Fang Hongbo

Fang Hongbo is chairman and president of Midea, having taken over the post of Midea chairman from founder He Xiangjian in 2012. He Xiangjian once said, “My greatest achievement was discovering Fang Hongbo”; in 2012, the 70-year-old He Xiangjian handed the baton to the 45-year-old Fang Hongbo, after which Midea achieved a new period of major development. According to media reports in 2024, Fang Hongbo had made Midea’s share price rise sevenfold over ten years, but outside doubts about him never ceased.

Since taking charge of Midea, Fang Hongbo has experienced two severe challenges. The first was from 2013 to 2015: shortly after he became chairman, revenue from Midea’s home appliance business fell by about 30% from the previous year. He took the company from a regional sales model back to an independent distribution model by business division, returned home appliance products other than air conditioners to an agency system similar to that used before 2007, and abolished Midea’s China marketing headquarters, in order to reduce the cost burden of a large marketing workforce and to drive market expansion through a flattened organisation. In 2014, he pushed the company to shift from “setting sales by production” to “setting production by sales”, reorganising the relationships among the four cycles of customer orders, raw material stocking, factory production, and shipping and sales, and shortening the supply cycle. In 2015, using digitalisation as the lever, he drove an upgrade of the organisational structure, achieving a new management form of “decentralisation, de-authoritisation and de-bureaucratisation”.

The second major challenge came in 2016. That year Haier Group acquired General Electric’s appliance business assets for US$5.4 billion in cash, while Fang Hongbo completed the acquisition of Toshiba’s home appliance business and pushed forward the takeover of KUKA, one of the “Big Four” global robotics companies, a deal that was widely questioned at the time as a “sky-high” acquisition. Fang Hongbo later explained that none of Midea’s acquisitions, KUKA included, was driven by the pursuit of simple, short-term growth in book wealth; rather, they resulted from a comprehensive assessment of market potential and technological advantages and from long-term strategic considerations: robots are the “jewel in the crown” of industrial manufacturing, and developing them in-house is difficult, costly and slow, so strengthening through acquisition is more efficient; the deal could also raise the level of automation at Midea’s dozens of manufacturing bases worldwide and push Midea further in its transformation into an industrial and technology company. At the hardest point in 2020, KUKA’s revenue fell to 20.652 billion yuan and its after-tax net profit turned into a loss that year; over those years the only major financial indicator at KUKA that rose was R&D spending. According to Fang Hongbo, KUKA’s profitability became relatively stable only by 2022. The synergies did not truly show up in the financial statements until 2021, when KUKA’s global revenue reached 3.3 billion euros and more than 10,000 robots were delivered to Midea’s business divisions. In 2023, Midea’s robotics and automation business generated revenue of 31.1 billion yuan, and its three core B2B businesses, namely new energy and industrial technology, intelligent building technology, and robotics and automation, together generated 84.9 billion yuan.

Under Fang Hongbo, Midea’s operating results reached their best in history. In 2023, Midea’s operating revenue was 372.037 billion yuan, up 8.18% year on year; net profit was 33.72 billion yuan, up 14.1% year on year; and overseas revenue reached a record 150.9 billion yuan. A review of Midea’s annual meeting speeches since 2021 shows that in three of the past four years Fang Hongbo mentioned respecting “common sense”, and every year he mentioned “iteration” and “courage”. At the annual meeting in January 2024 he said, “There are no friends of time, only friends of trends”, and proposed “challenging the unknown with common sense and courage”. He summarised Midea’s operating approach for 2024 as “improving efficiency in operations across the entire value chain, and upgrading structural growth”: the former means firmly pursuing the “digital-intelligence-driven” strategy, following the direction of Digitalisation 3.0 and, on the basis of upgraded digital capabilities, looking for room to cut costs and raise efficiency in every operating link and every detail; the latter means building a competitive advantage of time lag, promoting business model reform in China, implementing the “direct-to-consumer” (DTC) strategy, carrying out short-chain reform, being retail-centred and user-centred, and transforming offline with online methods, while overseas firmly pursuing the “global breakthrough” strategy, prioritising OBM (own brands), increasing resource investment, strengthening localisation across the entire value chain including R&D, manufacturing, marketing and service, building a second home market, and at the same time raising the share of ToB business and optimising the ToC and ToB industrial structure.

In Fang Hongbo’s account, Midea’s industrial transformation has been a long and orderly process of exploration: from entering the home appliance industry by producing electric fans in 1980, to horizontal and vertical diversification within the home appliance industry chain and entry into core components such as motors and compressors, and then, from 2015, incubating brands such as Annto, Midea Cloud and COLMO and acquiring domestic and overseas companies such as Toshiba’s appliance business, Clivet and KUKA, forming a pattern of developing ToC and ToB in parallel. He divides Midea’s digital transformation into three stages: before the listing, the “632 Project” unified the group’s processes, data and systems; in 2016 it launched Digitalisation 2.0, centred on data-driven customer customisation capabilities; and in 2018 it began Digitalisation 3.0, dedicated to building a digital world across the entire value chain.

Fang Hongbo believes that for Midea, which already operates in more than 200 countries and regions around the world, the biggest challenge of globalisation is localisation across the entire value chain, that is, how to achieve “direct-to-user” reach in all links from R&D, manufacturing, supply chain, sales and logistics to after-sales service; only in this way can the OBM-first strategy truly be implemented. In September 2022, Midea and Vanke signed a strategic cooperation agreement, and Fang Hongbo attended the signing ceremony.