From Peak to Fall: A Tale of the Rise and Fall of Chigo Air Conditioning

From Peak to Fall: A Tale of the Rise and Fall of Chigo Air ConditioningAir conditioners are undoubtedly an essential item for people to escape the sweltering heat in the summer, and the market is thriving as a result. According to data from Aowei Cloud Network, from January to March 2024, the overall sales revenue of air conditioners increased by 21% year-on-year, reaching 23

From Peak to Fall: A Tale of the Rise and Fall of Chigo Air Conditioning

Air conditioners are undoubtedly an essential item for people to escape the sweltering heat in the summer, and the market is thriving as a result. According to data from Aowei Cloud Network, from January to March 2024, the overall sales revenue of air conditioners increased by 21% year-on-year, reaching 23.8 billion yuan. Sales volume also increased by 21% year-on-year, reaching 6.83 million units. Industry giants such as Gree, Midea, Haier, Xiaomi, Hisense, and AUX continued to perform strongly in this quarter, with overall sales revenue showing positive growth. However, in the fiercely competitive air conditioner market, Chigo, once an air conditioner giant, has gradually faded from public view.

Past Glory: From One of the "Big Four" to a Listed Company

Mention Chigo air conditioning, and many people may still recall its former glory. In 2008, Chigo air conditioner sales ranked second only to Gree, Midea, and Haier, making it one of the "Big Four" in China's air conditioning industry at the time. In 2009, Chigo air conditioning reached its peak by successfully listing on the Hong Kong Stock Exchange, and founder Li Xinghao's personal wealth soared to HK$800 million.

Li Xinghao's confidence and arrogance also reached their peak. He even publicly declared that he would surpass Haier and said, "I never felt my contributions were less than Dong Mingzhu." In 2010, Chigo air conditioner sales even surpassed Haier, breaking the top three ranking in the domestic air conditioning industry that had lasted for 15 years. For a time, it was the talk of the town.

However, just like the predetermined ending of a script, after reaching the peak comes the fall. Today, Chigo air conditioning is shrouded in negative news, and its former glory seems like a mirage.

Falling into the Abyss: From Huge Losses to Delisting

In 2019, Chigo air conditioning's performance plunged, with losses reaching 1.4 billion yuan. There were even rumors that the company was unable to pay its employees. To maintain operations, Chigo air conditioning was forced to sell 404 acres of industrial land and two raw material factories in Foshan for 800 million yuan.

In September 2020, Chigo air conditioning was included in the "Old Lai" list with its legal representative, Li Xinghao, due to its failure to pay suppliers approximately 40 million yuan. They were also restricted from high-consumption activities. In addition, Chigo air conditioning faced compulsory liquidation and bankruptcy due to contractual disputes.

In April 2022, Chigo Holdings completely withdrew from the Hong Kong Stock Exchange, ending its listing journey there. Last August, there were even reports that Li Xinghao was taken into custody by the public security organs.

The former air conditioning giant is now in a precarious state, and its founder has fallen from the glory of tens of billions in revenue to the depths of the abyss. What exactly led to the decline of Chigo air conditioning? What twists and turns did Li Xinghao experience?

Grassroots Rise: From Ice Cream Vendor to Air Conditioning Giant

Li Xinghao was born in a small village in Nanhai, Guangdong, and his family was very poor. He dropped out of school early and returned home to work on the farm. In 1978, the wave of reform and opening up swept across China, and Li Xinghao seized the opportunity to enter the business world.

He started by selling popsicles, and later engaged in various industries such as clothing, hardware, catering, and appliance repair. Li Xinghao once said, "Once I realize there is something more profitable, I will not hesitate to devote myself to it."

In 1989, Li Xinghao founded Xinglong Refrigeration Equipment Repair Center, specializing in repairing air conditioners and other appliances. Within just two years, the company had grown into a repair center with 280 employees, covering the entire Guangdong region.

In 1992, Li Xinghao's repair factory attracted the attention of Taiwanese businessmen. He formed a joint venture with them to establish an air conditioning manufacturing plant, officially entering the air conditioning production field. He named the company "Chigo" and wrote the slogan "Create the highest quality air conditioners in the world" on the factory wall.

