United States / Spotlight Reports
Appliance Makers are Capitalizing on the Internet of Things

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by Dylan Miller Analyst
Apr 12 2018

One of the most prominent technology trends of the 21st century is having a major impact on a somewhat surprising industry; Major Household Appliance Manufacturing. Major companies in this industry include well-known brands such as GE Appliances and Whirlpool that produce home appliances like dishwashers, dryers and ovens. While this industry has had a longstanding place in the economy, the Internet of Things has created opportunities for companies to create new products and compete with the growing threat of overseas competition.

The IoT

The Internet of Things (IoT) refers to a vast quantity of devices that are increasingly equipped with technology that allows them to connect to the internet, facilitating the generation and sharing of key metrics such as performance and usage of physical goods. The salience of this growing trend can mostly be attributed to better processing power and more efficient wireless networks. This trend has resulted in a growing industry product line known as “smart appliances,” which includes home appliances, such as washers, dryers and ovens, that are easier to monitor and interact with via mobile devices. Appliance manufacturers have responded to increased demand for these high-quality products by forming partnerships with technology companies and even developing smartphone apps that streamline consumers’ interactions with their appliances. For example, Electrolux AB recently acquired Anova, a US-based provider of precision cookers. Anova’s precision cookers are quite technologically advanced and can easily be connected to users’ smartphones and provide instant access to recipes and preparation guides. This pivot to technology-oriented products represents a major trend that appliance manufacturers will likely have to adapt to moving forward.iot graph

A Changing Landscape

One of the largest threats facing US-based manufacturers is the threat of imports. In 2018, 49.5% of domestic demand for the Major Household Appliance Manufacturing industry is expected to be satiated by imports, which tend to be lower-quality, lower-cost appliances. In fact, the prevalence of imports is expected to be a major contributor to the industry’s decline over the five years to 2023; during this period, industry revenue is projected to fall at an annualized rate of 0.3% to total $19.2 billion.

Globalization poses another threat to the domestic industry in the context of increasing foreign competition. For example, major industry player GE Appliances was recently acquired by China-based conglomerate Haier; this may result in a change in how the company operates in the industry moving forward, especially true given the recent restrictions imposed on imported washing machines. These restrictions include a combination of tariffs (20.0% tariff on the first 1.2 million imported washing machines, followed by subsequent import tariffs of 50.0%.) The tariffs, which will be gradually phased down during a three-year period, will likely limit demand for imported appliances. However, while appliances will still be manufactured in the United States, foreign-owned companies are more likely to import IoT software and equipment as globalization increases. Nevertheless, GE Appliances remains one of the top brands leading the charge in the transition to smart appliances; currently the company maintains a product line of over 70 connected large appliances including ranges, ovens, dishwashers and dryers. GE  Appliances’ products also boast the ability to connect with other smart appliances, including Amazon’s Alexa and Amazon’s Dash service, which monitors food and other household goods, automatically placing an order for new materials through Amazon when supplies are expected to be low.

The supply of connected devices has largely been driven by changing consumer preferences for more seamless interactions and enhanced connectivity. Since most consumers in industrialized companies own a smart device of some sort, connectivity levels are at all-time highs. This connectivity has led to changing demand preferences from consumers, which have been largely positive for the domestic industry. A shift toward more technologically-advanced and, consequently, higher-end product lines will represent an opportunity for domestic manufacturers to bolster profit margins. The continued shift to smart appliances will also provide appliance manufacturers an opportunity to partner with software and other technology companies and services, such as Amazon Dash, in order to maximize user interactions with appliances. According to a poll conducted by Telecompetitor, 48.0% of respondents use mobile phones to monitor and interact with smart devices, 17.0% use wall-mounted terminals and 13.0% use tablet apps, with the remaining segments being dedicated to other interactions including computer and web applications.

Investment Opportunities

Given that more technologically enhanced and connected appliances sell well and bolster industry profit margins, appliance manufacturers are expected to continue investing in research and development and will provide the goods and services to transition to product lineups of mostly connected devices. Consumers, in turn, will pay a premium for a more streamlined home appliance experience. It will be easier for consumers to know, for instance, if their washers and dryers are working at full efficiency; at the same time, consumers will be able to follow recipes more easily as appliances monitor and share information on factors such as temperature and duration of cooking time.

iot canva

Although revenue for the Major Household Appliance Manufacturing industry is expected to fall over the five years to 2023, connected devices and the emerging IoT may provide an opportunity for players that manage to invest in their product lines and form beneficial relationships with software and other service providers. Additionally, IoT-enabled devices, which are being met with enthusiasm by increasingly connected consumers, can provide an opportunity for US-based manufacturers to differentiate their products from typically lower cost and lower quality imports. Connected devices will also provide appliance manufacturers with more information regarding product usage and how consumers are interacting with said appliances.  The major obstacles will remain: whether domestic players can successfully invest in enhanced product lines that will take into account consumers’ propensity to spend and their desire for more seamless appliance interactions.

Edited by Emily Lidstone. Designed by Stephanie Conte.

Industry Impact: Major Household Appliance Manufacturing