Global Domestic Appliance - copperalliance.org · THE MARTEC GROUP CONFIDENTIAL 3 Competitive Analysis of the Appliances Market Keith Miller Business Director, The Martec Group London,

THE MARTEC GROUP CONFIDENTIAL

1

Legal Statement

The purpose of the information in this presentation is to guide ICA programs and provide members information to make independent business decisions.

Based on primary interviews conducted in the industry and publically available information. The Martec Group in cooperation with MetalsPlus are the sources of the forecasted data in this presentation.


2

Antitrust Guidelines

Antitrust Guidelines for Copper Industry

Trade Association Meetings

The following guidelines with respect to compliance with antitrust laws of the United States, Japan and European Community1

are intended to govern the conduct of participants in copper industry trade association meetings, both at the meeting itself and

in informal discussions before or after the formal meeting.

Price: Competitors should not discuss future prices (including terms of sale) of their products. There is no blanket prohibition

against the mention of or reference to current or past prices but limits must be observed. Such references or mentions should

occur only when necessary in connection with the development of association programs. For example, reference to a particular

price level in comparing the cost of a copper product to a competing product is permitted. Whenever possible, such references

should be discussed in advance with legal counsel.

Competitive Information: Competitors should not discuss the market share of a particular copper producer or copper

fabricator’s products. Furthermore, nothing should be said at a meeting which could be interpreted as suggesting prearranged

market shares for such products or producer production levels. The overall market share of copper products may be discussed

with regard to competition with non-copper products and general market acceptance.

New Products: Competitors should not encourage or discourage the introduction of a new product by another competitor or

reveal a particular copper company’s plans to change the production rate of an existing product or to introduce a new product.

No company should disclose to another company whether it is in a position to make or market a new product. New products

may be discussed in a technical manner or from the standpoints of competition with non-copper products and general market

acceptance. In addition, proposed methods for and results of field and laboratory testing can be considered.

The Role of Legal Counsel: Legal counsel attends association meetings to advise association staff and other meeting

attendees regarding the antitrust laws and to see that none of the matters discussed or materials distributed raise even the

appearance of antitrust improprieties. During the course of a meeting, if counsel believes that the discussion is turning to a

sensitive or inappropriate subject, counsel will express that belief and request that the attendees return the discussion to a less

sensitive area.

A paper entitled ‘Copper Industry Trade Associations and Antritrust Laws’ is available upon request.

10/92, 5/93, 10/10

1. Other foreign competition laws apply to International Copper Association, Ltd. (ICA)’s activities worldwide.


3

Competitive Analysis of the

Appliances Market

Keith Miller Business Director, The Martec Group

London, October 2018


4

Methodology/Interviews

Martec has completed 70 interviews with various key industry respondents:

• Leading global Appliance OEMs, Suppliers and other industry experts:

Whirlpool, GE-Haier, BSH, LG, Samsung, Electrolux, Frigidaire, Panasonic, Keurig, Indesit, Zanussi, Vestel, Gorenje, Vestel, Candy, Elica, Insinkerator, Hoover, SharkNinja, Puppy Vacuums, Puti, Huadi, Rinnai, Gree, Prestige, Venus, Godrej, Rallison, Shanghai Highly, Nidec, A.O. Smith, Galanz Motor, Jinda Motor, Media Fans and various others

• Across the following key appliances: Refrigerators, freezers, washers, dryers,

ovens/hobs/cooking ranges, microwaves, dishwashers, range hoods, garbage disposals, mixers, hot water heaters, space heaters (non-home HVAC), air purifiers, coffee/tea machines, personal care appliances, etc.

Home HVAC including air conditioners were excluded

22 15

20 13


5

Important Industry Topics

- -

- -

Other

Another important factor for manufacturers is keeping the products cost competitive

Increase functionality of appliances while keeping them efficient and low-cost

Affordability of appliances is a big factor in fast paced middle-class countries such as China and India

Energy Efficiency

*NOTE: Based on respondents ranking in order by priority.

