Panasonic to invest over $375m in China with eye on post-COVID growth

beijingwalker · Jan 6, 2023

Panasonic to invest over $375m in China with eye on post-COVID growth

Company plans first new Chinese appliance factory in 19 years to keep up with consumers

KENTO HIRASHIMA, Nikkei staff writerJanuary 6, 2023 03:48 JST

OSAKA -- Panasonic Holdings plans to invest more than 50 billion yen ($375 million) over three years to expand production in China, betting on the country's long-term potential in the face of coronavirus and other headwinds.

The Osaka-based company will bring its first new Chinese appliance factory in 19 years online in 2024. The Zhejiang province plant will have the capacity to ship an annual 2 billion yuan ($290 million) worth of microwave ovens, rice cookers and other small kitchen appliances.

In Guangdong province, Panasonic will build a new wing at a beauty appliance factory and expand an air conditioner factory.

Panasonic is among the Japanese manufacturers bucking a trend of relying less on China.

Around half of respondents to a recent Nikkei survey of big Japanese manufacturers said they would reduce their dependence on Chinese suppliers. But 30% said they would expand business activity in China. Daikin Industries is investing around 1.7 billion yuan to open an air conditioner factory in Guangdong province in October 2024.

In addition to boosting production, Panasonic will develop more products tailored for Chinese consumers. It aims to halve the timeline for product development in China by fiscal 2024 -- to around eight months for new appliances and three and a half months for minor changes -- by allowing key decisions to be made there.

Chinese consumers tend to look for new features when buying appliances, which could lead Panasonic to revive ideas that never made it to market in Japan. The company recently debuted a washing machine in China that replicates washing clothes by hand. The technology was developed around a decade ago but never became a product in Japan.

Panasonic's market share in appliances languishes in the single digits in China, where local players like Haier Group and Midea Group dominate.

"You can't make products and services that appeal to consumers in China unless you settle in and look at the market from the inside," said Tetsuro Homma, Panasonic's regional head for China and Northeast Asia.

With online shopping now mainstream in China, Panasonic will make more products available online and experiment with live commerce. The goal is to have at least 7 million registered users on its official e-commerce platform by fiscal 2024, up from around 2 million currently.

Panasonic's China and Northeast Asia operating company logged sales of 832.4 billion yen for the fiscal 2021. The goal is to lift this to 1 trillion yen in fiscal 2024 -- the final year of the three-year investment period -- and to increase earnings before interest, taxes, depreciation and amortization to 80 billion yen from 30 billion yen.

The Chinese economy is suffering the effects of a surge in coronavirus infections. Retail sales fell nearly 6% on the year in November, according to official data.

Analysts say consumers are tightening their purse strings against economic uncertainty. Still, the economy is seen returning to higher growth in the long term once COVID-19 infections ease.

Panasonic has stronger ties to China than many Japanese manufacturers. Its founder, Konosuke Matsushita, invited then-Chinese Vice Premier Deng Xiaoping to visit an appliance factory in Osaka in 1978. It built a TV factory in Beijing in 1987 that became China's first foreign-owned plant in the postwar period.

Many Chinese consumers are still familiar with the Songxia brand -- the Chinese rendering of the first part of Panasonic's old name, Matsushita Electric Industrial.