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Midea Group: From Village Workshop to Global Appliance Empire
The Improbable Rise of a Cultural Revolution Startup to the World's Largest Appliance Maker
I. Introduction & Episode Roadmap
The year is 1968. The Beatles release the White Album. Martin Luther King Jr. is assassinated. The Boeing 747 takes its first flight. And in a dusty village in southern China's Guangdong Province, a 26-year-old named He Xiangjian pools together 5,000 RMBâroughly $940âwith 23 fellow villagers to start making plastic bottle caps.
Today, that humble enterprise has become Midea Group, a global leader in smart home appliances and commercial & industrial solutions, with revenue reaching RMB 409.1 billion (approximately $57 billion) in 2024. According to Euromonitor, Midea ranked as the world's top smart home appliances brand in 2024. In 2017, Midea was reportedly the world's largest producer of industrial robots and appliances.
The central question this deep dive seeks to answer: How did a small workshop producing plastic bottle caps during the Cultural Revolution become the world's largest appliance maker and owner of a German robotics giant?
The Midea story contains multitudes. It's a story about China's economic transformation, certainlyâbut it's also a masterclass in founder-to-professional-manager transition, a case study in acquisitive globalization, and a primer on what it takes to evolve from a low-margin OEM manufacturer to a technology-driven brand company. Midea's B2B revenue surpassed RMB 100 billion for the first time in 2024, representing 25.5% of total revenueâproof that the company's strategic pivot toward industrial technology is bearing fruit.
Midea Group is headquartered in Beijiao town, Shunde District, Foshan, Guangdong and listed on Shenzhen Stock Exchange since 2013. As of 2021, the firm employed approximately 150,000 people in China and overseas with 200 subsidiaries and over 60 overseas branches. It has been listed on the Fortune Global 500 since July 2016.
The themes that emergeâCommunist China entrepreneurship during an era when private business was forbidden, a carefully orchestrated professional management transition, acquisitive globalization that raised eyebrows from Beijing to Berlin, and diversification into B2B businesses ranging from robotics to medical equipmentâoffer lessons for investors and business students alike.
II. Founding: The Cultural Revolution Entrepreneur (1968â1979)
Picture the scene: Beijiao, a small town in Guangdong's Shunde District, 1968. Mao Zedong's Cultural Revolution is in full swing. The entire country is convulsed by ideological fervor. Private enterprise is not just frowned uponâit's dangerous. And yet, somehow, in this unlikely moment, He Xiangjian sees opportunity where others see only risk.
He Xiangjian was born in Shunde, Guangdong province in 1942. He started his business with 23 villagers making glass bottles and plastic lids. Business friends have shared some anecdotes about the school dropout who started Midea with 5,000 yuan (US$707) from a bottle-cap workshop in Foshan in 1968.
He Xiangjian was born on October 5, 1942, in Shunde, Guangdong, China. His early life was marked by the hardships of growing up in a rural village during a time of economic and political turmoil in China. He had no formal education to speak ofâa school dropoutâbut he possessed something more valuable: an intuitive understanding of markets and an appetite for risk that bordered on the reckless.
The workshop was structured as a "collective enterprise"âthe only legal form of non-state business at the time. It was called the Beijiao Street Office Plastic Production Group, a wonderfully bureaucratic name that disguised what was, in essence, entrepreneurship under the cover of socialism. He started out in the production of bottle caps and lids with an initial budget.
Why Guangdong? The province's unique geography provided crucial advantages. Its proximity to Hong Kongâjust across the Pearl River Deltaâmeant exposure to capitalist ideas and market practices that the rest of China wouldn't experience for decades. Even during the Cultural Revolution, Guangdong maintained informal trade connections with Hong Kong, and its residents developed a nascent "reform mindset" that would prove invaluable when Deng Xiaoping opened China's economy in 1978.
Through the 1970s, operations remained focused on low-tech plasticsâbottle caps, lids for thermos flasks, simple industrial components. The workshop leveraged local labor and basic injection molding techniques to build foundational manufacturing capabilities. It wasn't glamorous, but it was profitable. More importantly, it was building institutional knowledge about manufacturing at scaleâknowledge that would prove invaluable in the decades ahead.
The Midea origin story matters because it establishes a pattern that would define the company: pragmatic opportunism, willingness to embrace risk, and an understanding that scale is destiny in manufacturing. He Xiangjian wasn't building a bottle cap company; he was building the organizational capabilities that could manufacture anything.
III. The Pivot to Appliances & Early Growth (1980â1992)
The transformation began in 1980, coinciding almost precisely with Deng Xiaoping's economic reforms. After its initial period of manufacturing bottle lids and car parts, the company focused on the manufacture of fully finished goods; specifically, electric fans beginning in 1980. Five years later, Midea produced its first air conditioner, a product which remains the core component of Midea's business today.
The shift from plastics to electric fans was not random. He Xiangjian saw what was coming: hundreds of millions of Chinese families about to emerge from poverty, eager to purchase their first consumer goods. Electric fans were the gateway applianceâaffordable, practical, and a symbol of modernity. The Midea brand was born.
By 1985, Midea had expanded into air conditioners, establishing this as its core product line and driving significant market penetration in China. This was a consequential strategic decision. Air conditioners, unlike fans, are complex products requiring sophisticated manufacturing capabilities and significant capital investment. By committing to air conditioning, He Xiangjian was betting that China's economic boom would continueâand that rising middle-class families would want more than ceiling fans.
