The recent implementation of new national standards and the raising of subsidy thresholds, combined with intense public debate over genuine materials, the entry of new players from other industries, and the integration of AI, illustrate the fierce competition currently shaping the air conditioning market. The industry's discourse has evolved into a deep contest concerning technological dominance, environmental responsibility, and the future of the sector.
Panasonic Holdings Corporation (OTC: PCRFY) executive Daisuke Sato, General Manager of the Panasonic Central Air Conditioning Marketing Center at Panasonic Electric Works (China) Co., Ltd., believes the ongoing "energy efficiency reshuffle" is an inevitable part of industrial upgrading. While substituting aluminum for copper can reduce costs in the short term, it carries significant long-term risks. He states that true proactive intelligence is not about "people commanding the air conditioner," but about "the air conditioner understanding people."
Regarding new entrants to the air conditioning industry, Sato noted that the arrival of cross-industry players is positive, bringing advantages like internet-driven thinking, marketing innovation, and a focus on user experience. However, their shortcomings are also evident, including insufficient technical depth, unstable supply chains, and an incomplete service network. "The core essence of an air conditioner is to regulate air, not to serve as an aesthetic gimmick or a mechanical performance," he remarked. He believes these new players learn quickly, but air conditioners are not fast-moving consumer goods; user trust requires long-term accumulation.
Commenting on the market outlook, Sato candidly stated that for the central air conditioning segment, industry growth is expected to slow further by 2026, with the energy efficiency reshuffle intensifying and price wars continuing to shift towards value-based competition. Consumer sentiment is becoming more rational and cautious.
"Frankly, I think it will be difficult for the market to rebound in the short term," he said. "But no matter how challenging the market is, there are still structural opportunities. Demand for replacement and upgrades in the existing stock remains, and consumers are still willing to pay for healthy, smart, and high-efficiency products."
Key Executive Insights
On the Energy Efficiency Reshuffle
Sato views the "energy efficiency reshuffle" as a necessary process for industrial advancement. He noted that the past focus on price wars and competing on paper specifications led to homogeneous competition, straying from the product's essential purpose of providing comfortable, healthy air. When the tide recedes, companies lacking core technological accumulation will be forced out.
From a competitive landscape perspective, market polarization is accelerating: smaller brands are exiting, leading to greater concentration among top players; competition is shifting from price to technology, quality, and service; and first-tier energy efficiency products are becoming mainstream, with high-efficiency central air conditioning showing the fastest growth.
Panasonic Holdings Corporation's approach to energy efficiency upgrades is not passive compliance but involves proactive technological iteration and early planning. The company has been preparing technologies like R32 refrigerant, full DC inverter systems, and nanoe™X for years. Panasonic sells not just a machine but a systematic healthy air solution, integrating multi-split, ducted, and split systems to achieve optimal overall system efficiency—a unique technical concept difficult for competitors to replicate quickly.
On the 'Copper vs. Aluminum' Debate
With copper prices remaining high and volatile, the entire industry faces significant cost pressure. Sato acknowledged that using aluminum instead of copper can save costs short-term but poses major long-term hazards: poorer heat conduction, susceptibility to corrosion, shorter lifespan, and difficult repairs. While consumers may not easily discern the internal materials at purchase, the performance difference becomes apparent in use. Products with compromised materials frequently encounter issues requiring constant repairs, whereas brands committed to genuine materials ensure long-term stability and durability after installation.
Panasonic Holdings Corporation firmly chooses the latter, insisting on "genuine copper material" for all heat exchangers and connecting pipes. To manage costs, the company employs strategies like using inner-grooved copper tubes and microchannel heat exchangers that use less copper but offer higher heat exchange efficiency, implementing smart inverter and energy recovery technologies to reduce overall unit energy consumption, and applying lean production management to eliminate waste across production, processes, and the supply chain, squeezing out cost savings through efficiency.
On the State of AI in Air Conditioning
Sato agreed with consumer feedback that many current AI air conditioners are essentially upgraded remote controls, offering only passive control and falling short of true proactive intelligence. True proactive intelligence means the air conditioner understands the user—sensing their location, body temperature, and air quality—and automatically adjusts temperature, airflow, and sterilization. This requires the seamless integration of sensing, decision-making, and execution.