2.16

Product

Offering consistent products can help lead to product and brand loyalty.

Differentiating products through innovative designs can help gain the favor of consumers

The product is the brand and needs to keep consistent quality

Many product changes today are directly related to the image of the product

1.50

Design/Function

Changing functionality to meet customer’s needs while keeping costs low is very important to manufacturers.

Providing a function that another brand or product does not have can differentiate an appliance enough for purchase

Consumers are looking to save money without losing functionality

− Appliance OEMs trying to increase functionality while decreasing cost/price

− Failures are a concern with usage of alternative materials

China and India scored Design/Functionality higher in importance than ROW

2.10

Technology

Increasing integration of smart technologies will help separate great appliances from good appliances.

Companies will need to introduce new technologies to compete in the changing market

Innovations may be expensive, but there are ways to make up for the losses

Electrical efficiency is a major trend with regard to product technological improvements

Technology scored much higher in importance in NA (1.44) and Europe (1.13) vs. China & India


6

High Level Trends

Leading Trends:

• Higher efficiency rated appliances

• Larger capacity appliances

• New product configurations with new/advanced controls

Both large and small appliances

• Cost effective touch UI w/ color graphics and multi-color LEDs

• Connectivity / Smart appliance technology

• Value engineering / Product diversification / Broader portfolios / Increased functionality

• Cost reduction targets / Increase affordability

• Unique features across brands and price points

Materials, finishes, capabilities, extended warranties


7

Challenges for Alternative Materials

• Conductivity differences and losses vs. using Copper

Environmental effects in performance over time of alternative materials and issues with creep and electrolysis

• Changes to control algorithms due to electronic properties

Appliance process timing changes due to motor / pump / compressor performance such as torque or heating

• Reduced product / component life span with alternative materials

Impact on brand differentiation, may require or result in more maintenance, service & warranty

• Solve cross-regional procurement issues and procurement complexities

Need to provide reliable and low cost supply globally; 2 – 3 years to put into production and at least 2 – 3 to realize value

• Heating / Material expansion (especially w/ aluminum)

Effects contacts electrical properties & reliability

• Diameters and ability of suppliers in forming effective diameters for windings w/ Al for smaller motors and components

Aluminum and alternatives will increase motor size or will have to accept reduced performance and/or life span

Limited supply of reliable vendors capable to support material change


8

Simple

Difficult

Geometrics of Design

(fit in appliance)

Effect on other Components

Connection Reliability

Control System Changes

Small Component Geometries

CU embedded into design

(i.e. PCBs, UIs, Wire Harness)

Difficult to model & test (i.e. Connectivity)

Difficult for appliance OEMs to test wireless technology (high frequency equipment) with alternative materials due to unknown quantity vs. Cu. Significant investment & expertise required.

These are strongholds for Cu due to performance risks of alternative materials. Will take time to displace if it even will be displaced.

Very challenging to utilize Al in small geometries without sacrificing performance, especially with significant space restrictions or smaller appliances.

Technical Matters that Defend Copper

Ongoing problems with alternative materials vs. Cu as alt. materials have issues with creep, electrolysis over time and soldering issues. May require tradeoffs in life expectancy of appliance.

Change to alternative materials can create issues with another component or architecture that needs to be compensated for or balanced out (i.e., noise, vibration, heat management, etc.). Require dampening or mounting changes.

Size of components will change or changes in architecture design are required in order to fit in appliance. Aluminum windings can increase motor size up to 1/3 vs. Cu windings.

Heat management, motor cycling or recalibrating & programing control systems or error codes due to changes. Must evaluate whole system.

Challenges over time to OEMs

Meeting Energy Efficiency

Based on history and experience, easier path for Appliance OEMs to design and meet energy efficiency standards and maintaining desired life cycles with using Cu.