The 1990s saw further strategic diversification into the white goods sector, with Midea entering the refrigerators and washing machines markets around 1992, alongside microwave ovens, to broaden its portfolio beyond small appliances. This expansion was supported by establishing multiple production bases in Shunde, Guangdong, which benefited from the region's status as a hub for manufacturing under China's reform policies, enabling economies of scale and rapid output growth.
The Toshiba partnership proved pivotal. In 1990, Midea signed an agreement with Toshiba to develop technology and began production of split-style air conditioners. This wasn't just a licensing dealâit was a technology transfer that accelerated Midea's capabilities by years. The Japanese appliance maker saw Midea as a low-cost manufacturing partner; Midea saw Toshiba as a technology university. Both got what they wanted.
By the late 1990s, these efforts had propelled Midea from a modest workshop employing a handful of workers to a major enterprise with approximately 30,000 employees and annual revenue exceeding 8 billion yuan, largely fueled by its dominance in air conditioners and emerging white goods.
The Pearl River Delta manufacturing ecosystem was crucial to Midea's growth. Guangdong Province became China's factory floor, offering pools of disciplined labor, suppliers of every conceivable component, and local governments eager to support export-oriented manufacturing. Midea rode this wave, building factories, hiring workers, and steadily expanding production capacity.
Midea's appliance business has been a beneficiary of the housing reform initiated by China's former Premier Zhu Rongji, who privatized state-owned housing, transferring home ownership from the government to families occupying the dwellings. The demand for appliances has skyrocketed since then.
By 1992, Midea had completed its transformation from a village workshop to a modern manufacturing enterprise. It had a recognized brand, a diversified product portfolio, sophisticated manufacturing operations, and a growing management team. The foundations for the next chapterâgoing publicâwere in place.
IV. Going Public & The Business Division System (1993â2000)
Founder He Xiangjian grew the small plastics production company he created in 1968 and turned it into a successful household appliance manufacturer that went public in 1993 as "Guangdong Midea Electric Appliances Co. Ltd."
The IPO was a watershed moment, providing capital for expansion and establishing Midea as a serious player in China's industrial landscape. But the truly consequential changes came in 1997, when crisis forced transformation.
In 1997, the Asian financial crisis reverberated across the region, and Mideaâlike many Chinese manufacturersâexperienced a sharp drop in sales. For most companies, such a crisis would mean retrenchment. For He Xiangjian, it was an opportunity to address problems that had been festering for years.
The founder's approach was characteristically bold. He used the crisis to push out family members from daily operations, promoting a new generation of professional managers to leadership positions. His wife and several founding members were persuaded to leave the firm. This was not the purge of an autocratâHe Xiangjian retained significant personal relationships with the departedâbut it was a decisive restructuring that set the stage for everything that followed.
He introduced the "business division system" (äşä¸é¨ĺś), which decentralized decision-making to individual product divisions while maintaining central oversight of strategy and capital allocation. Each divisionâair conditioning, refrigeration, small appliancesâbecame a quasi-independent business unit, responsible for its own P&L and accountable for results. This structure, modeled on successful Western conglomerates, created internal competition, fostered entrepreneurship, and built a pipeline of general managers who would eventually lead the entire company.
The divisional system has been in operation for many years, and its performance-oriented evaluation and incentive mechanism featuring full decentralization has become a training and growth platform for the Group's professional managers. The Group's primary senior management team consists of professional managers who have been trained and forged in the operational practices of Midea Group. They have been working for Midea on average for more than 15 years, all with rich professional and industrial experience, deep understanding and insights of the global home appliance industry and related industries.
In 1998, Midea acquired the Macro-Toshiba compressor factory, later renamed GMCCâGuangdong Midea Toshiba Compressor Corporation. This vertical integration move secured access to a critical component (compressors are the heart of air conditioners) while deepening the technological partnership with Toshiba.
The late 1990s restructuring reveals several important aspects of He Xiangjian's management philosophy. First, he understood that family businesses often struggle to scaleâthat the skills required to start a company differ from those needed to run a large enterprise. Second, he was willing to make painful decisions to position the company for future success. Third, he believed in systems and structures over personal relationships. The business division system wasn't just an organizational chartâit was an expression of values.
V. Expansion Through Acquisition (2001â2011)
The new millennium marked Midea's emergence as an acquisitive powerhouse. The product portfolio expanded dramatically: in 2001, the company initiated product lines in microwaves, VRFs (variable refrigerant flow systems), water dispensers, and dishwashers. Each new category followed the same playbook: study the market, identify opportunities, build or acquire manufacturing capability, and scale aggressively.
In 2004, Midea acquired Hefei Royalstar and formed a joint venture with Toshiba-Carrier to produce air conditioning products. The Carrier partnership was particularly significantâit connected Midea to American HVAC technology and distribution networks, laying groundwork for future global expansion.
The Little Swan brand was adopted when Midea acquired the Little Swan company in 2008. Little Swan products are mostly laundry and refrigeration appliances. The Foshan, Guangdong province-based Midea, the largest white electronic appliance manufacturer and exporter in China, became the largest stakeholder in Little Swan in 2008. The two companies have collaborated on product capacity, research and development, marketing, supply chain and operational systems, but they remained independent in terms of operations.
Home appliance maker Midea said it would buy a 24.01 percent stake in Little Swan for $236 million from Wuxi Guolian Development Group. Wuxi Little Swan Co, established in 1958, is a top domestic washing machine manufacturer. More than 90 percent of the company's sales revenue comes from its washing machine products. In 1978, China's first fully automatic washing machine was developed by Little Swan.
