In this research note, we examine the Chinese global company Midea Group Co Ltd, established as an electric fan manufacturer in 1968, the firm rose to prominence as an air conditioning producer in the 1980s. While it is still best known for its HVAC equipment business, Midea has become a diverse and recognised player across the built environment sector and is a growing presence in the smart buildings market.
According to its most recent annual report, Midea's operating revenue exceeded 300 billion yuan for the first time last year, with a total of RMB 341 billion ($50 billion), a 20% increase from the previous year. Assets totalled RMB 388 billion ($57 billion), and despite continued supply chain challenges posed by the pandemic, Midea achieved RMB 29 billion in net profit, a YoY increase of 5.5%.
Midea is vertically integrated with 35 manufacturing bases and 35 R&D centers across 10 countries, total employees top 160,000, and its global sales platform maintains around 200 subsidiaries, and is active in over 200 countries. The firm also holds more green building-related patent families than any firm in China, only second in the world to Japan’s Panasonic but ahead of all other Asian and Western competition. While four of its factories were included in the World Economic Forum’s “Global Lighthouse Network” for leadership in using Fourth Industrial Revolution technologies.
The company is structured into five major business divisions: the Smart Home Business Group, the Industrial Technology Business Group, the Building Technologies Division, the Robotics & Automation Division, and the Digital Innovation Business —which includes Midea’s intelligent supply chains and the industrial Internet services.
The Building Technologies Division, which recorded 2021 revenue of RMB 19.7 billion ($2.88 billion) up 55% year-on-year, is responsible for providing products and services in relation to buildings, as well as the relevant operations including an established BMS and a newer intelligent building platform. Its emerging platform-centric solution aims to manage logistics, information, and energy flows within buildings to provide building solutions driven by intelligence and sustainability.
Midea Building Technologies Division
In the smart building space, Midea’s key product areas include HVAC, elevator, automation, and integrated energy management. The firm offers a BMS and various integration platforms but recently launched its intelligent building platform, iBuilding. It aims to bring together people and asset tracking, alongside space optimization, in real-time, throughout the building life cycle, and across building portfolios.
“Our BMS will be integrated into the iBuilding platform. Midea’s existing building platforms only operated on the equipment level or, at most, on the single building level but the data was not as interconnected, creating data silos,” says Stephen Meng, Head of Midea Building Technology Institute in a January 2023 interview with Memoori.
“BMS is in the past, iBuilding is an intelligent building platform that will integrate all the BMS data, from multiple buildings, and make it accessible from the cloud and analyzed by AI to offer better insights,” Meng continued. “Previously Midea was focused on product level solutions but with this integration we are able to take it to another level, enabling us to develop new business models and offer new business solutions.”
Meng also discussed Midea’s strong intentions to drive integrated heat pump solutions, especially in the European market. “With Europe’s energy crisis and growing general demand, Midea’s management team sees the opportunity to drive sales in heat pump solutions integrated with PV solar and energy storage, which can be managed through an app on the iBuilding platform,” explains Xu. “The app allows users to monitor and control the solutions, assess their performance, detect faults, and optimize maintenance. This is a fairly new product for the market, but one that we believe is useful and in need.”
The range of technologies being developed by Midea are naturally spawning new applications as each use case poses new challenges to the ecosystem. The firm has developed a carbon consulting business to support customers’ sustainability journeys and, last month, signed a strategic cooperation with China Southern Power Grid for development of virtual power plant technology. Together they aim to build a broad service offering that is feeding off the strength of the Chinese domestic market.
“Several huge Chinese tech firms have risen to be leaders in their respective fields thanks to a renewed government focus on Chinese intellectual property and innovation, as well as a huge domestic customer base to build upon,” explains our 2022 Smart Commercial Buildings report. “Organizations including Baidu, Alibaba, Tencent in native cloud infrastructure as a service, Xiaomi in wearables and smartphones, HikVision and Dahua in video surveillance and Ayla in connected HVAC and appliances, have all emerged as significant global players in recent years.”
In its annual report, Midea has revealed its intentions to develop both B2B and B2C business models and increase sales in the domestic and overseas markets concurrently. Stating its aim is to “focus on long-term investments on technology and digital transformation and accelerate the upgrade of its smart products and smart home business,” building on its dominant position in the residential market.
However, the firm has also laid out what they call “a second growth curve” from its four “business engines”, which include robotics and automation, building technologies, energy management, and smart travel. These broad technology ambitions are supported by Midea’s M&A strategy, which has resulted in several acquisitions in the building space in the last year or two.
Midea officially entered the elevator business in December 2021 when it acquired Winone Elevator, a leading elevator firm in China. Prior to the deal, Winone had registered more than 200 national patent authorizations and its products are sold in more than 60 countries across Asia and Africa.
Winone Elevator has been integrated into the overall Intelligent Building Solutions, adding to Midea’s overall goal of offering a one-stop service for buildings. While HVAC accounts for up to 60% of building energy consumption, elevators still represent a significant 15% in high-rise buildings.
The Building Technologies Division, encapsulated by the iBuildings ecosystem, benefits from such horizontal integration, allowing Midea to offer a full-service package. In addition to Winone Elevators, the firm led acquisitions of KUKA, a German robotics firm, and WDM, an established Beijing-based Medical supplies company, underlining their breadth across the built environment.
Midea’s emerging buildings segment is surrounded by residential, industrial, automation, and transport divisions that create a kind of ‘built environment conglomerate’. Supported by its dominant domestic position in China and its ambitious moves into integrated smart technologies, Midea could make a serious impact on the global smart buildings market in years to come.