The US International Trade Commission (ITC) will decide on a method for and the level of import sanctions for foreign washing machines on November 21 (local time). The decision is garnering a lot of attention as four ITC members unanimously ruled in September that import washing machines damaged the US washing machine industry.
Under the circumstance, the question is rising whether it is true that Whirlpool claims that the US washing machine market is being invaded by Korean washing machines due to their low prices.
Earlier on May 31, major US home appliance manufacturer Whirlpool requested the ITC to initiate a safeguard on 24.4- to 32-inch large home washing machines and major components for them imported from overseas. At that time, Whirlpool claimed that Samsung Electronics and LG Electronics dealt a great deal of damage to the American washing machine manufacturing industry because they were imported at extremely low prices. Whirlpool’s logic is that its products lagged behind in terms of price competitiveness and therefore, unfairly suffered damage.
Whirlpool Still Positioned to Control
Let's observes market shares first. According to US market research firm TrackLine, Whirlpool's share in the US washing machine market crept down by about 1.4 percentage points from last year's. On the other hand, Samsung Electronics’ and LG Electronics’ shares climbed by 4.3% points and 1.5% points respectively. It is true that Samsung Electronics and LG Electronics drove up their market shares while Whirlpool's share fell.
But in absolute terms, Whirlpool has a dominant position in the US washing machine market. Cumulative shares from the first quarter to the third quarter are 37.7% recorded by Whirlpool, 17.1% by Samsung Electronics and 13.5% by LG Electronics. Even the combined share of Samsung Electronics and LG Electronics could not eclipse that of Whirlpool.
Whirlpool recently enjoyed good North American operating performances. In the third quarter of this year alone, the company generated an operating profit of US$350 million in North America. Despite rising commodity prices, its sales in North America rose five percent to US$ 3 billion from last year.
"Operating profits increased thanks to strong shipments and improved productivity," said a Whirlpool official in an official statement. The official also forecast that this year, shipments of home appliances in North America would rise four to six percent compared to last year. Assuming that Whirlpool suffered a great deal of damage in the washing machine sector which is the mainstay of its home appliances business as Whirlpool claimed, it is natural to doubt how Whirlpool could achieve such solid performances recently.
Samsung, LG Basically Stick to Premium Strategy
Did Samsung and LG washers beat Whirlpool with price competitiveness? According to industry watchers, Korean washing machine makers are strong not in the market of relatively inexpensive top-lid type washing machines (top loaders), but in the market of relatively expensive drum washing machines (front loaders) in the US.
Until the third quarter of last year, LG Electronics topped in the US drum washing machine market, followed by Samsung Electronics. Samsung Electronics' US drum washing machine market share stood at 25.6% in the third quarter of this year according to TrackLine.
According to Best Buy, the largest electronics distributor in the US, the average price of LG Electronics's top three washing machine models was the highest at about US$1,470. That of Samsung Electronics stood at about US$1,317, while that of Whirlpool at US$1,110.
"Samsung Electronics and LG Electronics basically stick to premium strategy in the United States," said an official in the Korean electronics industry. “It does not make any sense to claim that the two Korean companies increased shares by dumping washers."
Key is the Level of Safeguard, If Imposed
The Korean washing machine industry forecast that the safeguard is likely to be triggered. Since the ITC's judgment about industrial damage was unanimous and the washing machine is a finished product rather than an intermediate product, there are few companies that will suffer damage after the implementation of a sanction.
"This is the first time consumer goods fell in a predicament of being sanctioned by a safeguard," said an official of the Import Regulation Response Team at the Ministry of Foreign Affairs said, "It seems highly unlikely that Korean washers will avoid a sanction." This means that limiting the import of washing machines make fewer waves than that of chemical raw materials and semiconductor parts.
Some experts suggested a possibility that Korean products and core parts will be excluded from the subjects of the safeguard. This is because the ITC made a negative judgment on products manufactured by countries including Korea that concluded free trade agreements (FTAs) with the US. This means that a shield can cover Korean-made products and parts.
The ITC will summarize the sanction that will be decided on November 21 in the form of a report and submit it to President Trump on December 4. Trump will finally decide whether or not to start the safeguard within 60 days.