The Little Swan acquisition demonstrates Midea's approach to M&A: acquire companies with strong brand recognition and manufacturing capabilities, integrate them gradually while preserving operational independence, and leverage synergies across the portfolio. This patient approachâwhich would later characterize the KUKA acquisitionâset Midea apart from more aggressive acquirers.
International expansion accelerated. Midea opened its first overseas production facilities in 2007, in the Vietnam Industrial Park outside of Ho Chi Minh City. 2010 would see the first of several overseas joint ventures between Midea and American air-conditioner manufacturer Carrier Corporation. Their first joint venture is based in Cairo, Egypt, under the name of Miraco Carrier. The next year, Midea and Carrier continued on this course, forming a collection of closely networked joint venture companies in Brazil, Argentina and Chile, and another one separately in India.
Throughout this period, Fang Hongbo was rising through the ranks. Fang joined Midea in 1992, first in the Marketing Department, later being promoted to General Manager of the firm's Air Conditioning Business Department, followed by President of Midea Refrigeration Electric Appliances Group, and then Chairman and President of GD Midea Holding Co., Ltd.
Fang was not a family memberâhe was a professional manager, recruited from outside the traditional Midea orbit. Fang has earned a Bachelor's Degree in History from East China Normal University and an EMBA from the National University of Singapore. His educational background marked him as a new breed of Chinese manager: internationally educated, professionally trained, and focused on systematic approaches to business challenges.
The decade from 2001 to 2011 was about building scale, diversifying products, and developing the management team that would eventually take over the company. It was preparation for the transition that He Xiangjian had been planning for years.
VI. INFLECTION POINT #1: The Founder's Exit & Professional Management (2012)
In August 2012, the board of Midea Group announced that the company's founder, He Xiangjian, had resigned as Chairman. Guangdong Midea Electric Chairman and President Paul Fang was named as the new Chairman of Midea Group.
This was not a sudden departure. The transition had been carefully orchestrated over fifteen years. From the 1997 restructuring that pushed family members out of operations, to the business division system that trained professional managers, to the gradual delegation of authority that allowed Fang and his team to gain experienceâevery step had been deliberate.
It was Xiangjian's firm belief that family should only exercise an ownership role and not be involved with managing the company. He himself resigned from the Midea Group board in 2012, naming a non-family member as his successor. The seven members of the senior management team were all professional managers and held Midea Group shares with voting rights.
Why does this matter? Because successful founder-to-professional-manager transitions in Chinese private enterprises are extraordinarily rare. Many Chinese founders, like their counterparts worldwide, struggle to let go. They hover over their successors, second-guess decisions, and ultimately undermine the professionals they've appointed. He Xiangjian took a different path.
He resigned as chairman of GD Midea in 2009 and sold some of his stake to institutional investors in 2011, paving the way for his retirement the following year. In August 2012, Fang Hongbo, a Midea veteran, was appointed chairman of the group after He Xiangjian retired.
The founder's family maintained ownership but not operations. The majority of He's wealth is derived from his 31% stake in Midea Group, a Foshan, China based home appliance maker that trades on the Shenzhen Stock Exchange. He holds the shares directly and through closely-held Midea Holding, according to the company's 2025 interim report.
Son He Jianfeng is a director in the company. But He Jianfengâthe founder's sonâdid not become CEO. He focuses on the family's other investments through Infore Investments, while Fang and his team run Midea's day-to-day operations. This separation of ownership and management, rare in Chinese family businesses, has allowed Midea to attract and retain top professional talent.
Fang Hongbo, Chairman and CEO of Midea Group has been instrumental in evolving the company from a local manufacturer into a global powerhouse, renowned for its innovation, operational excellence, and commitment to sustainable practices. He has championed significant investments in research and development, leading to the introduction of cutting-edge products that meet the evolving needs of consumers worldwide. By fostering a culture that encourages creativity and technological advancement, Fang ensures that Midea remains at the forefront of the industry.
Fang's management philosophy emphasizes efficiency and pragmatism. He advocates for a pragmatic approach to management, emphasizing the elimination of unnecessary processes and formalities that do not add value. This philosophy is encapsulated in his belief that "95% of overtime work is mere formalism," highlighting his focus on meaningful productivity over superficial busyness.
The transition was a bet that paid off spectacularly. Under Fang's leadership, Midea would embark on its most ambitious period of international expansion and strategic transformation. The foundation He Xiangjian builtâthe culture, the systems, the management development programsâenabled Fang to take the company places the founder never could have reached on his own.
VII. INFLECTION POINT #2: The Corporate Restructuring & Shenzhen Listing (2013)
The year after He Xiangjian's retirement, Midea underwent a corporate restructuring that simplified its capital structure and positioned it for global ambitions.
Midea Group, whose businesses range from selling appliances to providing logistics services, took its unit private as part of plans to list the group, according to filings with Shenzhen stock exchange. Midea Group listed in Shenzhen on Sept. 18, 2013.
It went public in September 2013 through a merger with publicly traded subsidiary GD Midea. Guangdong Midea Electric was privatized by Midea Group, consolidating ownership and eliminating the complex holding structure that had developed over the years. The result was a cleaner corporate structure that international investors could understand and value.
Since September 18, 2013, Midea Group's market cap has increased from 42.24B to 579.86B, an increase of 1,272.79%. That is a compound annual growth rate of 24.12%.
The restructuring reflected a fundamental shift in Midea's ambitions. No longer content to be a Chinese champion, the company was positioning itself for global competition. A simplified corporate structure made it easier to pursue international acquisitions, access global capital markets, and attract international talent.
