A cache of robots perform a task in an almost synchronous motion. From a distance, the robots appear to be a performing a some sort of a dance to a musical symphony. In fact, there is a certain tune that plays in the background, something that sounds like children’s music.
However, these robots that we talk about are performing the mundane task of manufacturing and assembling a spilt air-conditioning device completely devoid of human intervention.
MEP Middle East witnessed these industrial robots at Midea’s RAC (residential air conditioner) facility in Nansha district, Guangzhou, China. The visit was part of a press trip organised by the company in collaboration with its UAE-headquartered distributor, Taqeef.
The fully automated 118,000m2 Nansha facility has a monthly average production capacity of 500,000 sets.
In a bid to go completely automatic, the factory had been systematically cutting down on the number of people who work in the manufacturing facility.
Talking about automation, Peck Zhao, senior marketing manager, overseas sales, Midea Commercial Air Conditioner (CAC), said: “Automation is a long-term strategy because we think the future will be automated. First, by automating, the labour cost can be reduced, and second, young people don’t like working in a factory. You have to invest in automation. It’s not because of the low cost itself but largely because of people’s preference. More people choose jobs in an office environment rather than factories. We’re investing for the future.”
Zhao said that Midea invests around 4% of the total revenue in research and development. He says: “In the last five years, $3.8bn has been invested in research and development. The R&D department is always our richest department.”
Founded in 1968 in Guangdong, China, Midea has now established a global platform of more than 200 subsidiaries, over 60 overseas branches and 12 strategic business units. The company is also the majority shareholder of KUKA -- German manufacturer of industrial robots and solutions for factory automation.
In 2015, Midea was granted credit ratings by three international credit rating agencies, Standard & Poor, Fitch, and Moody. In 2016, Midea Group was listed in Fortune Global 500, ranking 450 when it came to revenue.
Zhao said: “In China, last year we sold about $17bn of products, out of which $6bn will be from the sale of air-conditioners. And of those $6bn, about $2bn are sold through Alibaba and Jingdong. Air conditioners actually are very big in size, and yet 30% of air conditioners are sold through the e-commerce sites.”
Midea has customers and strategic partners worldwide, and about 130,000 employees in total. Midea’s CAC facility in Shunde district, Guangdong, China, although not fully automated, still has major tasks performed by industrial robots. In the near future, this facility too will be fully automated, said Zhao.
The CAC facility in Shunde has an annual manufacturing capacity of 3 million units per shift. It has a total area of 110,000m2.
Midea CAC has another facility in Chongqing. This facility has a total area of 200,000m2, with an annual manufacturing capacity of 400 units for centrifugal chiller, 3,000 units for water-cooled screw chillers, 1,000 units for air-cooled screw chillers, 11,000 units for modular chillers, and 190,000 units for terminals.
Midea's headquarters in Beijiao, Guangdong, China.
VRFs and Middle East
The major segment that Midea focuses is the VRF market when it comes to the Middle East region. Midea has already made inroads into the VRF sector, with its 5,000 villas project in Al Ain. This project boasts of sophisticated new VRF HVAC technology capable of providing not only cooling, but also heating. According to Zhao, these VRF HVAC systems are very quiet and energy-efficient because the variable-speed compressor runs only at the capacity needed for the current conditions by varying the flow of refrigerant to the indoor units based on the exact demands of the individual areas. He said: “The kind of VRF systems installed there has more than 30,000 indoor units and 5,000 outdoor units.
“We also have several projects in Saudi Arabia. We have worked on a big tower of more than 30 floors where we have installed mini-VRFs. Mini VRFs can be installed on a floor-by-floor basis and large VRFs work for big villas or office buildings.”
Zhao also mentioned that district cooling is not efficient for villas, and therefore, VRFs are more popular for villa developments in the Middle East. His sentiments are in line with Ahmad Bin Shafar, CEO of UAE-based district cooling company. Earlier in an interview with MEP Middle East, Bin Shafar said: “District cooling is the proper solution for high-density areas, [such as, for example] if there are three towers next to each other and each tower has 250 apartments.
“So if you want to have air-conditioning in 250 units and if you put chillers, who will pay the bill if it’s freehold property? But for villas, district cooling is not the solution because the cost will be in the network. We [would] have to spend on the network [and] it’s not going to be very efficient.”
Zhao added that the installation costs for district cooling is more as it requires long piping and big pumps to circulate water, but it the case of VRFs short pumps are used with a maximum length of 30 metres.
Addressing the issue of leakage and operational data for VRFs, Zhao said: “Leakage is not a concern because after more than 10 years [of operation], there are very few [reports of] leakage. And even leakage occurs, there will be a warning or alert made through the use of sensors. If people are really concerned, they can install leakage sensors.”
