Just as in the US, there is little room in Europe for domestic manufacturing of consumer electronics. Lately, one of the few who still tried to survive, German Loewe, asked for bankruptcy protection. And begin August it was announced that Loewe and Chinese TV producer HiSense agreed on a far reaching cooperation. Earlier, Loewe CEO Matthias Hirsch, prepared Germany for the inevitable. In leading German newsmagazine Der Spiegel (The Mirror) he announced that Loewe should stop pretending to be a TV manufacturer, and the only way the company can survive is the way car tuning brands upgrade standard products. He mentioned the AMG division of Mercedes-Benz, which offers high-powered versions of most Mercedes cars.
Loewe, which is not sold in the US, is specialized in high-end televisions and entertainment systems, characterized by a German minimalistic modern design and a sleek user interface. The design is inspired by classic examples as German Braun yes, the shaver company and Danish Bang & Olufsen. All modern design can be traced back to the German Bauhaus architectural movement, from 1919 to 1933. In small appliances, Braun was famous for this style, just as other German brands Krups and Rowenta, currently part of French GroupeSeb. It is no secret that many Apple products are very much ‘inspired’ by Braun just google “braun apple gizmodo” and you’ll see an overview. Japanese brand Muji also blends traditional Asian trends with European style.
But why does a Chinese mass manufacturer need a small European brand? And we mean ‘small’, just 250 M Euro, down from 400M a few years ago. Hisense produces about 12 M TV’s for China alone, where Loewe’s production is about 200K. The key is branding. The weak spot of Chinese manufacturing in general is the build-up of brands. Even in Chinese stores, foreign brands dominate and Chinese companies need Western-style brand-building, marketing and advertising. So Loewe will be used in China, but if the brand identity will be the same as in Europe is still unknown. In Europe, Hisense will use the Loewe organization to get access to the market. The Loewe brand will get much-needed cheaper models, but if the cooperation will expand to other brands is yet unknown. It is expected that Loewe will limit themselves to designing and selling, whereas Hisense will take care of technical design and production.
Curious facts about Loewe are that in 1923 they developed the world’s first sort-of integrated circuit, being a triple-circuit radio tube in the OE333 radio. They also had the first cassette tape recorder. And, they did cooperate with John Logie Baird, the UK inventor of the television.
Many famous European brands are no more. Grundig, for many years Germany’s leading CE maker, is now a brand of TurkishArçelik. A fun fact is that Grundig now even offers a white goods line, where they originally made only CE products. Telefunken, once a conglomerate not unlike GE, is a cheap accessory brand. Blaupunkt is now the car radio brand from Bosch.
Another famous European brand is Dutch Philips, formally called Royal Dutch Electronics. They still exist, although with a twist. Philips used to be a conglomerate with 400K staff, they even manufactured chips, components and white goods. The white goods division Italian Ignis and German Bauknecht were sold to Whirlpool when they wanted to enter the European market. After rigorous rightsizing Philips now just has 160K staff in three divisions: lighting, consumer products and medical. Philips is a famous inventor: they created the compact cassette, the VCR, Laserdisc and the CD the latter together with Sony. Many see their TV technology as leading: especially their movement prediction has always been the best in the market, and their AmbiLight background illumination for TV’s is unique and patented. But they also could not Keep Up With the Koreans, especially with the low prices of top models. So they merged the audio and video division of their consumer business called Consumer Lifestyle in a joint venture with Taiwanese/Chinese TPV. TPV is the global leader in LCD monitors and third in flat screen TV’s; they also needed a European brand to sell in China. Then, there was much speculation if TPV really wanted to maintain a few hundred TV engineers in Europe, and until now we don’t know because it is business as usual. In small appliances Philips is only a bit smaller than market leader GroupeSeb yes, from food crazy France and is seen by many as innovation leader in this field. Philips makes huge profits in shaving and dental care, and manages to create successful innovations in personal care and wellness products AirFryer, IPL hair removal, Wake-up Light. Their lighting division took over Belgian fixture maker Massive and together they sell a lot of LED fixtures, where the famous Philips design department shows its added value. A challenge for Philips will be maintaining the brand as a B2C entity with small appliances only; TV’s were much more sexy and thus had larger budgets.
In white goods there is not a lot of Chinese competition, but here the companies to watch out for are the Turkish and the Koreans. Samsung has been very successful with a limited but very affordable product range: cooling, washers and compact dual cavity ovens. As AD readers know, white goods differ much more over the continents and are expensive to ship. Therefore Samsung produces most of their European sales in Poland. European white goods makers as BSH, Electrolux and Whirlpool have been shifting most of their plants to Eastern Europe (Poland, Czech Republic, Romania) where wages are much lower. While Germany has kept most of high-end production and development, Italy as Europe’s second white goods manufacturing base has been hit quite hard. Lack of innovation spirit, powerful but conservative unions, high costs, bureaucracy, and the non-government of Berlusconi result in low economic growth. Meanwhile the Turks and the Chinese continue to attack. Symbolic car maker Fiat once was leading in small cars and now barely survives on US Chrysler profits. In generally the German industry can be seen as the opposite of the Italian: much more innovative, well-organized, strong but cooperative unions, a good government, and they combine mass production in nearby Eastern European countries with top-notch German design and innovation. It is not accidental that Der Spiegel has a cover story recently titled “The Attack – How Volkswagen Conquers The World”, with an illustration where the grille of a Golf has shark teeth.