9

Growth Opportunities

Leading Areas of Opportunity for Growth:

1. Appliance Connectivity

• Plans are to move more volume of appliances (even small appliances) to this space of functionality

• Controls and signals involved currently use copper and will be difficult to transition to Al or other alternatives without performance changes

Engineers and designers accustomed to designing with Cu

Design initially with the best materials until there is a strong drive to make transition and create new materials & processes for lower cost

• Area is more complex and more difficult to model & test (unless LG and Samsung, other appliance OEMs must invest heavily)

2. Expected appliance growth in China and India

• Growing economies & middle-class to purchase new appliance units

3. Finishes / Coatings / Coverings (small and large appliances)

• More copper colorant options are expected in the future

4. Alloy blends or Nano materials

• Largely an unexplored area in appliance sector

• Hybrid materials that are blended on the molecular level (i.e., conductive carbon fibers)

• Just being contemplated by Appliance OEMs (two areas where OEMs are focusing on):

Wire harnesses / Displays / Connectivity components

Electric motors

5. Any potential for stricter energy efficiency standards


10

Oven/Stove/Range/Hobs Overview – Large Appliance Example

Fan motor windings

Induction Coils

Contact Points & PCB for controls

Power Cord/Wiring

0.8kg <2%

Common Copper Components

Avg. Copper per Oven/Stove/Range

Copper as % of all materials in a Oven/Stove/Range

Oven/Stove/Range/Hobs Sold per Household

Fan motor windings

Induction cols (in process to copper-clad /

aluminum)

Piping (typically aluminum, some copper)

Cu Alt.

Regional

Country

.01

.09

.09 .12

0.9 Ovens/Stoves/ Ranges/Hobs per Household (total)

4.2 people per Oven/Stove/Range/

Hobs (total)

.05

ROW

-

25

50

75

100

125

150

175

2015 2016 2017 2018(F) 2022(F)

North America Europe China India ROW

Global Units per Year (in millions)


11

Global Large and Small Appliance Sales: Year over Year 2012 – 2022(F)

1,852 1,928

1,997 2,042 2,100

2,166 2,228

2,289 2,350

2,405 2,461

0

500

1,000

1,500

2,000

2,500

3,000

0

500

1000

1500

2000

2500

3000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Small Appliances Large Appliances TOTAL

In M

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of

Un

its

Total CAGR 2012-2017 3.2% Total CAGR 2017-2022 2.6% Total CAGR 2012-2022 2.9%

Large Appliances CAGR 2012-2017 2.7% Large Appliances CAGR 2017-2022 2.8% Large Appliances CAGR 2012-2022 2.8%

Small Appliances CAGR 2012-2017 3.4% Small Appliances CAGR 2017-2022 2.5% Small Appliances CAGR 2012-2022 3.0%

Large & Small Appliances


12

Small Appliances Sold by Region: 2012 – 2022(F)

0

100

200

300

400

500

600

700


Small Appliances Total CAGR 2012-2017 3.4% Total CAGR 2017-2022 2.5% Total CAGR 2012-2022 3.0%

North America CAGR 2012-2017 1.1% North America CAGR 2017-2022 1.5% North America CAGR 2012-2022 1.3%

Europe CAGR 2012-2017 1.3% Europe CAGR 2017-2022 1.0% Europe CAGR 2012-2022 1.1%

China CAGR 2012-2017 8.2% China CAGR 2017-2022 3.7% China CAGR 2012-2022 6.0%

India CAGR 2012-2017 7.8% India CAGR 2017-2022 7.4% India CAGR 2012-2022 7.6%

Bulk of unit volume growth coming

from China & India due to growing economies and

middle class growth.

Small Appliances

In M

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Un

its


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Large Appliances Sold by Region: 2012 – 2022(F)

Large Appliances

0

50

100

150

200

250

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022


Total CAGR 2012-2017 2.5% Total CAGR 2017-2022 2.8% Total CAGR 2012-2022 2.6%





Bulk of unit volume growth coming

from China & India due to growing economies and

middle class growth.