At the end of 2014, the Chinese electronics giant Xiaomi invested CNÂĽ1.2 billion by acquiring 1.2% shares of Midea Group. A cooperation between the two companies was also announced at the same time.
Xiaomi launched an air purifier last week, and now the Chinese company is putting hard cash behind its smart home push after investing over $200 million in home appliance firm Midea. Xiaomi Inc., one of the Chinese firm's group of technology companies, bought a 1.29 percent share of Midea Group â Midea's Shenzhen-listed parent company â for RMB1.266 billion, that's around $205 million. Guangdong-based Midea produces a range of home appliances, including air conditioners, refrigerators, kitchen appliances and more.
The Xiaomi investment signaled Midea's relevance in China's emerging smart home ecosystem. Xiaomi, the smartphone maker sometimes called "the Apple of China," saw Midea as an essential partner for its smart home ambitions. The partnership brought technology, marketing capability, and credibility in the consumer electronics space.
The 2013-2014 period established the platform from which Midea would launch its most aggressive international expansion. The company had a clean corporate structure, a deep management bench, a major tech partner in Xiaomi, and access to capital. It was ready to go shopping.
VIII. INFLECTION POINT #3: The 2016 Acquisition Spree (Toshiba, KUKA, Eureka)
2016 stands as arguably the most transformative year in Midea's history. In a matter of months, the company completed three major acquisitions that fundamentally changed its profile from a Chinese appliance manufacturer to a global technology conglomerate.
A. Toshiba Home Appliances Acquisition
In 2016, Midea made three major acquisitions, the first of which was Toshiba's home appliances business for US$477 million.
China's leading home appliance maker Midea Group announced an agreement with Japan's Toshiba Corporation to buy the latter's home appliance business. Midea will acquire an 80.1 percent stake in Toshiba Lifestyle Products & Services Corporation (TLSC), the home appliance arm of Toshiba, at a price of approximately $473 million. Toshiba will retain a 19.9 percent holding. The business will continue to develop, manufacture and market refrigerators, washing machines, vacuum cleaners and other small domestic appliances under the Toshiba brand name.
Midea will be licensed to use the Toshiba name worldwide for 40 years and will receive more than 5,000 intellectual property assets and a license to use other home appliance-related intellectual property retained by Toshiba.
In the process of identifying a trusted partner, we carefully looked at track records, capabilities, resources and commitment to the Business. Midea and Toshiba have more than 20 years' successful cooperation in various areas and have built a good mutual understanding. We are impressed by Midea's focus on globalization, strong product development capabilities, extensive global distribution network and commitment to high quality.
The Toshiba deal was about more than acquiring a storied brand. It provided Midea with advanced refrigeration and washing machine technologies, premium distribution networks in Japan and Southeast Asia, and a 40-year brand license that continues generating value today. COLMO and Toshiba dual premium brands saw 55%+ retail growth in early 2025, demonstrating the ongoing power of the Toshiba brand in Asian markets.
B. KUKA Acquisition â The Controversial âŹ4.5 Billion Bet
KUKA AG is a German manufacturer of industrial robots and factory automation systems. In 2016, the company was acquired by the Chinese appliance manufacturer Midea Group. It has 25 subsidiaries in countries including the United States, the European Union, Australia, Canada, Mexico, Brazil, China, Japan, South Korea, Taiwan, India, and Russia.
Kuka, a listed mechanical engineering company located in Augsburg, Bavaria, is one of the world's leading manufacturers of industrial robots. In 2015, the Chinese electrical appliance manufacturer Midea initially acquired 5.4 percent of the voting rights, which the company expanded to almost 95 percent by 2016. With a transaction volume of around âŹ4.66 billion, this was the largest corporate takeover of its kind to date.
In January 2017, the Midea Group Co. Ltd. (Midea), a China-based large manufacturer of electrical appliances, completed its acquisition of German-based KUKA AG (KUKA), a large manufacturer of industrial robots.
The KUKA acquisition sparked heated debate in Germany about the transfer of valuable technical knowledge to an economic competitor. The Kuka takeover has provoked extensive debates throughout Germany. Concerns were also expressed by the Federal Ministry of Economics. The then Minister for Economic Affairs Sigmar Gabriel, for instance, stressed the need to explore other options and to look for alternative opportunities.
However, alternatives would have been conceivable: Siemens was originally in talks to take over shares from Kuka but declined for financial reasons. Similarly, the mechanical engineering company Voith had the opportunity to increase its already existing shares in the company â or at least not to sell them. But in the end, no one was able or willing to outbid the Chinese offer.
Why did a home appliance company want a robotics manufacturer? The answer reveals Midea's long-term strategic thinking. China's working-age population was already declining, labor costs were rising, and smart factory automation represented the future of manufacturing. By acquiring KUKAâone of the "Big Four" global robotics companies alongside Yaskawa, FANUC, and ABBâMidea was positioning itself for that future.
KUKA Systems' plants and equipment are used by automotive manufacturers such as BMW, GM, Chrysler, Ford, Volvo, Volkswagen, Daimler AG and Valmet Automotive, as well as by manufacturers from other industrial sectors such as Airbus, Astrium and Siemens.
In November 2022, Midea Group acquired the remaining 4.69% stake in Kuka. The full privatization, completed after years of patient stake-building, gave Midea complete control over KUKA's strategic direction.
C. Eureka Acquisition
Lastly, acquiring Eureka, the brand that specializes in floorcare, from Electrolux AB in December.
The Eureka acquisition was smaller but strategically importantâit gave Midea a recognized brand in the North American floor care market, expanding its portfolio beyond HVAC and major appliances.