Currently, Panasonic Holdings Corporation products with nanoe™X technology can automatically detect air quality and activate sterilization functions. Human detection and zoned temperature control are also implemented in high-end models. However, Sato admitted a gap remains toward achieving "unnoticeable intelligence," primarily due to insufficient data, limited device synergy, and lack of personalization.
The company's goal for the next 3-5 years is for the air conditioner to become a user's "indoor air steward," integrated with technologies for "air, water, and light" to form part of a holistic healthy home space system, rather than an isolated appliance. AI air conditioners don't need conceptual hype; the priority is to avoid "pseudo-intelligence." Panasonic aims for users to forget the air conditioner's presence, allowing it to blend naturally into the living space while silently safeguarding comfort and health.
On Future Breakthroughs and Cross-Industry Competition
While technologies like bionic robotic arms are interesting, Sato does not consider them revolutionary breakthroughs for air conditioners. The core function is air regulation, not visual gimmicks or mechanical performances. He sees the real breakthroughs in the next three years in three more practical directions: health functions becoming standard features rather than luxuries; system energy efficiency breakthroughs coming from optimized "combo packages" rather than single-unit specs; and deeper integration with building structures to achieve "unnoticeable energy savings."
Future air conditioners will resemble an "organ" of the building itself, not a later-added appliance. Regarding cross-industry technologies, the company will monitor and study them rationally but will not blindly follow trends. Consumers need an air conditioner that provides comfort upon entering a room, operates quietly and stably, and requires minimal manual adjustment—not one that "performs."
On cross-industry competitors, Sato welcomes their entry, noting they bring fresh internet operational thinking valuable for product iteration, new media operations, and private traffic marketing. However, they will quickly realize that central air conditioning sales differ significantly from other appliances, relying heavily on offline dealers for installation, maintenance, and after-sales service. Their strengths lie in internet thinking and marketing innovation, while their weaknesses include shallow technology, unstable supply chains, and an incomplete service network.
For established giants like Panasonic Holdings Corporation, the "moat" comprises core technology (decades of accumulation in compressor and heat exchanger tech), supply chain (long-term partnerships with core component manufacturers), advanced manufacturing capabilities, and a nationwide sales and service network. The company's strategy involves maintaining technological leadership, continuing R&D investment, learning internet thinking to drive digital transformation, and fostering open collaboration. The fundamental moat, however, is its commitment to a "long-termism" philosophy—avoiding blind inventory push, refraining from vicious price wars, protecting reasonable dealer profits, and upholding market order, ensuring compliant partners are not disadvantaged.
"Cross-industry players learn fast, but we are deeply rooted," Sato concluded. "Air conditioners are not fast-moving consumer goods; user trust requires long-term accumulation."
Market Outlook for 2026
For the central air conditioning sector, Sato expects further slowdown in industry growth by 2026, with the energy efficiency reshuffle intensifying and competition shifting from price to value. The residential market is still bottoming out, commercial project launches are slow, and consumer sentiment is cautious. While a short-term market rebound seems difficult, structural opportunities persist. Replacement demand in the existing stock remains, and consumers are willing to pay for healthy, smart, and high-efficiency products.
Penetration rates for central air conditioning, especially residential central systems, are still rising, indicating growth potential in this segment. Regionally, first- and second-tier cities focus on replacement and upgrades, while third- to fifth-tier cities require cost-effective products to enhance brand competitiveness. As industry competition intensifies, Panasonic Holdings Corporation will compete on its own terms, focusing on value. New central air conditioning product series, high-value product combos, strict market management, and channel policies that "protect partners' reasonable profits" form key competitive strengths. Retail is the main battleground this year, focusing on executing every sale and serving each customer well, relying on core technology, professional service, and a strong reputation to solidify its market position.
"While we cannot control the broader market climate," Sato stated, "Panasonic Holdings Corporation consistently focuses on enhancing product value, technological value, and service value. 'Long-termism' is not just a slogan; it is our firm choice, reflected in optimizing products, deepening channels, and refining services every single day."
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