Midea Invests RMB 10 Billion to Build HeYou Hospital, Files IPO Prospectus

In June 2024, Shunde Heyou Hospital finally entered the stage of official operation.

This is the first non-profit, Grade 3A hospital in China to be equipped with a proton and heavy ion particle therapy center. It also introduced next-generation infrastructure during its initial establishment phase to support AI and big data applications, as well as to align with smart hospital development. Both its software and hardware are essentially top-tier.

Backed by the Foshan-based Midea Group, He You Hospital stands as a testament to its support.Three-year construction period, with Midea investing no less than RMB 10 billion.

In the words of He Xiangjian, founder of Midea, the motivation behind establishing Heyou Hospital was to return to the original philanthropic mission of “benefiting one’s hometown and giving back to society.” Yet in the home appliance sector, regardless of whether there is a stated rationale, participating in hospital construction projects—or even building hospitals independently—has become a common choice among leading enterprises.

As early as 2006, AUX fully funded the construction of Zhejiang University Mingzhou Hospital in Ningbo, and subsequently continued to expand its investments in specialized medical institutions focusing on rehabilitation, women’s and children’s health, and physical examinations. Haier, which entered the sector later, has leveraged its Yingkang Yisheng platform to establish a recognized brand in the private hospital business, with two secondary hospitals in its portfolio upgraded to tertiary status.

Is the Ultimate Path for Home Appliance Giants’ Cross-Industry Expansion Hospitals?

In April this year, Midea submitted its prospectus to the Hong Kong Stock Exchange alongside an impressive financial report, marking its second attempt at an “A+H” listing. Despite this, beneath its composure, a hint of urgency remained evident.

Focusing solely on its core business, Midea has bucked the trend in the home appliance competition in recent years. Relying only on air conditioners, refrigerators and washing machines, as well as a range of small home appliances, it has generated revenue exceeding RMB 240 billion. The growth rates of its corresponding “Smart Home” business over the past three years were 13%, -1%, and 5%, respectively, far surpassing the industry average.

However, the market growth potential that can be tapped through traditional business has reached its limit. In 2023, the sales revenue of China's home appliance retail market (excluding 3C products) was only RMB 849.8 billion, almost on par with the level in 2020 when the pandemic struck. As the downturn in the real estate sector spreads to related industries, the scale of the home appliance market will shrink further.

Chairman Fang Hongbo has clearly stated that the home appliance market has entered a saturation phase, and industrial upgrading is essential to identify a second growth curve. To navigate economic cycles, home appliance giants such as Midea must move beyond their once-prided core home appliance business.

At the turn of the century, the rise of manufacturing in China, Japan, and South Korea broke the market monopoly held by European and American giants, but also intensified competition in the home appliance and even consumer electronics sectors, prompting them to make a timely retreat and increase their investments in more sophisticated high-end industrial markets and high-end medical equipment markets.

Today, low- to mid-end manufacturing is further shifting southeast. The former “dragon slayers” now find themselves at the same crossroads; to sustain the hundreds of billions in market capitalization accumulated over decades, they need to identify more than one strategic pivot point and rebuild their business footprint in new sectors.

Before heavily investing in the construction of Heyou Hospital, Midea had already made numerous attempts in the healthcare sector.

Public records indicate that Midea’s earliest investment in the healthcare sector dates back to 2007, when it established an independent medical device division focused on the research and production of electronic physiotherapy products, thereby operating in a niche segment of the medical field.

Midea’s large-scale entry into the healthcare sector did not begin until a decade later. In January 2017, Midea completed its acquisition of Germany’s Kuka for €3.7 billion, representing a 36% market premium, thereby gaining capabilities in the manufacturing of industrial robots. That same May, Midea partnered with Japanese industrial robot manufacturer Yaskawa Electric to produce and sell nursing and rehabilitation robots in the Chinese market. In September of that year, Midea Group further signed a strategic cooperation agreement with Guangzhou Pharmaceutical Holdings Limited (GPHL), with both parties focusing on collaboration in areas such as medical robots, intelligent logistics, and health big data.

In February 2021, Midea re-entered the high-end medical sector by acquiring a 29.09% stake in Wandong Medical, a manufacturer of medical equipment. He Xiangjian, the founder of Midea, subsequently became the new actual controller of Wandong Medical. Based on the transfer price of RMB 14.6 per share, the transaction amounted to RMB 2.297 billion, representing an acquisition premium of over 40%.

In addition to directly acquiring leading companies and venturing into unfamiliar sectors, Midea is also attempting to transfer its technologies across different application scenarios, leveraging its existing technological barriers to explore new markets.

For instance, Midea Biomedical, established in March 2021, leverages Midea’s refrigeration technology to enter the market for ultra-low temperature safe medical storage. Meanwhile, Midea Building Technologies integrates its HVAC systems, building intelligence, elevator services, and energy management solutions—previously serving the real estate sector—into hospitals, thereby achieving a disruptive advantage in hospital facility management.

Among its various strategic moves, the acquisitions of Germany’s KUKA and its building technologies business represented Midea’s two most significant cross-industry steps into the healthcare sector, directly enabling the company to establish itself as a leader in hospital logistics within just a few years.

While hospital logistics infrastructure in China was still in its infancy, Swisslog, a subsidiary of KUKA, had already implemented logistics system projects worldwide, securing the top global market share. Today, pneumatic tube systems, track-based transport, and AGVs have become standard installations in hospitals. Among the top 20 hospitals in China, 17 have adopted Swisslog’s products. These logistics systems, often valued at tens of millions of yuan, have contributed significantly to Midea’s healthcare revenue.