D. Fortune 500 Entry
Midea has been listed on the Fortune Global 500 since July 2016. Recognized globally, Midea Group has consistently ranked in the Fortune Global 500, securing the 277th spot in 2024, and as the 205th company in the 2024 Forbes Global 2000 list.
The 2016 acquisition spree transformed Midea from a large Chinese appliance maker into a global technology conglomerate. The company now had premium brands (Toshiba), cutting-edge industrial technology (KUKA), and an expanded international footprint. The question was whether it could integrate these diverse assets and extract synergies.
IX. Digital Transformation & B2B Expansion (2017â2023)
Under Fang Hongbo's leadership, the post-acquisition years focused on digital transformation and strategic diversification into B2B businesses.
In December 2018, Midea Group established its semiconductor subsidiary MR Semi Co. Ltd. The semiconductor initiative reflected growing concern about supply chain security and technological self-sufficiencyâthemes that would become increasingly important as US-China relations deteriorated.
The company's innovative edge is reflected in its cutting-edge manufacturing, including 3 zero-carbon, 9 5G-enabled, and 5 World Lighthouse Factories. The "World Lighthouse Factory" designation, awarded by the World Economic Forum, recognizes manufacturing facilities that have successfully integrated Fourth Industrial Revolution technologiesâautomation, IoT, artificial intelligenceâinto their operations.
The company has accumulated massive intellectual property. By the end of 2024, Midea had filed over 150,000 global patent applications. Its strong commitment to R&D has resulted in more than 90,000 patents granted to date.
Nowadays, Midea has evolved into an international tech-leading company which specializes in six major businesses including Smart Home Business, Industrial Technologies, Building Technologies, Robotics & Automation, Midea Medical and Annto Logistics.
The diversification into B2B businessesâbuilding technologies, industrial automation, medical equipment, logisticsârepresented a strategic hedge against the maturing consumer appliance market. While smart home appliances remained the core business, the B2B segment offered higher margins and less price competition.
The acquisition of over 5,500 new patents in 2025 has placed Midea among the top 10 global patent holders. Its global network of 38 R&D centers and 63 production bases highlights its leadership in smart manufacturing and digital transformation.
The company's innovative edge is reflected in its advanced manufacturing facilities, including 37 green factories, 13 green supply chain, 9 5G-enabled, and 6 "World Lighthouse Factories". On August 26, the Midea Washing Machine Jingzhou (Hubei) Factory received certification from the World Records Certification Agency (WRCA) based in London as "The World's First Intelligent Factory with Multi-scene Coverage of Excellence".
X. INFLECTION POINT #4: Hong Kong IPO & Global Expansion (2024âPresent)
Midea, China's leading home-appliance company, made a triumphant debut on the Hong Kong Stock Exchange in September 2024, raising US$4.6 billion. In a deal that has reshaped Hong Kong's IPO landscape, China's home-appliance giant Midea successfully raised $4.6 billion in September, marking the city's largest offering in years.
This marks the largest Hong Kong IPO in three years and the second-largest globally that year. The company's stock surged 8% on the first day of trading and continued to soar, gaining more than 40% in just three weeks.
Midea chairman Paul Fang (ćšć´Şćł˘) called the listing "a strategic step forward in the company's globalization."
On 17 September 2024, Midea Group Co., Ltd. successfully issued H-shares and listed on the Main Board of the Stock Exchange of Hong Kong, achieving its A+H dual listing. Midea Group also became the first A-share listed company to complete an H-share IPO following the implementation of the overseas listing registration system.
Cornerstone investors, including a subsidiary of Cosco Shipping Holdings Ltd and part of UBS Asset Management Singapore Ltd, agreed to buy Midea stocks worth US$1.26 billion.
The Hong Kong listing was not primarily about raising capitalâMidea generates strong free cash flow and maintains a solid balance sheet. The primary purpose of the IPO was "not raising capital". Instead, the offering was motivated by the innovative, efficient, and fast-paced nature of the Hong Kong Stock Market, Midea executives said at the 2023 annual shareholders' meeting.
Rather, the listing expanded Midea's investor base to include international institutions, enhanced its global brand profile, and created a trading venue more accessible to overseas investors. It signaled that Midea sees itself as a global company, not just a Chinese one.
Overseas markets contributed over 40% of total revenue, of which self-owned brand (OBM) sales represented over 43%.
The strategic acquisitions continued into 2025. In April 2025, Midea Group effectively completed the acquisition of Teka Group (excluding Teka Rus LLC). This strategic operation, initially disclosed in June 2024, strengthens Teka Group's global competitiveness and positions it for rapid expansion in new product categories and markets.
Teka Group currently operates in over 120 countries across five continents. The company has established significant market positions in countries such as Spain, Portugal, Mexico, Chile, Thailand, Turkey, Germany, the United Arab Emirates, and Scandinavia. The company produces millions of products annually and operates 10 factories in Europe, Asia, and the Americas, employing nearly 3,000 professionals.
On February 26, 2025, Midea Group announced the completion of its acquisition of ARBONIA climate, a division of ARBONIA AG, for an enterprise value of 760 million euros. This powerhouse collaboration will significantly strengthen Midea's strategic deployment across Europe.
Together with Clivet S.p.A., which has been acquired by Midea in 2016, the group of companies will form a strong new alliance in the HVAC industry in Europe. The companies will join forces and expand their market and innovation leadership in Europe with their complementary product offering.