Large Appliances

In M

illio

ns

of

Un

its


14

16 15 16 16 17 17 17 17 18 19 19

43 40 41 43 44 44 44 45 46 47 49

34 33 34 34 34 35 36 38 39 41 44

164 170 182 188

196 201 208

216 225

233 241

100 98 100 96 95 96

99 102

107 111

117

356 357 374 378 385 393

405 419

436 452

469

0

50

100

150

200

250

300

350

400

450

500

0

50

100

150

200

250

300

350

400

450

500

2012 2013 2014 2015 2016 2017 2018(F) 2019(F) 2020(F) 2021(F) 2022(F)

North America European Union India China ROW TOTAL

Electric Motors

• Motors represent approximately 25% of overall Cu usage • Growth in copper usage has been slower for North America &

Europe due to further movement of manufacturing to China • China has experienced the most growth at 4% annually driven by

unit volume production growth

Global CAGR 2012-2017 2.0% Global CAGR 2017-2022 3.6% Global CAGR 2012-2022 2.8%





*NOTE: Based on production.

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Copper Use (kt Cu) – Motors


15

Copper Use (kt Cu) – Equipment Wire

31 31 31 30 30 29 28 28 28 27 27

77 78 81 82 83 86 88 90 92 94 96 31 32 35 37 40 42 45 47 49 51 53

209 218 226 233 240

248 260

273 285 297

308

157 157 160 161 161

163 169

174 178

183 188

504 515 533 543 553

568 590

612 632

653 673

0

100

200

300

400

500

600

700

800

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016 2017 2018(F) 2019(F) 2020(F) 2021(F) 2022(F)


Equipment Wire

• Equipment wire represents ~35% of total Cu usage • Copper usage in equipment wiring has been decreasing

in North America due to shifts in manufacturing • Growth in India is expected to slow down from a high of

nearly 7% while China is expected to increase growth to >4% per year over the next 5 years

Global CAGR 2012-2017 2.4% Global CAGR 2017-2022 3.4% Global CAGR 2012-2022 2.9%

North America CAGR 2012-2017 -1.6% North America CAGR 2017-2022 -0.9% North America CAGR 2012-2022 -1.2%





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16

Total Copper Use (kt Cu)

91 90 90 90 90 88 89 89 89 90 90

183 182 187 190 192 196 198 200 202 203 206

96 98 102 104 107 111 116 122 127 133 139

643 665 697 721

750 770 801

832 864

895 926

452 449 454 447

443 449 463

477 491

506 520

1,465 1,484 1,530 1,552 1,582 1,614

1,667 1,720

1,773 1,827

1,881

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2012 2013 2014 2015 2016 2017 2018(F) 2019(F) 2020(F) 2021(F) 2022(F)


Total Copper

• Overall, the total amount of copper used globally in appliance products is expected to project at around 3% growth annually over the next 5 years Global CAGR 2012-2017 2.0%

Global CAGR 2017-2022 3.1%

Global CAGR 2012-2022 2.5%

North America CAGR 2012-2017 -0.7%

North America CAGR 2017-2022 0.5%

North America CAGR 2012-2022 -0.1%

Europe CAGR 2012-2017 1.4%

Europe CAGR 2017-2022 1.0%

Europe CAGR 2012-2022 1.2%

China CAGR 2012-2017 3.7%

China CAGR 2017-2022 3.8%

China CAGR 2012-2022 3.7%

India CAGR 2012-2017 3.0%

India CAGR 2017-2022 4.6%

India CAGR 2012-2022 3.8%


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Documents

Global Domestic Appliance - copperalliance.org · THE MARTEC GROUP CONFIDENTIAL 3 Competitive Analysis of the Appliances Market Keith Miller Business Director, The Martec Group London,