Midea Building Technologies’ entry into the field further strengthens Midea’s control over hospital logistics, and even proposes a new model for the construction of smart hospitals.

Traditional healthcare systems are technology-centric and adopt a hierarchical technical architecture, which often leads to difficulties in usage and fragmented user experiences. This is because the underlying systems—including intelligent systems, specialized medical systems, and healthcare information systems—are each designed by respective specialists and then integrated via a technical platform. The resulting integrated platform typically serves these specialized professionals, making it difficult for end users, such as patients and healthcare providers, to understand or effectively engage with it. Under this traditional model, hospitals cannot leverage top-level systems to influence subordinate subsystems. Furthermore, due to the strong coupling among various subsystems, the overall iteration speed remains exceedingly slow.

Under the architecture of Midea Building Technologies, all technologies and resources are integrated in a flat manner around scenarios and medical processes. When scenarios change, such as the demand for dual-use facilities for both routine care and epidemic control during pandemic prevention and control periods, the digital platform can rapidly decouple various subsystems and then quickly recombine them to form new applications, thereby flexibly serving end users—namely, human lives.

More practically valuable is Midea’s strategic layout in hospital HVAC engineering and the Internet of Things (IoT). As complex structures that combine the attributes of both public and industrial buildings, hospitals exhibit remarkably high energy consumption; data indicates that energy use per square meter in hospitals may exceed that of conventional buildings by 30%–50%. Therefore, to maintain the healthy and efficient operation of smart hospitals, there is an urgent need to address the industry’s challenges of high energy consumption and significant carbon emissions.

The Executive Director of a Grade-A Tertiary Hospital in Guangzhou shared the following example. Prior to the implementation of refined management across the hospital, its daily electricity expenditure exceeded RMB 60,000. However, after implementing interventions and strengthening intelligent smart management of logistics support, this cost was reduced to nearly RMB 30,000, representing a 50% decrease.

In other words, electricity costs alone can save the hospital tens of millions of yuan annually.

With dual investments in both hardware and software, Midea has established a closed-loop ecosystem in this niche sector. Over time, Midea’s market share is poised to expand further, while various medical institutions will continue to benefit from the emergence of these innovative technologies and concepts.

Compared with the logistics sector, the incremental value generated by the acquisition of Wandong Medical remains relatively limited at present. Although medical equipment represents a significantly larger market, Wandong Medical is positioned in the second tier within this segment. While its CT, MR, and DSA product lines include high-end offerings, they still fall considerably short of the highly profitable ultra-high-end segment. Furthermore, synergies between medical equipment and building technologies are rather limited, making it difficult to create new value through industrial integration at this stage.

Taking Toshiba as a cautionary tale, Midea has been consistently striving to unlock the potential of Wandong Medical. A decade ago, the medical imaging equipment market was dominated by “GPS+T,” with the “T” standing for Toshiba. However, as the medical imaging sector matured, with GE, Philips, and Siemens maintaining their triopoly while United Imaging and Neusoft surged ahead, Toshiba’s CT market share was steadily eroded, and sales of its MRI, DR, and other imaging devices remained sluggish. Ultimately, Canon acquired Toshiba Medical Systems for RMB 39.5 billion, propelling Canon to the fourth position globally in the medical imaging industry.

With the establishment of Heyou Hospital, Midea may be able to find a solution to the issue of synergy among its business units.

In terms of hospital business synergy, Haier can be considered a pioneer ahead of Midea, having progressed far and achieved significant success along this path. In 2015, Haier’s subsidiary, Yingkang Life, entered the field of radiological medical devices through the acquisition of Masipu. During the era of internet healthcare, Yingkang Life also established its own digital family doctor contract services. These services have been integrated and validated within Yingkang Life’s hospital matrix, and are being further promoted externally.

With Heyou Hospital as its platform, Midea may be able to accelerate the synergy of its medical industry operations, much like Haier has done. Although public reports on Heyou Hospital have not disclosed details regarding the procurement of medical equipment, the smart hospital concept and its corresponding hardware—such as HVAC systems and IoT infrastructure—are all derived from Midea’s proprietary portfolio of medical solutions.

So, can hospitals help Midea capture a share of the medical equipment market? The answer remains unclear.

In any case, it is no small feat for Midea to have identified logistics as a high-quality application scenario within the healthcare sector and rapidly emerged as the market leader. During the era of GPS’s transformation, the Internet of Things was not yet ubiquitous, leaving vast untapped markets across various industries, with relatively few top-tier companies competing in these spaces. Today, the environment for home appliance giants seeking transformation is far less favorable than it was in the past. Midea should not be expected to replicate GPS’s dominance in fields such as medical equipment. After all, without strong technological barriers and sustained, efficient innovation at the technological frontier, even corporate behemoths with market capitalizations in the hundreds of billions will struggle to survive in new business scenarios over the long term.

Nevertheless, Midea remains highly confident in its own strategic layout. At the CMEF over the past two years, Midea has secured the largest booth in the most premium imaging zone, surpassing the “GPS” giants and standing on par with the top contender, United Imaging Healthcare.

Seven years ago, when acquiring Germany’s Kuka, Midea pressed ahead against a wave of opposition, insisting on paying a premium for the takeover. Now, riding the new energy wave, it has secured orders from industry leaders such as BYD and CATL, capturing a 21% share of the robotics and automation market. By comparison, Midea still has time to potentially create another business miracle in the medical device sector.