In 2025, Midea Group will promote growth through simplification, eliminate redundancies, simplify categories, streamline SKUs, shut down and replace non-core businesses, focus on core business and core categories, and strictly control the entry of new categories. At the same time, as an enterprise with 40 years of overseas experience, with overseas revenue exceeding 20 billion US dollars accounting for more than 40% of the company's total revenue, the Midea Group will make a global breakthrough with unprecedented investment in 2025.
XI. Business Model Deep Dive
A. Product Portfolio & Revenue Mix
Midea's main business is producing home appliances and commercial air conditioners; air conditioners accounted for CNY161.1 billion in 2023, over $20b USD, with other appliances accounting for CNY134.7 billion. It sells products domestically under its own name, while the majority of its export business is as an OEM and ODM for many well-known global brands.
Most American microwave ovens are produced by Midea, including ovens sold by major brands such as Toshiba, Whirlpool, and Black+Decker. Midea is the largest microwave oven manufacturer, and acts as an OEM for many brands.
B. Six Business Segments
The modern Midea operates across six major business divisions:
- Smart Home Business - Consumer appliances including air conditioners, refrigerators, washing machines, and small kitchen appliances
- Industrial Technologies - Components, compressors, motors, and automotive parts through the Welling subsidiary
- Building Technologies - Commercial HVAC systems, elevators, and building automation
- Robotics & Automation - Industrial robots and automation solutions through KUKA
- Midea Medical - Healthcare equipment and medical devices
- Annto Logistics - Smart logistics solutions and automation
Net sales break down by family of products and services as follows: domestic appliances (41.6%), heating, ventilation and air conditioning systems (38.6%), robotic and automation systems (8%), other (11.8%). China accounts for 59.7% of net sales.
C. Multi-Brand Strategy
Midea forms a brand matrix covering Midea, Little Swan, Toshiba, WAHIN, COLMO, Clivet, Eureka, KUKA, GMCC, Welling, LINVOL, and Wandong.
The dual high-end brand strategy with COLMO (launched as a premium smart appliance brand) and Toshiba is designed to drive higher-margin sales and compete in segments where the Midea brandâassociated with valueâcannot effectively reach.
D. OEM vs. OBM Evolution
In recent years, Midea has begun launching its own brand in a growing number of foreign markets, such as Brazil, Argentina, Chile, India, Egypt, and most countries in Southeast Asia.
The evolution from OEM (original equipment manufacturer) to OBM (own brand manufacturing) represents a fundamental strategic shift. OEM manufacturing offers steady revenue but thin marginsâtypically 5-10%. Own-brand sales, while requiring marketing investment and channel development, offer significantly higher margins and brand equity accumulation.
Overseas markets contributed over 40% of total revenue, of which self-owned brand (OBM) sales represented over 43%.
The 43% OBM share in overseas operations represents significant progress, though substantial OEM business remains. This balance reflects a deliberate strategy: use OEM relationships to maintain manufacturing scale and customer relationships while gradually building own-brand presence in target markets.
XII. The Competitive Landscape: Midea vs. Gree vs. Haier
The three largest manufacturers â Midea Group, Gree Electric Appliances and Haier Smart Home â make up 80 per cent of the combined value of the top 10, while four of the 10 largest are based in southern China's Greater Bay Area, according to the Hurun China Top 10 Most Valuable Electrical Appliance Companies 2020 report.
Understanding Midea requires understanding its relationship to these two major competitorsâeach with distinct strategies and competitive advantages.
Midea's Advantage: Diversification and Balance
The big difference between Midea and Gree is that Midea's business is more balanced by selling the full range of home appliances, while Gree is more dependent on the air conditioning business.
Midea performed better than Gree and Haier because it is less affected by the epidemic due to a more diversified strategy.
Midea's diversificationâacross product categories, geographies, and B2C/B2B segmentsâprovides resilience that more focused competitors lack. When air conditioning markets slump, refrigerator sales may hold. When China slows, overseas markets may grow. This balanced approach has proven especially valuable during periods of economic volatility.
Gree: The Air Conditioning Specialist
Midea leads the market in air conditioning, whereas Haier holds the top position in refrigerators. On the other hand, Gree has not secured a dominant market position, and its financial performance falls short compared to the other two.
Gree built its reputation on air conditioning excellenceâ"good Gree air conditioning" is a famous advertising slogan in China. But this focus has become a vulnerability as the air conditioning market matures and competitors catch up technologically.
Haier: The Global Brand Builder
Haier's business extends beyond China, with its overseas revenue making up a significant portion, approximately 52% of the total revenue.
Haier pursued a different internationalization strategy than Midea. While Midea relied heavily on OEM manufacturing for overseas revenue, Haier invested in building its own brand in developed marketsâacquiring GE Appliances in the US, Fisher & Paykel in New Zealand, and Candy in Italy. Today, Haier's overseas brand recognition exceeds Midea's in developed markets, though Midea's OEM relationships provide manufacturing scale advantages.
The Strategic Tradeoffs
Each company has made distinct strategic choices: - Midea: Diversification + OEM scale + selective acquisitions - Gree: Technical excellence + domestic focus + vertical integration - Haier: Brand building + developed market focus + premium positioning
Despite the industry downturn, Chinese brands still handed in a dazzling transcript in the international market, namely Haier and Midea. Haier topped with a 16% market share, followed by Whirlpool and Midea, accounting for 11% and 7%, respectively.
