Industry giants Midea, Gree file complaints, seek millions of yuan

With this hot summer continuing to fuel a boom in air conditioner sales, a legal wrangle over air conditioner patents between home appliance leaders Midea and Gree is also heating up.

Gree Electric Appliances in Zhuhai, Guangdong province, filed a patent complaint against its peer, Midea Group, with the Beijing Intellectual Property Court in late June, claiming 50 million yuan ($7.4 million) in damages from the latter.

In response, Midea, headquartered in Foshan, Guangdong, sued Gree for a combined 50 million yuan in damages in another four following patent cases in Suzhou, Jiangsu province, and Guangzhou, capital of Guangdong, the latest filed with the Guangzhou Intellectual Property Court on July 5.

Both companies said in their respective public statements that they believe in the court system, declining to make further comments to Chinese media.

The cases are a reflection of the increasingly fierce competition between the rivals, Hong Shibin, an industry observer, told China Economic Weekly magazine.

There were roughly 400 air conditioner manufacturers across China about 17 years ago, yet most of them have been elbowed out, leaving only about 10 brands surviving.

Data from ZDC, an internet consumer research center based in Beijing, shows Gree has topped its peers with 44 percent of the domestic market, followed by Midea and Haier.

The air conditioning business plays a major role at Gree, contributing 88.1 billion yuan in sales last year, or 81 percent of its total revenue, according to its financial report. 

The company claimed to have ranked No 1 by air conditioner sales in China for 22 consecutive years since 1995 and taken first position worldwide since 2005.

In contrast, Midea generated 66.8 billion yuan in air conditioner sales last year, which accounted for 42 percent of the company's total revenue.

The air conditioner sector has slowed its growth, as the entire industry scale is approaching a ceiling, industrial insiders said.

For the two tycoons, the remaining market is limited, China Economic Weekly said, citing Zuo Yanque, general manager of China Market Monitor, a consumer product retail research company based in Beijing.

"To ensure growth, they have to snatch market share from each other, which has positioned themselves in fierce rivalry," Zuo said. "They need to change their mindset and seek new profit growth spots in other fields."

Liang Zhenpeng, an industry analyst, said that historically, players in the industry used to focus on expanding distribution channels, while they have started to shift their focus to research and development.

Liu Buchen, another industry observer, added: "The legal procedures help the already well-established brands to further increase their reputation and provide them the opportunities to showcase their technological muscles.

"From this perspective, they are both winners of the cases."