Hongbo is 14 years younger than Dong Mingzhu, so for at least the next 10 years, the United States does not have to worry about the potential risks of leadership change. Because the most likely change in the change of senior leaders is the fault of corporate strategy, which puts the enterprise in uncertainty.

In addition, a good system design will automatically filter the personal decisions of the management, so that the probability of passing the wrong decision is very small, and the risk of the enterprise will be reduced. So in the United States, it is hard to imagine that Fang Hongbo's decision to do TV or mobile phone will be approved by the board of directors.

Although Fang Hongbo's business wisdom is not so "old" at this stage, nor can it be compared with the leaders of other giant technology companies, it is an indisputable fact that Mei's probability of making big mistakes is much lower than that of Gree.

Transforming layout and drawing lessons from Huawei

In recent years, Midea has learned from Huawei in R & D and invested more and more in R & D. And in terms of the growth Midea has shown in the past five years, it is indeed similar to Huawei. However, it would be unrealistic to say that Midea already has the corporate attributes of Huawei.

Since 2017, Huawei seems to have become China's "Internet celebrity" technology company. But Huawei, an "online celebrity", is much more hardcore than the average online celebrity. And it has become a benchmark for many Chinese enterprises to learn.

The success of Huawei is essentially the success of the product, and the success of the product comes from technology and research and development. Over the years, Ren Zhengfei has always adhered to the belief that only technology leads to product leadership, and only product leadership leads to market leadership. He believes that the lead brought by all other factors is unreliable. Only the lead brought by technology and products is reliable.

Last April, Huawei's "Heart Voice Forum" published an internal speech by founder Ren Zhengfei, saying that Huawei's goal for its consumer business was to reach $150 billion by 2023. The entire Huawei Group achieved US $2500-300 billion. To this end, Huawei plans to invest $100 billion in research and development over the next five years.

When people exclaimed that "Huawei is becoming more and more radical", it was found that Huawei did not unrealistically put forward a seemingly impossible goal, but invested the same seemingly radical R & D resources at the same time. And over the past decade, Huawei has invested as much as 480 billion yuan in research and development.

Willing to invest in R & D is not only a kind of courage, but also a kind of foresight. For a long time, most Chinese companies would rather spend a lot of money on marketing than spend on research and development. Therefore, most Chinese enterprises still stay at the level of marketing-oriented enterprises, and it is difficult to transform into truly meaningful science and technology enterprises. This is the root cause of the lack of stamina for the development of most Chinese enterprises.

Meimei, which has been looking forward to transforming into a technology-based enterprise like Huawei, has been increasing its R & D investment in recent years, and has become the largest household appliance enterprise in R & D, far exceeding the second place.

If an enterprise wants to develop for a long time, it must realize that the first driving force for its development comes from technology rather than marketing. Huawei is what it is today, isn't it the result that Ren Zhengfei established the basic strategy of "building an enterprise through technology" many years ago?

R & D is invested in the industry first, and the future development can be expected.

If you look at Midea's strength in terms of R & D expenses, the continuous increase of foreign holdings in Midea is a high recognition of the company and the result of Midea's continuous R & D and innovation.

The core technology is not blown out, but "thrown" by money. In recent years, Midea has continued to increase investment in research and development, which has left a deep impression on the home appliance industry. For this reason, Midea identified the enterprise as a technology group in 2018.

At present, Midea has formed a "two-tier and four-tier" R & D structure, with Academia Sinica at the group level to carry out subversive research, cutting-edge technology research, as well as common technology and future technology research; the following division level is responsible for personalized technology research and product development.

According to Midea, R & D investment is 10 billion yuan in 2018 and may exceed 12 billion yuan in 2019, making it the largest R & D investment in China's home appliance industry.

The R & D expenditure of the home appliance industry in the first three quarters of 2019 can be divided into four echelons: the first echelon is Midea, with R & D expenditure of 6.994 billion yuan. The R & D expenses of the two second echelons, Gree and Haier, are 4.63 billion yuan and 4.46 billion yuan respectively. The third echelon has three Hisense Appliances, Sichuan Changhong and Hisense household appliances, and the R & D costs are 10.16,10.15 and 577 million yuan respectively.

Even compared with its biggest competitor, Glippi, Midea is far ahead in R & D spending. From the perspective of R & D costs, Gree's investment level is only 66% of that of the United States, and the gap is very obvious. This has a lot to do with the relative concentration of Gree's industrial layout in air conditioning, but it also shows that Gree has not invested heavily in new areas, so Gree's mobile phone is more like a "show".

Data show that from 2014 to 2018, Midea's cumulative R & D investment in the past five years exceeded 34 billion yuan, an average annual growth rate of 21%. If Midea can always maintain such R & D investment, Midea will have a qualitative improvement in both technological breakthroughs and product sales in the future.

(official account of Liu Kuang / tr. by Phil Newell) ID:liukuang110

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