In recent years, China has become one of the world's largest air-conditioning producers, with its household air-conditioning output accounting for 83.2% of the global market share in 2021.
Air conditioners can be divided into fixed-frequency air conditioners and energy-efficient variable-frequency air conditioners. Energy-efficient variable-frequency air conditioners are one of the main downstream consumers of high-performance rare earth permanent magnet materials. Fixed-frequency air conditioners can only work at the same fixed frequency and require the compressor to keep switching on and off to cool the air, which can easily produce noise and temperature fluctuations. Energy-efficient variable-frequency air conditioners can work within a certain frequency range, produce less noise, and do not damage the compressor.
Before 2008, the core technology of variable-frequency air conditioners was monopolized by countries such as Japan and the United States. In 2009, Gree Electric Appliances shifted its focus to the research and development of variable-frequency air conditioner core technology and successfully broke the foreign monopoly on this technology in 2010, reducing the minimum power requirement for variable-frequency air conditioners to just 45 watts. As the technology of variable-frequency air conditioners in China continues to improve, manufacturing enterprises have also joined this race.
Market scale of energy-saving variable-frequency air conditioners in China
As one of the main products in the home appliance market, air conditioners are mainly divided into fixed-frequency air conditioners and energy-saving variable-frequency air conditioners. Among various home appliances, energy-saving variable-frequency air conditioners are the main consumer downstream of high-performance rare earth permanent magnet materials, used in compressor motors to operate them at different speeds. Compared with fixed-frequency air conditioners that can only adjust indoor temperature by repeatedly starting and shutting down the compressor, energy-saving variable-frequency air conditioners can maintain the operating frequency of the compressor within a certain range and control the motor speed by changing the input voltage frequency. Therefore, energy-saving variable-frequency air conditioners are less noisy, consume less energy, have a longer service life, faster cooling speed, and a stable temperature control range.With the continuous improvement of customers' consumption capabilities and government policy support, the penetration rate of variable-frequency air conditioners will increase accordingly. In terms of domestic sales volume of household air conditioners in 2021, Gree and Midea ranked first and second respectively.
From 2016 to 2021, the production volume of energy-saving variable-frequency air conditioners in China increased from 39.455 million units to 107.08 million units, with a compound annual growth rate of 22.1%. By 2030, the production volume of energy-saving variable-frequency air conditioners in China is expected to reach 368.716 million units, with a compound annual growth rate from 2021 to 2030 of 14.7%.
Source: Frost & Sullivan
The consumption of high-performance rare earth permanent magnets in China's energy-saving air conditioners increased from 3,623.8 tons in 2016 to 9,834.9 tons in 2021, with a compound annual growth rate of 22.1%. Thanks to the government's support for the application of energy-saving air conditioners, such as the promulgation of the 'Energy Efficiency Limit Values and Grades for Room Air Conditioners' in 2020, it is estimated that by 2030, the consumption of high-performance rare earth permanent magnets will reach 33,865.2 tons, with a compound annual growth rate from 2021 to 2030 of 14.7%.
Source: Frost & Sullivan
The main driving force for the China energy-saving inverter air-conditioning market
(1) Per capita disposable income of urban residents continues to grow
From 2016 to 2021, with the steady development of China's economy, the per capita disposable income of urban residents increased from 33,616 yuan to 82,424 yuan, with a compound annual growth rate of 19.6%. It is evident that as the per capita disposable income of urban residents continues to grow, especially in third- and fourth-tier cities, energy-saving variable-frequency air conditioners are favored by consumers for their better product quality and energy efficiency. At the same time, more and more families are willing to replace their old fixed-frequency air conditioners with variable-frequency ones, promoting the development of the variable-frequency air conditioner energy-saving market in China.
(2) Continuous technological innovation
To meet consumers' personalized and diverse needs, there are an increasing variety of air conditioners on the market. Consumers are also paying more attention to energy efficiency, environmental protection, technology, lifestyle, and functionality of air conditioners. Therefore, technological innovation has become one of the key driving forces for the development of the Chinese air-conditioning market. In recent years, with the acceleration of the application of new materials and technologies, the structural design, intelligence, convenience, safety, and health of air conditioners have been continuously upgraded, promoting further development in the market for energy-saving variable-frequency air conditioners.
(3) Government Support
A series of policies and regulations, including the 'Guiding Opinions on Building a Market-Oriented Green Technology Innovation System', have improved mandatory standards for energy consumption quotas, carbon emissions, and pollutant emissions; strengthened standard implementation to force household appliance enterprises to carry out green technology innovation; and established a green certification management system for the entire life cycle of household appliances, automobiles, etc.
In 2020, the Chinese government officially implemented the 'Energy Efficiency Limit Values and Grades for Room Air Conditioners', unifying the evaluation methods for fixed-frequency and energy-efficient variable-frequency air conditioners, and gradually phasing out fixed-frequency air conditioners with high energy consumption and those rated below grade three in terms of energy efficiency. The standard for room air conditioner energy efficiency is required to increase by 14%, and by 2022, the overall energy efficiency standard for the air conditioning industry is to be increased by 30%. In the future, only energy-efficient variable-frequency air conditioners equipped with high-performance rare earth permanent magnet materials can meet the requirements of the new standards, providing great potential for the development of producers of high-performance rare earth permanent magnet materials.
(4) Carbon emission peak and carbon neutrality targets
The Chinese government delivered an important speech at the ninth meeting of the Central Financial and Economic Affairs Commission, emphasizing that achieving carbon peak emissions and carbon neutrality is a broad and profound transformation of the economic and social system. It is expected that the goal of carbon peak emissions will be achieved by 2030 and carbon neutrality by 2060. Due to the energy-saving and variable-frequency characteristics of energy-saving air conditioners, the development of the market for energy-saving and variable-frequency air conditioners will further benefit from the process of achieving carbon peak emissions and carbon neutrality goals.
Development Trend of Energy-saving Inverter Air Conditioners in China
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Division of Labor and Economic Globalization
In order to make full use of resources, reduce production costs, and enhance core competitiveness, large air-conditioning manufacturing enterprises are gradually implementing global procurement strategies or outsourcing production processes to OEMs orODMTo gain a competitive edge, Chinese air-conditioning manufacturing enterprises need to continuously improve product performance, optimize production processes and supply systems, maintain long-term cooperation with competitive home appliance manufacturers, and expand their business scope.
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Diversified sales channels
With the continuous increase in the number of internet users, consumer consumption patterns have undergone significant changes. Compared to traditional offline sales channels, online sales channels are not limited by geography or time, providing customers with a wider variety of products and a more convenient shopping experience. The rise of online sales channels will further expand the overall scale of the air-conditioning market and provide strong channel support for Chinese air-conditioning manufacturing enterprises.
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Increase in costs
The increase in costs such as raw materials and labor will have a certain impact on the price advantage of China's air-conditioning manufacturing industry, especially for energy-saving variable-frequency air conditioners, whose raw material costs are higher than those of fixed-frequency air conditioners. In order to control costs and indirect expenses during the manufacturing process, energy-saving variable-frequency air-conditioning manufacturing enterprises are likely to cooperate with suppliers who can provide stable supply, high-quality products, and competitive prices, and develop long-term strategic partnerships.