“For operational data and energy efficiency, we are capable to provide such information through software. We can show the daily operational data, monthly operation data, and other billing information.”
Peck Zhao, senior marketing manager, Midea CAC.
Predicting the growth of VRFs in the Middle East, Zhao said: “The Middle East market is sure to choose VRFs more than chillers because the latter requires water. Even in China, there is scarcity of water in most cities. So that is why the Chinese government is pushing for VRFs. In Shanghai, 80% (commercial applications) of the buildings are using VRFs, and not chillers. About 30 years ago, there was no VRF. But now, most of the hospitals, office buildings, apartments, they choose VRFs, more than chillers. This is how it is in China and I think this will happen in the Middle East too. Chillers require a lot of water and service, and therefore, cost is very high.”
However, Zhao said that VRFs are meant for specific applications and that it cannot be applied everywhere.
Hadi Ismail, senior director – energy solutions and mega projects, Taqeef, had earlier said that a lot of suppliers are comparing VRFs with chillers, which should not be done. He said: “Air-cooled chillers business will stay and will keep on growing. But the VRF market is growing faster than the air-cooled chillers. And VRFs were not made to compete against air-cooled chillers.”
Ismail, speaking earlier this year, admitted that, originally, VRF was not an appealing product for many reasons. He said: “It’s only three years ago, VRF started moving in the ME market. There was no proper foundation for the preparation of VRF planning. If you screw up the installation, you screw up the whole system. You end up in a project where the contractor does not have qualified people to do the installation, and then you end up being blamed for this.”
Moving away from the subject of VRFs, Zhao said that competition among Chinese manufacturers has helped propagate the idea of high-quality China-made products.
Zhao said: “Nobody can really survive independently in this market. If you try, you will fail! Everybody is competing and cooperating at the same time.”
Midea has partnerships with brands such as Carrier, Hitachi and Toshiba. He said: “Hitachi is now acquired by Johnson Controls and we are competing together. But we are also using some of their components. Even Toshiba is our partner. But in the VRF sector, we are competitors.”
Competition is a good thing, said Zhao. “It helps us grow together. Also, this benefits Chinese manufacturers. It helps thwarting the wrong perception that China-made products are of low quality. We also need distributor companies like Taqeef to believe in brands such as Midea.
“Moreover, the media is shaping the direction of how people think, because in the real world China has already changed.
“The concept of low-quality ‘Made in China’ products was 10 years ago. We now focus on only high-quality products.”
Some of the main competitors from other markets for Midea are Daikin, particularly in VRF sales, LG, Samsung and Mitsubishi Electric. However, there also exists business cooperation with such companies, said Zhao.
The shift towards different business divisions by Japanese manufacturers has given Midea the upper hand. He said: “Japanese manufacturers are looking at different business fields. They may give up some of the old businesses, like home appliances and air-conditioners. They are now investing in health care, robotics, new batteries, solar energy, etc.
“This is the current trend and this is very beneficial for Midea air-conditioner, home appliance, and robotics businesses. But in the next 10 years, it will be difficult to say.”
There is not a lot of competition in technological innovation within the HVAC sector, according to Zhao.
“In the HVAC field there is not a very big change in technology as we have witnessed for mobile phones,” he said.
“Even though every manufacturer has new launches in VRFs, it’s hard to say that it’s a big revolution. It’s more of an evolution, such as extending the capacity, increasing the efficiency, improving the flexibility of the controller and increasing the production efficiency.”
The fully automated 118,000m2 Nansha facility has a monthly average production capacity of 500,000 sets.
The one field where Midea competes with others is price however. He said: “Now we have more robots to reduce the labour costs and manage components cost. Finally, we can maintain the same price as it was three years ago.
“So this is how we survive as Chinese manufacturers. In the next five years, this is also our main advantage over other manufacturers because we have huge volumes. Not only in China but also outside the country. The average cost can be more competitive”.
Midea also continues investing in research and development. “We think this will bring a big change, as we don’t know what will happen when we keep innovating. In Guangzhou, Nansha, our factory is 100% automated. Staffs there do not need to touch anything; they only need to monitor,” Zhao said.
The Chinese government too plays a major role in pushing for innovation. The government is targeting an increase in R&D spending to 2.5% of GDP by 2020, further closing its gap with the US. Credit Suisse estimates that this would represent an increase of 73% compared to 2015, meaning the US will likely be surpassed (adjusted for purchasing power).
The government encourages multinationals to set up R&D centres in China in which many Chinese graduates could learn the disciplines needed to innovate and commercialise innovations at scale. Midea has its own innovation centre in Shunde town, Guangdong Province, China, that’s been recruiting and training graduates. The company has already taken steps to align its strategy towards a more automated future.