Executive Summary
Key takeaways from Gree Electric’s recent leadership and strategic shifts:
- Dong Mingzhu (董明珠), the 71-year-old chairperson, has stepped down from the法定代表人 (legal representative) role at Gree’s key chip subsidiary, signaling a gradual transition in leadership and a push for organizational capability over personal influence.
- Gree’s chip business, focused on third-generation semiconductor silicon carbide (SiC) chips, is central to its diversification strategy, with plans for commercialization in automotive and energy sectors, but faces intense market competition and long validation cycles.
- The company’s commitment to not using aluminum代替铜 (replace copper) in home air conditioners despite cost pressures highlights a strategic bet on brand trust and product reliability in a saturated market, even as profitability faces headwinds.
- Rising competition from rivals like Midea (美的) and Xiaomi (小米), coupled with internal channel reforms and younger executive promotions, underscores Gree’s need to innovate beyond traditional strengths to maintain market share and investor confidence.
- Financial performance shows revenue declines but strong dividend payouts, emphasizing Gree’s balance between shareholder returns and long-term investment in high-growth areas like chips and new energy.
The Unfolding Leadership Transition at Gree Electric
In late January 2026, a routine business registration change sparked widespread attention across China’s financial markets. Tianyancha (天眼查) data revealed that Dong Mingzhu (董明珠) had stepped down as the法定代表人 (legal representative) of Zhuhai Gree Electronic Components Co., Ltd., a critical subsidiary driving Gree Electric’s (格力电器) “造芯” (chip-making) strategy. At 71, this move marks another step in her gradual retreat from frontline operational roles, following a similar departure from another chip entity just six months prior. This leadership transition is not merely a personnel change; it reflects a deeper strategic realignment at one of China’s appliance giants, as it navigates evolving market dynamics and internal succession planning. The focus on Dong Mingzhu steps down underscores a pivotal moment for Gree, where reliance on charismatic leadership is giving way to a more structured, organizational approach.
Details of the Subsidiary and Strategic Importance
Established in July 2022, Zhuhai Gree Electronic Components Co., Ltd. is dedicated to the manufacturing and packaging of third-generation semiconductor silicon carbide (SiC) chips. According to Gree Electric’s investor briefing in June 2025, the chip factory’s first phase has an annual planned capacity of 240,000 wafers, with over 70% core equipment localization. More than one million Gree air conditioners have already been equipped with self-developed chips, boasting a yield rate exceeding 99%. Feng Yin (冯尹), Gree’s总裁助理 (president assistant), disclosed in January 2026 that SiC chips for photovoltaic energy storage and logistics vehicles would enter mass production this year, with cumulative chip sales surpassing 300 million units in 2025. This subsidiary is a cornerstone of Gree’s broader ambition to reduce dependency on external suppliers and tap into high-growth sectors like新能源汽车 (new energy vehicles), where it has engaged in talks with companies such as比亚迪 (BYD) and广汽集团 (GAC Group).
Succession and Broader Management Shifts
Fang Xiangjian (方祥建), who took over as the new legal representative, embodies Gree’s focus on operational expertise. Joining the company in 2004, he rose from production lines to副总裁 (vice president), overseeing quality control, intelligent manufacturing, and even managing Gree Titanium New Energy (格力钛新能源) operations. His recent appointments span multiple subsidiaries, including Gree Electromechanical (格力电工) and Gree Rongzhu Copper (格力荣著铜业) in 2024, followed by roles at Gree’s Zhuhai Jinwan Intelligent Manufacturing Base and Zhejiang Dun’an Artificial Environment Co., Ltd. (浙江盾安人工环境股份公司) later that year. Concurrently, younger executives like Zhong Chengbao (钟成堡), born in 1986, are gaining prominence; elected as the youngest board member in April 2025, he now independently leads the intelligent equipment division. These changes illustrate a deliberate effort to decentralize authority and foster a new generation of leaders, aligning with Dong Mingzhu’s own statement: “I will try to speak less in the future and let the young management team step forward.”
