Xiaomi has made significant inroads into the home appliance market, particularly in air conditioners. In July 2025, industry reports revealed that Xiaomi captured over 10% of China's domestic air conditioner market, positioning itself among the top players. Online sales were even more impressive, with Xiaomi holding a 13.5% market share—just 6 percentage points behind industry leader Midea Group. This aggressive push has put Midea’s core business—air conditioners—under direct threat.
Midea’s Chairman and President, Fang Hongbo, responded confidently: "Tactically, I take Xiaomi seriously, but strategically, I’m not afraid of their entry." His remarks set the stage for an intense battle between the two giants.
**From Allies to Rivals** The relationship between Midea and Xiaomi wasn’t always adversarial. In 2014, the two companies formed a strategic alliance to explore smart home solutions. By 2015, they deepened ties through cross-shareholding—Midea invested ¥1.273 billion in Xiaomi, while Xiaomi injected ¥1.211 billion into Midea. This collaboration aimed to merge manufacturing expertise with internet-driven innovation.
However, business alliances are rarely permanent. In 2018, Xiaomi announced its entry into the air conditioner market, directly challenging Midea’s core business. Over time, both companies reduced their stakes in each other. By 2024, Midea fully divested its Xiaomi holdings, recouping ¥1.837 billion and marking the end of their decade-long partnership. The real competition had just begun.
**Xiaomi’s Lightning Offensive** Xiaomi’s rapid rise in the air conditioner market stems from its focus on affordability and smart features. While competitors like Gree, Midea, and Casarte targeted the premium segment, Xiaomi appealed to budget-conscious younger consumers. From January to September 2025, Xiaomi’s online average selling price (ASP) for air conditioners was just ¥2,453—¥480 lower than Midea’s.
Xiaomi’s success isn’t just about low prices. The company streamlined distribution by prioritizing online sales, eliminating middlemen, and leveraging promotions like livestream discounts and flash sales. Additionally, Xiaomi integrated its air conditioners into its Mi Home ecosystem, enabling seamless connectivity with smartphones, robot vacuums, and other smart devices.
This strategy paid off: Xiaomi’s air conditioner shipments surged past 6.8 million units in 2024, up over 50% year-on-year. Growth remained strong in 2025, with Q2 shipments exceeding 5.4 million units and maintaining a 50%+ annual growth rate for three consecutive quarters.
**Midea’s Fortified Defense** Midea isn’t standing idle. Fang Hongbo emphasized a dual strategy: enhancing high-value products while competing on cost. To counter Xiaomi in the budget segment, Midea deployed its sub-brand, Hualing, offering air conditioners at an online ASP of ¥2,154—¥299 cheaper than Xiaomi’s. Meanwhile, Midea’s main brand adjusted prices downward by 5.07% year-on-year to retain market share.
Beyond pricing, Midea leveraged its after-sales service strengths, offering price guarantees, rapid installation, and 10-year warranties. In the premium segment, Midea’s technological edge—bolstered by its 45% global market share in residential air conditioner compressors—allowed it to compete differently. Its high-end brands, COLMO and Toshiba, saw retail sales grow over 60% in H1 2025, with COLMO contributing 15% of revenue.
Crucially, Midea diversified beyond home appliances. Its B2B ventures—including industrial automation, robotics (via KUKA), and new energy—generated ¥65.7 billion in H1 2025, accounting for 26% of total revenue. This diversification reduces reliance on the home appliance market and enhances resilience.
**Conclusion: A Battle with No Clear Loser** As the dust settles, neither Midea nor Xiaomi is likely to emerge as a definitive loser. Instead, both are evolving—Xiaomi’s ecosystem-driven approach pushes Midea to accelerate smart home integration, while Midea’s manufacturing expertise helps Xiaomi strengthen its production capabilities. This dynamic competition ultimately benefits consumers and drives industry innovation.
(Note: The above analysis does not constitute investment advice. Market risks exist; investors should exercise caution.)
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