In an era where the importance of technology and innovation cannot be overstated, the emergence of Gree Electric Appliances as a key player in the semiconductor industry has stirred both intrigue and skepticismRecently, Gree's chairman Dong Mingzhu triumphantly announced that the company has successfully established its own semiconductor manufacturing capabilities, completing what can be described as a comprehensive production chain—from research and development to manufacturing—all without reliance on government fundingThis bold statement paints a picture of a company that is determined to redefine its boundaries beyond traditional home appliances.

However, the path Gree has taken has not been without controversyTraditionally, the household appliances sector has not been viewed as a high-tech industryDong's assertion that Gree has ventured into the semiconductor business has met with disbelief and ridicule from critics, many of whom argue that Gree’s chips merely fall within the lower-tier segment of the semiconductor market—far from the cutting-edge technology produced by global leaders in that field.

Despite these challenges, Dong remains steadfast in her belief that mastering core technologies is paramount for Gree’s future

This belief forms the crux of the company's current strategy and provides a rationale for its accelerated push into the semiconductor space, a decision reflective of a wider trend across various sectors known as "Chip Making." This initiative gained momentum around six years ago, initiated by a nationwide "chip shortage" that forced many manufacturers, including those in the appliance sector, to reassess their supply chains and technological dependencies.

As the first major player in the home appliance industry to announce its success in chip development, Gree's tactics have involved strategic investments in numerous semiconductor firms and setting up its own chip manufacturing facilitiesIn 2018, the company invested 1 billion yuan to create the Zhuhai Zero Boundary Integrated Circuit Co., focused on chip design and researchThat same year, Gree also secured a significant minority stake in the public semiconductor company WenTian Technology, further solidifying its foothold in the industry.

In 2020, Gree reported the launch of several self-designed chips tailored specifically for air conditioning units, followed by chips aimed at smartphones in 2021. By 2022, Gree expanded its repertoire yet again, introducing Internet of Things (IoT) chips, a clear indicator of its desire to explore diverse technological possibilities

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Despite these advancements, it is essential to note that these chips predominantly target the mid to low-end industrial grade segment, as opposed to high-performance, high-capacity semiconductors that dominate the current global landscape.

As of now, Gree's outputs mainly consist of power semiconductors and microcontroller units (MCUs) manufactured with a 28nm process technologyThis places Gree's chips at a significant distance from the industry's leading manufacturing processes, which have evolved to the cutting-edge 3nm and beyondThe relatively low technical barriers within the home appliance market enable numerous Chinese chipset manufacturers to produce similar components, consequently raising questions about the uniqueness and competitive edge of Gree’s semiconductor offerings.

The company's latest announcements regarding the completion of a third-generation semiconductor factory, focusing on silicon carbide (SiC) chips, herald a new chapter in Gree’s journey

This facility, sprawling over 200,000 square meters, boasts an annual production capacity of 240,000 six-inch SiC wafers and marks a major leap in regional semiconductor manufacturing capabilities.

Despite its ambitious expansion into the semiconductor space, Gree continues to contend with market fluctuations and consumer perception issues, particularly in light of its recent attempts to diversify its product linesDong has been vocal about Gree’s reliance on chip imports, revealing that the company typically spends around 4 billion yuan per year on semiconductor procurementIf Gree’s investment in self-sufficiency proves successful, it could drastically alter its operational costs and dependency matrix.

However, the company faces notable growth challenges, which became evident in its recent reports showing a revenue drop of 5.34% year-over-year for the third quarter of 2024, although net profits exhibited a slight increase

Gree pointed to business restructuring as the culprit, highlighting that while its core air conditioning business continued to perform steadily, other segments lagged significantly, witnessing declines in revenue that were imperiling overall performance.

The diversification efforts into sectors like smart appliances, industrial products, and renewable energy were reported to have yielded only modest returns, compared to competitors like Midea Group, whose diverse business segments generated substantial contributions to their revenuesThe challenge remains acute for Gree, which finds 78% of total revenue derived from its air conditioning unit sales, reflecting an increasing dependency on a singular product line.

Yet the dynamics within Gree's operational environment are further complicated by existing rivalries, particularly with Xiaomi, who has not only offered competing products but also draws significant media attention due to ongoing disputes and patent infringements, showcasing how tech competition transcends mere product offerings

This evolving market landscape demands Gree engage more actively with innovative branding and marketing strategies to reshape consumer perceptions.

Moreover, the company’s attempts to engage in cooperative dialogues regarding its channel strategies, particularly involving dealership relationships, have also sparked disagreementsDong believes in an integrated online-offline sales approach, affirming that a purely offline method could be detrimental to both dealers and Gree itselfYet this sentiment has not resonated equitably across all dealer networks, as some feel their interests are being compromised in this digital pivot.

As Gree navigates the murky waters of its technological aspirations, it will need to reconcile multiple internal and external pressuresThe backing of fresh technological pursuits must be paralleled with robust market strategies, a balance that could see Gree either becoming a hallmark of innovation in the appliance industry or risk stagnation in a rapidly evolving market