Source of this article: Consumer Reports Author: Zhang Derong
As one of the first multinational companies to enter the Chinese consumer market, Philips is synonymous with "high-end imports" and "quality assurance" in the minds of many people. The world-class electronics giant operates in a wide range of sectors, including lighting, home appliances, medical devices and semiconductors.
However, in the past few years, electrical products with the nominal brand of Philips have been detected as unqualified many times, is it still the "white moonlight" in the hearts of consumers?
Are Philips home appliances "OEM" goods?
Founded in 1891, Philips started out as a light bulb in the 20th century. Even semiconductor giants ASML and TSMC are funded by it.
At the beginning of the 21st century, in the era of rapid development of electronic appliances, strong competitors such as General Electric, Siemens, Samsung, LG, and Panasonic ran exceptionally well on the track that Philips was proud of, which once made the "royal noble" feel powerless.
What's even more embarrassing is that at that time, the global consumer electronics market was growing rapidly, while Philips' business revenue was declining year after year. With no clear advantage in quality and price, Philips had to make a strategic realignment to its stagnant business.
In 2005, Philips sold its monitor and flat-screen TV OEM business to TPV for $358 million, making it the world's largest PC monitor manufacturer. In 2010, Philips outsourced TV sales, distribution and procurement in China to TPV Technology, gradually fading out of the TV market.
TPV's business model
TPV's annual report shows that in 2021 and 2022, TPV will pay 1.778 billion yuan and 1.498 billion yuan to Philips for trademark licenses, respectively. The net profit in the corresponding year was only 532 million yuan and 87 million yuan.
In 2014, Philips integrated the LED business and the general lighting business to form an independent company, Philips Lighting, Signify, and merged the LED chip manufacturing and automotive lighting business into a company called Liangrui. In 2016, Philips Lighting sold 80.1% of its shares in Liangrui to Apollo's fund. Philips' knife slashed at its old lighting business.
In 2021, Hillhouse Capital invested 4.4 billion euros to acquire Philips' global small home appliance business (with a 15-year brand license agreement), including garment steamers, electric irons, vacuum cleaners, coffee machines, air fryers and other kitchen appliances, as well as air purifiers and other products, but not shavers, electric toothbrushes and other personal care and beauty products.
Most of the OEMs are well-known domestic home appliance brands
At present, Philips has basically divested its consumer electronics business, and the focus of its operation has long been shifted to the medical and health field. However, in China, the Philips TVs, air conditioners, water purifiers, etc., which consumers now buy, are to some extent "OEM products", and the design and production of their products are responsible for other companies authorized by the brand.
It is reported that Nanjing Zhipu Supply Chain Management Co., Ltd. (hereinafter referred to as "Nanjing Zhipu") is responsible for the operation of Philips air conditioner in China. Tianyancha information shows that the company is 100% controlled by Anhui Enboli Electric Appliance Co., Ltd. (hereinafter referred to as "Enboli"). The company is 39.5% owned by Shanghai Lepu Technology Development Co., Ltd. (the actual controller is Xu Zifa, a large agent of the original Gree air conditioner); Huang Hui, the former executive president of Gree Electric Appliances, holds 19% of the shares; Anhui Meibo Intelligent Electrical Appliance Group Co., Ltd. holds 18% of the shares.
The reporter inquired on the official website of the China Quality Certification Center that the applicants and manufacturers who applied for the 3C certification of Philips air conditioners are mainly Enboli, and the manufacturers are mainly Enboli (Meibo air conditioning), and other OEM manufacturers include Oaks, Changhong, Hisense, etc.
That is to say, the Philips air conditioners purchased by consumers are basically from the hands of domestic second- and third-tier air conditioning companies. Moreover, Philips's air conditioner has an obvious brand premium, and its hot-selling 1.5 hp new level of energy efficiency hangs up at a price of about 3,500 yuan. Compared with other brand models with similar parameters,Hisense、Oaks、Changhong、The price of Meibo is roughly 2000 yuan to 2300 yuan。
It is worth noting that Philips air conditioner launched sales strategies such as "12 years of free replacement of new machines" and "12 years of free repair" in January this year, which caused heated discussions in the home appliance circle. Some people think that this is unscrupulous means to grab the market and traffic, completely ignoring the cost-effectiveness, and destroying the order of industry competition; Some people question whether the air conditioning companies that have been licensed by the Philips brand can continue to operate is still unknown, and the so-called commitment may be "unfinished".
Philips' online official channel customer service replied to the reporter that the 12-year replacement activity is temporarily not participated in online, and it is recommended to consult offline stores, and the current activity is a ten-year warranty for the whole machine.
At the same time, the reporter noticed that Philips' water health and personal care health appliances were "operated" by Delmar, an innovative home appliance company listed on the GEM. These two categories are important sources of Delmar's revenue, accounting for more than 50%; And the gross profit margin is more than 30%, slightly higher than Delmar's own brand (home environment).
In 2018, Delmar and Philips signed the "Philips Trademark License Agreement", and over the past 5 years, the authorized products have expanded from water purifiers, water dispensers, filter cartridges, water heaters and other categories at the beginning of the cooperation to toilets, showers, massages, fitness equipment related products and other products.
Screenshot from Delmar's 2023 semi-annual report
Shanghai Water Shield Health Technology Co., Ltd. and Guangdong Water Shield Health Technology Co., Ltd. are both subsidiaries of Delmar
In addition, the reporter inquired on the official website of the China Quality Certification Center that many well-known home appliance companies do OEM for Philips, such as Hongyan produces Philips power strips; Roman produces Philips high-speed blowers; Xinbao Electric Appliances, a listed company, produces Philips coffee machines and cooking sticks; Laike Electric, a listed company, produces Philips vacuum cleaners, etc.
Philips home appliances have been repeatedly found to be unqualified
Under the ideal operation, brand authorization, OEM, and OEM are not synonymous with inferior quality. Brand licensing is a win-win cooperation model for the licensor (generally a foreign brand) and the licensee (generally an operating enterprise). On the one hand, it is a direct and efficient profit measure for foreign brands to choose to monetize their brand power when they are struggling or unexplored in the local market. On the other hand, the licensee can use the brand value to quickly open sales channels and reduce marketing pressure under the "OEM" model.
But in fact, the licensor loses the most important link after the brand authorization - the quality control of the OEM product. In recent years, Philips' products have blossomed everywhere, from juicers, electric kettles, coffee machines, to heaters, electric ovens, and air conditioners, but sampling inspections and complaints have also followed.
In the 2023 supervision and random inspection of beauty care appliances by the Shanghai Municipal Administration for Market Regulation, Philips's ultrasonic skin beauty and nourishing device was found to be unqualified in the structural project.
In some typical cases of unqualified quality and safety of imported consumer goods detected in 2023, Philips' toothbrush heads were notified of unqualified brushing items.
In the 2021 national supervision and random inspection of the quality of kitchen and bathroom electrical appliances, Philips's electric oven was found to be unqualified for stability and mechanical hazards (still unqualified in re-inspection).
In the 2020 Guangdong Province clean and sanitary electrical appliances product quality supervision and random inspection, Philips's hair dryer was found to be unqualified in harassment power and radiation harassment items.
In the first batch of provincial consumer product quality supervision and random inspections in 2020, Philips's household vacuum cleaners were found to be unqualified for internal wiring.
In the home appliance market, where brand licensing is popular, if the product quality cannot well match the consumption of high-premium brands, what awaits will be the overdraft of brand vitality and the rational farewell of consumers.
I hope that the scattered Philips will not become the European version of the "Antarctic man".