Zhang Kun: White-Goods Volume and Price Ceilings, Chinese Leaders Globalize, Daikin Market Cap Tops $60

Zhang Kun believes that the demand for durable goods has a ceiling. Household demand for products such as refrigerators and air conditioners is rigid; once saturation is reached, incremental demand is hard to come by. Similarly, the prices of functional goods face an upper limit. Air conditioners and similar products, serving as tools to address basic needs, lack room for brand premiums and cannot sustain price increases like luxury goods or baijiu. Moreover, the improvement in net margins for industry leaders will eventually hit a wall. When profit margins become high enough to attract new entrants, the industry landscape begins to loosen.

Industry data from subsequent years show that domestic air-conditioner sales exceeded 90 million units in 2019 and remained around 100 million units by 2025. Annual sales of refrigerators and washing machines have long been stable at over 40 million units each. The share of demand driven by new housing has gradually declined, and the industry has entered a phase dominated by replacement demand from existing stock. On pricing, the price band for mainstream mass-market models has remained unchanged for years. Although high-end product lines can slightly lift average prices, basic models have held steady. In terms of profitability, the net margin of a leading home-appliance company improved by less than one percentage point over six to seven years, and it has occasionally dipped due to fluctuations in raw material prices.

The development trajectory of overseas white-goods companies offers a reference. Whirlpool in the United States and Electrolux in Europe experienced roughly two decades of rapid growth after World War II. As market penetration increased, the industry entered a mature stage, with revenue growth slowing from 20% to 8% and valuation multiples gradually declining from 20–25 times to 12–15 times. After 2000, their home markets became fully saturated, revenue growth stalled, and they relied mainly on acquisitions. Dividend payout ratios rose to above 50%, and in normal years the market priced them at only 8–10 times earnings. Since 2022, affected by inflation and property downturns in the United States and Europe, both companies have seen consecutive revenue declines. Whirlpool's market cap fell from $11.4 billion in 2021 to just over $2 billion, while Electrolux dropped from a peak of over $8 billion to just above $2 billion.

Daikin Industries in Japan has followed a different path. The company focuses on the specialized air-conditioning and HVAC segment, building barriers in technologies such as inverters and refrigerants, and has pursued global expansion by acquiring U. S. HVAC firms to enter the North American market. Meanwhile, its business has extended from residential air conditioning to commercial air conditioning, building HVAC, heat pumps, and data-center cooling. From 2013 to 2021, Daikin's net profit grew 3.4 times, with a compound growth rate of about 16.5%. Its valuation rose from 10–15 times to 20–25 times earnings, and its market cap increased from under $5 billion to over $60 billion. After 2021, its price-to-earnings ratio has remained above 20 times, with a market cap near $40 billion.

Chinese white-goods leaders have also shown new developments in recent years. As of 2025, Haier Smart Home's overseas revenue reached RMB 154.5 billion, accounting for 51.1% of total revenue, with growth exceeding 8%. Midea Group's overseas revenue was RMB 195.9 billion, representing 43% of total revenue, up 16% year-on-year. In business expansion, Midea's B2B operations (including building technology, industrial technology, and robotics and automation) generated revenue of over RMB 120 billion in 2025, accounting for more than 25% of total revenue, with growth of 17.5%. On shareholder returns, Gree Electric has long maintained a dividend payout ratio above 50%, while Midea raised its payout ratio to 70% in 2025 and has continued share buybacks and cancellations.