XIII. Porter's Five Forces Analysis
1. Threat of New Entrants: LOW-MEDIUM
The home appliance industry presents significant barriers to entry:
- Capital requirements: Modern appliance manufacturing requires substantial investment in plant, equipment, and R&D
- Economies of scale: China has the world's most extensive white goods production base, accounting for about 60-70% of global production capacity. Established players operate at scales that new entrants cannot easily match
- Brand recognition: Building consumer trust in appliance brands requires years of marketing investment and quality track record
- Distribution access: Retail partnerships and online platform relationships favor established players
However, several factors moderate these barriers: - Component standardization allows new entrants to assemble products relatively quickly - E-commerce platforms reduce the importance of traditional retail relationships - Smart home technology creates opportunities for tech companies to enter the market (as Xiaomi has done)
2. Bargaining Power of Suppliers: LOW-MEDIUM
Midea has systematically reduced supplier power through vertical integration: - GMCC (compressor manufacturing) provides critical components internally - Welling produces motors and other electromechanical components - The company's scale provides leverage in component sourcing
3. Bargaining Power of Buyers: MEDIUM-HIGH
The buyer's power is high in this case. The consumer holds power when there is plenty of available options in the market, and they can switch easily. The deciding factor for any consumer is cost and efficacy. In electrical home appliances, efficiency leads to price, and the product must be efficient and reliable.
Consumer price sensitivity in the appliance market is high, particularly in emerging markets where Midea competes primarily. This limits pricing power and puts continuous pressure on margins.
4. Threat of Substitutes: LOW
Home appliances have few direct substitutesâpeople need refrigerators, washing machines, and air conditioners. However, extending product lifecycles (durable goods lasting longer) and the sharing economy (laundromats, rental appliances) represent indirect substitution threats.
5. Competitive Rivalry: HIGH
The competition is increased recently to new heights due to the saturation of products in the region and worldwide. Chinese companies in the region are developing new electronics products and posing new challenges to well-established companies.
Intense competition from domestic rivals (Gree, Haier) and international players (Samsung, LG, Panasonic) creates constant pressure on prices and margins.
XIV. Hamilton Helmer's 7 Powers Framework
Analyzing Midea through Hamilton Helmer's framework reveals its competitive advantagesâand limitations:
1. Scale Economies: STRONG
In 2017, Midea was reportedly the world's largest producer of industrial robots and appliances.
Manufacturing scale provides significant cost advantages. Midea's production volumes allow it to negotiate favorable component pricing, spread fixed costs across larger output, and invest in automation that smaller competitors cannot justify.
2. Network Effects: WEAK
Unlike platforms or software businesses, appliances do not benefit meaningfully from network effects. One customer's purchase does not make the product more valuable to other customers.
3. Counter-positioning: MODERATE
Midea's OEM business model represents a form of counter-positioningâit offers manufacturing services that competing brands cannot easily adopt without cannibalizing their own manufacturing operations. However, this advantage is eroding as more competitors embrace asset-light models.
4. Switching Costs: LOW
Appliance switching costs are minimal. Customers face no meaningful barriers to switching brands when replacing appliances.
5. Branding: DEVELOPING
Midea's brand remains a work in progress in international markets. While the company has made significant investments in brand building, it still lags behind Haier in developed markets and LG/Samsung in premium segments. The dual-brand strategy with COLMO and Toshiba attempts to address this gap.
6. Cornered Resource: MODERATE
KUKA's robotics technology and Midea's patent portfolio (90,000+ granted patents) represent meaningful cornered resources. The acquisition of over 5,500 new patents in 2025 has placed Midea among the top 10 global patent holders.
7. Process Power: STRONG
Perhaps Midea's strongest competitive advantage lies in process powerâthe operational excellence and manufacturing capabilities developed over five decades. The professional management system, divisional structure, and continuous improvement culture are difficult for competitors to replicate.
XV. Key Performance Indicators for Investors
For investors tracking Midea, three KPIs matter most:
1. Overseas OBM (Own-Brand Manufacturing) Ratio
The ratio of own-brand sales to total overseas revenue is the single most important indicator of Midea's strategic progress. OBM sales generate higher margins and build brand equity; OEM sales provide scale but limited value creation. Self-owned brand (OBM) sales represented over 43% of overseas sales in 2024.
Track this metric quarterly. Rising OBM ratios signal successful brand building; declining ratios indicate competitive pressure or distribution challenges.
2. B2B Revenue Growth Rate
Midea's B2B revenue surpassed RMB 100 billion for the first time in 2024, representing 25.5% of total revenue.
The B2B segmentâindustrial technology, building technologies, robotics, medicalârepresents Midea's diversification away from mature consumer appliances. Faster B2B growth signals successful strategic transformation; slowing growth may indicate execution challenges or market headwinds.
3. R&D Investment as Percentage of Revenue
Midea's long-term competitiveness depends on continuous technological innovation. Gree is investing approximately 6% of its annual revenue to R&D. Midea should match or exceed this level to maintain technological leadership. Track both absolute R&D spending and its ratio to revenue.
XVI. Bull Case
The bull case for Midea rests on several reinforcing trends:
1. China's Smart Home Evolution As Chinese consumers upgrade from basic appliances to connected, intelligent home systems, Midea's integrated product portfolioâspanning HVAC, refrigeration, laundry, and small appliancesâenables whole-home solutions that single-category competitors cannot match.
2. B2B Growth Runway Energy Solutions & Industrial Technology: Revenue reached RMB 11.1 billion (+45% YoY), with Welling Auto Parts launching Mexico production base.
The B2B businessâparticularly industrial automation and energy solutionsâoffers higher margins and faster growth than mature consumer appliances. KUKA's technology positions Midea for the factory automation megatrend.
