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Japan-Update

'Toshiba' brand strikes back in China under Midea

Home appliance maker aims for full-year profit in 2017

Toshiba Lifestyle plans to introduce a cordless vacuum cleaner in China by the end of the year.

TOKYO -- Toshiba Lifestyle Products & Services, which was sold by its embattled former parent, Toshiba, to China's Midea Group in June last year, in August introduced a combination microwave oven-electric range in China, marking a return to the country for the Japanese home appliance brand after a two-year absence.

Next in line is a vacuum cleaner, which is scheduled to go on sale by the end of the year.

More than a year after it became part of the Chinese home appliance giant, the manufacturer of white goods, including washing machines and refrigerators, is under pressure to prove itself. It chalked up an operating loss of some 50 billion yen ($460 million) in the year ended March 2015.

Toshiro Ishiwatari.

The company aims to turn around its business by focusing on Chinese consumers, combining Toshiba's established brand with Midea's 2,200-strong network of stores and other sales channels, including some 5,000 home electronics retailers.

The Nikkei spoke with Toshiba Lifestyle President Toshiro Ishiwatari about the company's strategy.

Q: How do you view the current market environment?

A: The Japanese market is very strong. Statistics show that retail sales are growing 6% in 2017. Shipments are increasing, too. For us, however, the issue is to restore trust in the tarnished Toshiba brand. We recently launched TV commercials and newspaper ads featuring Japan's first refrigerator and washing machine, which were developed by Toshiba. The advertisements talk about the legacy of Toshiba's home appliances, which played a significant roles in households, [and how] that is being carried on Toshiba Lifestyle.

Q: What are Toshiba Lifestyle's expansion plans for other parts of Asia?

A: We have always focused on the Asian market. We are selling our products in Myanmar and Cambodia, and our sales area now covers nearly all of Southeast Asia. But we cannot take on overseas markets with only Toshiba Lifestyle products. [Elsewhere] in Asia, for example, washing machines designed with just washing functions are popular, but they will not sell in Japan. But we can develop products with that particular design using Midea washing machines as a base.

We entered the Chinese market in the early 2000s, but have since withdrawn after being hampered by emerging local manufacturers.

We would need sales offices in at least 15 locations to cover the vast Chinese market, which would mean a huge investment. Luckily, Midea already has outlets all across China and sales channels to home appliance retailers. So our plan is to take advantage of these channels and to stimulate demand for our products among consumers who like the Toshiba brand.

Q: Are there any other markets that you intend to take on?

A: We plan to go to Europe and the U.S., as well as India. These are markets where Midea is selling its products. Midea has sales worth 2.6 trillion yen globally, and we joined them [to ensure] our global growth. This has given us the opportunity to challenge global rivals like South Korea's Samsung Electronics and Whirlpool of the U.S.

Q: What do you see as the impact from joining the Midea group in terms of your earnings?

A: We turned profitable in the second half of 2016, right after we joined Midea [on June 30 that year]. We aim to turn a full-year profit in 2017. I can't disclose the target figure, but we think we can achieve it, unless there is some unexpected change in the market.

Midea produces in huge quantities, so we can ask them to help with our production and work together on product development to improve our efficiency.

Midea's takeover of German industrial robot maker Kuka is also a plus for us, because labor costs are rising in China and unless we actively use robots, our production will not be able to keep pace with our rivals. We still have a long way to go in terms of robot use on Toshiba Lifestyle production lines, but we get information on developments at Midea Group by attending their management meeting in China once a month.

Interviewed by Nikkei staff writer Yuma Ikeshita

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