Strategic Imperatives Behind Gree’s Chip Ambitions
Gree’s foray into semiconductors, initiated in 2015, represents a bold diversification move beyond its core air conditioning business. The chip subsidiary’s role extends beyond internal supply; it aims to penetrate external markets, particularly the automotive sector. However, this expansion is fraught with challenges. As Dong Mingzhu steps down from operational roles, the burden falls on executives like Fang Xiangjian to navigate these complexities. Vehicle-grade chips typically require 2-3 years for validation, and the market is experiencing fierce price wars. For instance, 800V SiC modules have seen annual price declines of around 20%, squeezing margins. Gree’s engagements with automotive players, though初步的 (preliminary), highlight the potential. A GAC Group clarification on January 20, 2026, denied reports of supplying half of its chips from Gree, but confirmed high-level talks on January 15, indicating ongoing exploration. This strategic pivot underscores Gree’s need to monetize its chip investments amidst global supply chain reshuffling and China’s push for semiconductor self-sufficiency.
Commercialization Challenges and Market Dynamics
The chip business’s success hinges on overcoming technical and market barriers. While Gree has made strides in产能 (production capacity) and良品率 (yield rate), commercializing chips for external use requires meeting stringent industry standards. The automotive supply chain, dominated by established players like英飞凌 (Infineon) and意法半导体 (STMicroelectronics), demands reliability that Gree must prove over time. Moreover, the broader semiconductor sector in China faces oversupply in certain segments, leading to price pressures. Gree’s strategy involves leveraging its vertical integration—using chips in its own products first to ensure quality before external sales. This approach mirrors tactics by other Chinese firms diversifying into tech, but it requires sustained investment. As Dong Mingzhu steps back, the leadership must balance this long-term bet with short-term financial performance, especially as Gree’s core appliance business faces headwinds.
Market Pressures and Gree’s Defensive Maneuvers
Gree’s recent market actions reveal a company under dual pressure from cost inflation and intensifying competition. In early January 2026, as copper prices surged past 100,000 yuan per ton, Gree issued a声明 (statement)承诺 (promising) not to raise prices for home air conditioners and having no plans to use aluminum替代铜 (replace copper). This decision, attributed to maintaining十年免费包修 (ten-year free repair) service standards, contrasts with industry trends where rivals are exploring cost-cutting measures. Dong Mingzhu emphasized in December 2025: “We have researched aluminum technology for many years but still insist on not using it because it hasn’t reached the same technical conditions and guarantees as copper.” This stance prioritizes brand integrity over immediate profit, but it comes at a cost. The price difference between copper and aluminum exceeds fourfold, with copper’s material成本 (cost) being 12 times higher per same volume due to density differences. This has contributed to Gree’s毛利率 (gross margin) declining by 0.27 percentage points year-over-year in Q3 2025, while销售费用率 (sales expense ratio) rose by 0.2 percentage points.
Competitive Landscape and Market Share Erosion
Data from奥维云网 (AVC) shows that in the first three quarters of 2025, Midea led China’s空调市场 (air conditioning market) with a 29% share, while Gree dropped from 19% to 17% year-over-year, ranking second. More disruptive is Xiaomi’s rapid ascent: in Q2 2025, Xiaomi’s air conditioner shipments exceeded 5.4 million units, up 60% year-over-year, with招商证券 (China Merchants Securities) predicting 2025 sales可能 (possibly) reaching 10 million units. Xiaomi’s first self-built smart home appliance factory in Wuhan光谷 (Optics Valley), with peak capacity of 7 million sets, further threatens Gree’s dominance. This shift from增量 (incremental) to存量 (stock) market means competition revolves around retaining existing customers rather than acquiring new ones. Gree’s response includes channel reforms, such as establishing around 60恒信系 (Hengxin-affiliated) subsidiaries from June to August 2025, aiming to weaken代理 (agency) networks and strengthen零售 (retail) presence. These moves are critical as Dong Mingzhu steps down, requiring the new team to execute these transformations effectively.