3. Global Diversification With overseas revenue exceeding 20 billion US dollars accounting for more than 40% of the company's total revenue, the Midea Group will make a global breakthrough with unprecedented investment in 2025.
Growing international presence reduces dependence on China's property market and consumer confidence.
4. Professional Management and Governance The successful founder-to-manager transition and 15+ year track record of the professional management team provides institutional stability rare among Chinese family-controlled enterprises.
5. Capital Return Discipline Since its 2013 listing, cumulative dividends have exceeded RMB 134 billion, maintaining its position as the dividend leader among A-share companies.
Consistent shareholder returns through dividends and buybacks demonstrate capital discipline and alignment with investor interests.
XVII. Bear Case
The bear case raises several legitimate concerns:
1. China Property Sector Exposure China's worsening real estate sector would further weigh on demand for domestic home appliances.
Home appliance demand correlates with housing activity. China's protracted property downturnâwith developers defaulting, housing starts collapsing, and consumer confidence weakenedâposes significant headwinds for domestic sales.
2. Geopolitical Risk Chinese companies face increasing scrutiny and potential restrictions in developed markets. The KUKA acquisition faced intense political opposition in Germany; future deals may encounter even greater barriers. Technology transfer restrictions could limit Midea's ability to leverage Western expertise.
3. Price Competition and Margin Pressure The industry faces challenges from price wars and market saturation.
Intense competition from Gree, Haier, and international players creates constant margin pressure. Smart home features that once commanded premiums are becoming table stakes.
4. KUKA Integration Challenges German industrial robots and Chinese consumer appliances represent vastly different businesses. Synergy realization has been slower than initially projected, and cultural integration across such different corporate environments presents ongoing challenges.
5. Currency and Trade Risks With 40%+ of revenue from overseas, Midea faces significant currency exposure. Trade tensions, tariffs, and logistics disruptions (as demonstrated during COVID) can quickly impact profitability.
XVIII. What This Means for Long-Term Investors
Midea presents an intriguing investment proposition: a dominant Chinese appliance manufacturer transitioning into a diversified global technology company, led by a professional management team with a long track record, trading at reasonable valuations.
As of November 2025 Midea has a market cap of $81.35 Billion USD. This makes Midea the world's 263th most valuable company according to our data.
Price/Earnings (Normalized) 13.12, Price/Sales 1.26, Dividend Yield (Trailing) 4.69%.
The key investment debate centers on whether Midea can successfully transition from a manufacturing-focused business to a technology-driven company with meaningful own-brand presence in international markets. The KUKA acquisition, the Hong Kong listing, and ongoing European expansion all point toward this aspiration. Execution risk remains significant.
XIX. Regulatory and Legal Considerations
Investors should note several regulatory and accounting considerations:
1. State Influence While Midea is a private enterprise, Chinese companies operate within a political environment that can influence business decisions. Government priorities around manufacturing self-sufficiency, technology development, and overseas expansion generally align with Midea's strategy, but this alignment could shift.
2. Related Party Transactions He holds the shares directly and through closely-held Midea Holding, according to the company's 2025 interim report.
The He family maintains substantial ownership through various vehicles. Investors should monitor related party transactions and potential conflicts of interest.
3. Overseas Acquisition Scrutiny The KUKA acquisition faced significant regulatory scrutiny. Future European and American acquisitions will likely face even greater obstacles given heightened geopolitical tensions.
XX. Final Thoughts: The Midea Model
The Midea story offers several lessons for understanding Chinese business development:
Lesson 1: Institutional Building Trumps Individual Brilliance He Xiangjian's greatest contribution was not founding the companyâit was building the institutional capabilities and management systems that allowed the company to succeed after his departure. The divisional system, the professional manager development programs, and the governance structures he created have proven more valuable than any single strategic decision.
Lesson 2: Patience in Global Expansion Midea's international expansion proceeded methodically over decadesâfirst as an OEM, then through joint ventures, then through acquisitions. This patient approach allowed the company to build capabilities and relationships before taking on the full risk of global brand building.
Lesson 3: Diversification as Risk Management The balanced portfolio across products, geographies, and B2C/B2B segments provides resilience that more focused competitors lack. This diversification comes at the cost of some focus and specialization but provides valuable optionality.
Lesson 4: Founder Vision and Succession It was Xiangjian's firm belief that family should only exercise an ownership role and not be involved with managing the company. He himself resigned from the Midea Group board in 2012, naming a non-family member as his successor.
He Xiangjian's willingness to step back and empower professional managementâextremely rare among Chinese foundersâenabled Midea's continued growth and transformation. The contrast with family-dominated competitors highlights the importance of governance in long-term value creation.
From a village workshop making bottle caps to a global technology conglomerate owning German robots and Japanese brands, Midea's journey spans the entirety of China's economic transformation. Whether it can complete the next transitionâfrom Chinese manufacturing champion to globally recognized technology leaderâremains the central question for investors watching this remarkable company.
Midea Group delivered robust growth in Q1 2025 by focusing on core businesses, achieving total revenue of RMB 128.4 billion, a 20.6% year-over-year increase. Net profit attributable to shareholders surged 38.0% to RMB 12.4 billion, with net profit margin rising 1.4 percentage points to 9.9%, demonstrating strong operational momentum.
The evidence suggests that Midea's transformation continues on track. But in an industry characterized by intense competition, thin margins, and rapidly evolving technology, continued executionâquarter after quarter, year after yearâwill determine whether the story begun in that Beijiao workshop in 1968 continues its remarkable trajectory for decades to come.
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