Haier is setting up a massive manufacturing facility in Egypt

The Chinese white goods manufacturer Haier has begun constructing a 200,000 sqm industrial facility in Cairo which will produce air conditioners, washing machines, and screens. The facility, which is located in the so-called 10th of Ramadan City part of Greater Cairo consists of three primary factories, carries an investment of US$100m. Production is slated to commence in the first quarter of 2024. Phase one of the project will focus on manufacturing air conditioners, washing machines and screens, whereas phase two will encompass the production of refrigerators and freezers.

The site is located inside a special economic zone, which will allow Haier to benefit from tax concessions. Overseen by the General Authority for Investment and Free Zones (GAFI), these zones aim to foster a conducive environment for investment. In December 2022, Haier became the first recipient of Egypt's new fast-track Golden Licence, which streamlines the regulatory requirements investors need from various government agencies into a one-step approval process, significantly reducing time and effort.

In addition to serving the 105 million-strong Egyptian market, Haier aims to leverage the North African country as a central hub for exporting its products, benefiting from Egypt's trade agreements that facilitate easier access to markets across Africa, the Middle East and Europe. Several other Asian appliance manufacturers have also recognised the potential of the Egyptian market. South Korean electronics giant LG is poised to expand its presence in Egypt with a US$200m refrigerator factory. Midea, another Chinese home appliance maker, has invested over US$25m in a 60,000 sqm dishwasher factory within the Suez Canal Economic Zone, primarily targeting the export market. The firm also holds a majority stake in Miraco, a local air-conditioner manufacturer. Guangdong Vanward New Electric, a Chinese water heater manufacturer, plans to shift some production to Egypt, while Chinese consumer electronics maker OPPO intends to invest US$20m to construct a factory producing 4.5m smartphones annually.

In 2022, Chinese home appliance exports to Arab League states reached US$7.8bn – an 11% increase from 2021 as the Covid-19 pandemic subsided and the purchasing power of oil-rich nations rose amid elevated crude prices. Notably, air conditioner unit shipments grew by 26%, while gas shower heater exports soared by 64%. Egypt's strategic location in the Middle East and North Africa enables Chinese firms to serve the region more effectively.

In addition to accessing Middle Eastern and African markets, geopolitics also appears to be driving Chinese firms to start manufacturing abroad. A recent Financial Times article quoted Guangdong Vanward New Electric's chairman, Lu Yucong, who said that US clients demanded that the company relocate its production. Manufacturers are also re-evaluating their global operations in light of Russia's invasion of Ukraine and escalating tensions between Beijing and Washington. Additionally, growing concerns about China's relations with Russia and the potential for sanctions are influencing decision-making. According to Lu, rising tariffs on Chinese-made goods are also prompting companies like Vanward to shift some of their manufacturing operations abroad.

 

References

‘PM attends the signing ceremony of an MoU between GAFI and Haier Smart Home Co’, The General Authority for Investment and Free Zones, 04 August 2022

‘The Golden License for investment projects’, Andersen, 09 November 2022

‘GAFI CEO lays the foundation stone of the first ecological industrial park in Egypt’, The General Authority for Investment and Free Zones, 15 March 2023

‘PM inspects factory of Midea company for electrical appliances’, State Information Service Egypt, 16 March 2023

‘China's Haier, Midea bet on made-in-Egypt to sell in the ME, Africa’, Yicai Global, 17 March 2023

‘Chinese company moves some production abroad to escape geopolitics’, Financial Times, 16 April 2023

‘Global electronic manufacturers expanding into Egypt’, Ahram Online, 16 April 2023

‘Company profile’, Miraco, Accessed 20 April 2023

‘World Economic Outlook Database’, International Monetary Fund, Accessed 20 April 2023