Financial Performance and Shareholder Considerations
Gree’s financial metrics provide a mixed picture, reflecting the trade-offs in its strategic choices. For the first three quarters of 2025, revenue stood at 137.65 billion yuan, down 6.6% year-over-year, according to中国基金报 (China Fund News).光大证券 (Everbright Securities) analysis attributes this decline to the退坡 (phase-out) of national subsidy policies and pressure on central air conditioning exports. However, Gree’s substantial revenue base allows for continued investment in growth areas. The company has been a consistent dividend payer, with cumulative分红 (dividends) exceeding 177.6 billion yuan since listing, including a mid-2026 payout of 5.585 billion yuan. Dong Mingzhu remarked at a shareholder meeting: “Shareholders hope the horse runs fast, but please insist on letting the horse have grass to eat.” This philosophy balances investor returns with long-term strategy, but the “增利不增收” (profit increase without revenue growth) model is unsustainable. As Dong Mingzhu steps down, Gree must demonstrate tangible progress in chip commercialization and diversification to justify its valuations and maintain investor confidence in Chinese equities.
Profitability Trends and Strategic Investments
中金公司 (China International Capital Corporation Limited) reports highlight Gree’s ongoing channel reforms, which aim to reduce中间环节 (intermediate links) and enhance direct consumer engagement. These efforts, while costly in the short term, are essential for improving operational efficiency. Gree’s investment in芯片 (chips) and新能源 (new energy) through subsidiaries like Gree Titanium requires significant capital, impacting cash flow. The company’s ability to fund these initiatives while sustaining dividends relies on optimizing its core business. Financial projections suggest that without breakthroughs in new revenue streams, margin pressures may persist. The leadership transition, with Dong Mingzhu stepping back, adds urgency to these efforts, as the new management must align financial discipline with aggressive growth targets.
Future Outlook: Navigating a Crossroads in Chinese Manufacturing
Gree Electric stands at a critical juncture, where legacy strengths in appliances intersect with ambitions in high-tech and energy sectors. The leadership transition symbolized by Dong Mingzhu steps down is a microcosm of broader trends in Chinese corporates—shifting from founder-driven models to institutionalized governance. Looking ahead, Gree’s success will depend on several factors: accelerating chip commercialization, particularly in automotive applications where validation cycles are long but rewards high; defending market share against agile competitors like Xiaomi through innovation and service excellence; and managing cost pressures without compromising quality. The company’s commitment to R&D, evidenced by its芯片工厂 (chip factory) investments, positions it well for China’s industrial upgrade, but execution risks remain. External factors, such as potential 2026家电国家补贴政策 (home appliance national subsidy policies) and global economic conditions, will also influence outcomes.
Organizational Capability vs. Personal Leadership
Dong Mingzhu’s gradual retreat underscores a strategic pivot towards building organizational capability. Her statement about letting younger teams take the stage reflects a recognition that sustainable growth requires systems, not just personalities. This shift is common among aging Chinese enterprises seeking rejuvenation. For investors, this means evaluating Gree not just on past performance but on its ability to foster innovation and adaptability within its ranks. The rise of executives like Fang Xiangjian and Zhong Chengbao suggests a pipeline of talent, but their effectiveness in driving change will be tested in coming quarters. As Dong Mingzhu steps down, monitoring management cohesion and strategic clarity will be key for stakeholders in Chinese equity markets.
Synthesizing the Path Forward for Gree and Investors
The developments at Gree Electric offer valuable lessons for market participants. Dong Mingzhu’s step down is more than a symbolic event; it signals a maturation phase where the company must balance tradition with transformation. Key takeaways include the importance of brand trust in saturated markets, the challenges of diversifying into capital-intensive tech sectors, and the necessity of leadership succession in long-term corporate health. For investors, Gree represents a case study in navigating China’s evolving manufacturing landscape—weighing dividend yields against growth potential, and assessing management transitions in context of broader market shifts. As the company pushes forward with芯片商业化 (chip commercialization) and channel reforms, stakeholders should watch for execution milestones and financial metrics that indicate traction. The call to action is clear: engage with Gree’s story not as a static entity, but as a dynamic player in China’s equity markets, where strategic pivots like Dong Mingzhu stepping down can unlock both risks and opportunities. Stay informed through continuous monitoring of regulatory announcements, industry reports, and Gree’s own disclosures to make informed investment decisions.