Chigo air conditioning rapidly rose to become one of the "Big Four" in China's air conditioning industry thanks to its low-price strategy. Li Xinghao's rags-to-riches story became a typical representative of that era.

Neglecting Core Business, Entering the Wrong Path: The Risks Behind Diversified Investments

During the reform and opening up period, many entrepreneurs took advantage of the development of the times and made a fortune. But as the proverb says, "Wealth brought by luck can be lost without sufficient ability." Li Xinghao was no exception.

He quickly achieved success in the air conditioning industry with his keen sense of smell, but instead of focusing on the development of his main business, he started to invest across different industries, attempting to achieve rapid wealth growth through "money making money."

In 2010, Li Xinghao invested in Shenzhen Installation General, intending to make it his "second main business." Shenzhen Installation General, as one of China's earliest building decoration companies, possessed strong capabilities and rich experience. Li Xinghao signed a bet with Zheng Limin, the former actual controller of Shenzhen Installation General, promising to help the company successfully go public within three to four years.

Li Xinghao's efforts initially led to some success for Shenzhen Installation General. In early 2016, the company successfully listed on the New Third Board. However, due to Li Xinghao's lack of understanding of the building decoration industry, Shenzhen Installation General only stayed on the New Third Board for a year before it was delisted and fell into a predicament of declining performance and employee departures.

Li Xinghao's investment journey did not stop there. He set his sights on the financial industry, joining with other companies to prepare for the establishment of Guangdong Nanhua Bank. He stated that he wanted to make it a model for private banks in China. However, due to policy restrictions, Nanhua Bank was ultimately ordered to cease operations.

Li Xinghao also ventured into the media and high-tech industries, investing in companies such as Guangdong Guang Digital Multimedia, Wan Zhi Electronics, and Tian Tong Intelligent Equipment. He actively participated in various associations and served as Honorary President of the Lishui Intelligent Furniture Industry Association of Guangdong, President of the Guangdong Five-a-side Football Association, and President of the Nanhai District Brand Enterprises Promotion Association of Foshan.

However, Li Xinghao's diversified investments did not achieve the expected results. Instead, they exacerbated the crisis at Chigo air conditioning. Chigo air conditioning started to suffer losses from 2011, reaching a staggering 1.4 billion yuan in losses in 2019.

Focusing on Core Business is Essential: Lessons Learned from Chigo Air Conditioning

The failure of Chigo air conditioning was not an accident. Li Xinghao's "neglect of core business" was a major reason for its eventual decline. He did not focus his energy on the air conditioning business, but instead constantly invested in other industries, ultimately making a loss.

In stark contrast, Midea and Gree have continued to increase their research and development investment, investing over 4 billion yuan each year, while Chigo lagged far behind in this area, not even reaching a fraction of their expenditure.

In recent years, many companies have experienced similar phenomena of "sacrificing the main for the secondary," like Chigo air conditioning, ultimately leading to a negative impact on their core business. The founder of Jiajia Soy Sauce, Yang Zhen, is another example. He blindly invested in non-professional ventures, ultimately burdened with heavy debt, becoming a "Old Lai."

For entrepreneurs, production and operation are the core business. Excessive pursuit of diversified investment often leads to numerous obstacles due to lack of expertise across different industries, and even brings huge risks. Focusing on specialized development, controlling quality, and building a good brand are the fundamental principles for long-term enterprise development.

The rise and fall of Chigo air conditioning provides valuable lessons for numerous companies. In the fierce market competition, enterprises can only stand firm by focusing on their own core business, continuously improving product quality and service levels.

Summary

The rise and fall of Chigo air conditioning tells us that businesses should not blindly pursue diversified investments, but should focus on their core business and continuously improve their core competitiveness. Only by focusing on core business can companies achieve sustainable development in market competition.

Lessons Learned

• Business development should be based on its core competitiveness. Focus on the main business and continuously improve product and service levels.

• Be cautious with diversified investments to avoid investment failures due to lack of professional experience.

• Business owners should remain rational, avoid excessive confidence and impulsiveness, and never blindly pursue short-term profits.

Points to Consider

• How to find a balance between diversified development and focusing on core business?

• How to prevent businesses from falling into the trap of "sacrificing the main for the secondary"?

• How can companies maintain sustainable development in

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