(Yicai) Sept. 4 -- Chinese home appliance giants Midea Group and Haier Group plan to boost production in Africa this year, with the continent's large and relatively young population creating significant market potential amid low adoption of such products, according to an expert.

Chinese home appliance companies are increasing investment in Africa to take advantage of population growth and consumption upgrades in the region, Cai Ling, global home appliances strategic client director for China at market research firm NIQ GfK, told Yicai. The shift can also help optimize their global supply chain layout, Cai noted.

The business model has transitioned from "product export" to an integrated local operation that encompasses "branding, manufacturing, channels, and services," Cai stressed.

The second phase of the Haier Egypt Ecological Park is scheduled to become operational by the end of this year after construction began in 2024. The first phase has an annual production capacity of over 900,000 air conditioners, washing machines, and televisions and went live in 2024, while the second phase will add a refrigerator production line.

The Haier Egypt Ecological Park has a total investment of USD170 million and covers 200,000 square meters, with its production capacity to exceed 1.5 million units a year once fully operational, providing more than 3,000 jobs for the local community. About 70 percent of products ended in the Egyptian market this year, while the rest were shipped to nearly 20 countries in the Middle East, North Africa, and Southeast Africa, including Jordan, Kenya, Algeria, and Morocco.

Midea set up a subsidiary in South Africa in July, while also starting construction of its washing machine factory that will likely begin production by the end of this year. The Foshan-based company entered the country more than 20 years ago and has steadily deepened its presence in the local home appliance sector, growing its market share to about 7 percent to 10 percent.

The washing machine plant will help Midea move away from relying solely on imports and strengthen the supply chain in Southern Africa. The company has also established production lines for air-cons, dishwashers, refrigerators, and washing machines in Egypt's Suez Canal Economic Zone, with products supplied across North Africa and the Middle East.

In addition, Hisense Home Appliances Group launched its first school-enterprise cooperation in South Africa on Aug. 26. Collaborating with the National Business Initiative and Northlink TVET College, the Qingdao-based firm aims to form a local talent development system by co-building practical training systems, targeted skills training, and employment channel connections.

Global TV market demand is saturated, while the Chinese market is shrinking, so domestic brands are actively expanding into overseas markets such as the Middle East and Africa to boost their global market share, Zhang Hong, deputy general manager of Sigmaintell Consulting's large-sized display division, said to Yicai. In addition, establishing TV manufacturing capacity in countries like Egypt can meet demand in the Middle East, Africa, and Europe, serving as an important strategy to handle tariff barriers, Zhang pointed out.

However, the African market still faces weaknesses in infrastructure and supply chain support, posing challenges to TV production and sales, Zhang stressed. Local consumers' purchasing power is also relatively low, with demand highly susceptible to cost fluctuations, Zhang added.

Overall market demand growth will likely be sluggish in the short term, putting significant pressure on profitability, Zhang noted, adding that this raises requirements on manufacturers' cost competitiveness.

Editor: Martin Kadiev