[Edaily Reporter SOYEON KIM ] Most global home appliance companies are devising survival strategies that rely on China’s manufacturing infrastructure rather than in-house production. As profitability comes under increasing pressure due to China’s low-cost offensive, these companies are focusing more on securing software R&D capabilities to expand their artificial intelligence (AI) ecosystems than on in-house manufacturing.

According to industry sources on the 9th, major global home appliance companies, including SamsungElectronics and LGELECTRONICS, are establishing a business structure in which manufacturing is outsourced, allowing headquarters to focus on branding, research and development (R&D), and software.

U.S.-based Whirlpool and Sweden’s Electrolux have restructured their businesses to scale back their own production facilities and leverage external manufacturing ecosystems as labor and logistics costs have risen. Most small and mid-to-low-priced home appliances have shifted to original equipment manufacturer (OEM) and original design manufacturer (ODM) supply chains in China and Eastern Europe, and the proportion of small home appliances sourced from specialized Chinese manufacturers has been steadily increasing.

Panasonic has outsourced all production of entry-level LCD TVs to China’s TCL, and Sony has also significantly expanded its reliance on TCL for contract manufacturing. The companies have shifted to a strategy of entrusting volume-zone (mass-market) products to Chinese ODM firms while their headquarters focus on developing premium technologies such as organic light-emitting diodes (OLEDs) and picture quality engines.

SamsungElectronics and LGELECTRONICS are also leading the trend in the global home appliance industry by expanding outsourcing and streamlining their assets. This is because, while they maintain in-house production for their unrivaled premium products, they find it difficult to match the cost competitiveness of Chinese manufacturers for mid-range and entry-level products without outsourcing.

Competitive advantage in the home appliance industry is also rapidly shifting from manufacturing to software and AI. Securing R&D capabilities to expand the AI ecosystem is emerging as the key to corporate competitiveness, rather than simply streamlining manufacturing.

In May, SamsungElectronics officially withdrew from the home appliance sales business in China and converted its local production facilities into export hubs. Although the company had previously adhered to the principle of in-house production for core large home appliances such as refrigerators, washing machines, and air conditioners, it began a full-scale business restructuring this year. In April, SamsungElectronics’ Home Appliances (DA) Division shared plans—during an employee briefing—to shift low-margin products such as dishwashers, microwaves, and entry-level air conditioners to joint development and manufacturing (JDM) and original design manufacturing (ODM) models, as well as to reorganize production hubs, and has begun implementing these measures.

LGELECTRONICS began restructuring its production by product category starting with air conditioners in 2020. It reorganized its supply chain by shifting production bases to Vietnam and actively leveraging China’s manufacturing ecosystem. Currently, high-volume large home appliances—such as entry-level drum washers, refrigerators, and air conditioners—are developed and produced through JDM partnerships with Chinese partners, while some small home appliances utilize China’s ODM ecosystem.

An industry official stated, “Amid the low-price offensive by Chinese companies, it has become difficult to secure cost competitiveness without outsourcing,” adding, “As the focus of competition in the home appliance sector has shifted from hardware manufacturing to AI and AI-based connectivity ecosystems, strategies that prioritize software and AI capabilities over manufacturing are becoming increasingly important.”