SCDigest editorial staff

The Wall Street Journal reports this week that traditional U.S. manufacturers of refrigerators, washers, dryers and ovens are receiving increased direct competition from Asian manufacturers, using a combination of cost and innovation as their weapons.

Like many manufacturing sectors, the appliance industry has undergone some serious structural change already, with traditional U.S. leaders such as Maytag and Whirlpool moving an increasing amount of production to low cost countries. Now, however, the Wall Street Journal notes an increasing threat from direct Asian producers such as Samsung and LG Electronics from Korea and China’s Qingdao Haier. The companies are grabbing market share by exploiting innovation and changing distribution channels. There is a real chance one of the Asian companies may take over a U.S. company, with Maytag currently in play.

Though foreign brands still have a small amount of U.S. market share, that percentage is likely to see strong growth. Part of the change is driven by the emergence of large new retail distribution channels, especially as Home Depot and Lowes have entered the business in a big way. This has opened a path for these non-U.S. producers to reach U.S. consumers directly. Home Depot, for example, announced in January that it would begin carrying LG’s line of appliances.

While the direct foreign share of the U.S. appliance market is still only about 5.5%, that’s more than double the 2.5% share of just four years ago, the WSJ article says. Meanwhile, Sears/Kenmore’s share has slipped to 25.3% versus 28.7% in 2001, while Maytag has gone from 19% share to 17.6% in the same time.

The foreign competitors are winning in large part due to design and innovation, such as LG’s refrigerator with a built-in flat screen television. A washer and dryer set from LG comes with a mobile device that let’s consumers know what stage of the process clothes are in. But, the article notes, U.S. manufacturers aren’t sitting still. In addition to moving more production offshore to reduce costs, U.S. producers are also innovating, such a new Whirlpool refrigerator with a water dispenser that fills various containers precisely with the push of a button.

While foreign manufacturer’s are also gaining share at the low end of the market, what’s most interesting and/or disturbing, depending on your perspective, is this grab for share at the top end based on innovative design and engineering.

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