China Galaxy Securities released a research report stating that home appliance companies are facing cost-driven price increases alongside partial structural upgrades. The current cost inflation cycle differs significantly from the eight consecutive quarters of sharp cost rises between Q3 2020 and Q2 2022. Air conditioner manufacturers are implementing firm price hikes, with the most intense period of market competition and cost pressure expected in Q4 2025. Price increases initiated since 2026 are projected to notably alleviate industry cost pressures. Robotic vacuum makers are attempting to phase out self-subsidies, though the situation remains complex. Structural upgrades are evident in color TVs, while competition intensifies in the action camera segment. Key viewpoints from China Galaxy Securities are as follows:

Home appliance sector faces cost-driven price increases and some structural upgrades: 1) CPI returned to positive growth in October 2025, with rates of +0.2%, +0.7%, and +0.8% in October, November, and December 2025 respectively. 2) National subsidies continued into 2026 but with diminishing marginal utility, resulting in weak appliance demand. Rising costs are driving price increases across the industry, while certain products like MiniLED TVs are experiencing structural upgrades with improving penetration rates.

Differences between current cost cycle and 2020-2022 period: 1) Appliance manufacturers are facing cost pressures from rising prices of various metal raw materials, memory chips, and MCUs. Unlike previous cycles, current cost increases are driven by supply factors rather than strong retail demand. 2) The 2020Q3-2022Q2 period saw eight consecutive quarters of rapid metal raw material cost increases due to pandemic-related supply chain disruptions, leading to frequent industry-wide price hikes. 3) The current cost increase pace is significantly slower than during 2020Q3-2022Q2. Copper prices, for example, have risen 36% from early 2025 to present. While domestic demand remains weak, improved competitive landscape enables most cost increases to be passed downstream.

Firm air conditioner price increases: 1) Copper constitutes a higher cost proportion in air conditioners compared to other appliances, creating greater cost pressure. Since early 2026, Midea has led price increases followed by other manufacturers. Midea adopted a step-by-step price hike strategy for residential air conditioners, raising factory prices by 2% on January 3 for some popular models and by an additional 4% on January 5. Aux increased prices for residential and central air conditioners by 3-8% starting January 19. TCL raised prices by 4-10% for similar products from January 21. Hisense increased prices for its Hisense and Kelon brand residential air conditioners by 5-10% from February 11, while raising central air conditioner prices for Hisense and Hitachi brands by 8-10%. 2) According to AVC retail monitoring, average online/offline air conditioner retail prices were 2,981/3,801 yuan in December 2025. Since early 2026, online prices reached 3,151 yuan by the third week, while offline prices remained above 4,000 yuan for three consecutive weeks. 3) While Gree publicly announced no price increases, its premium positioning and stable offline retail prices mask structural adjustments that effectively raise online prices, as seen in the significant increase during the third week of 2026. Haier has similarly implemented price increases through product mix optimization. 4) The most challenging period for air conditioner market competition and cost pressure is projected for Q4 2025, with 2026 price increases expected to substantially ease industry cost pressures.

Robotic vacuum makers attempt to reduce self-subsidies amid complexity: 1) Robotic vacuum subsidies benefited from certain local government product selections. When national subsidies largely ceased in second-half 2025, brands like Ecovacs and Roborock implemented self-subsidies (marketed as national subsidies), pressuring profit margins. 2) Companies attempted to phase out self-subsidies, but subsidy resumptions in some provinces since early 2026, coupled with platform subsidies from JD.com and Tmall, have effectively restored "national subsidies" (combining government, platform, and manufacturer contributions). 3) AVC data shows average online robotic vacuum retail prices declining to 3,645, 3,387, and 3,291 yuan in October, November, and December 2025 (year-on-year decreases of 2.9%, 6.2%, and 5.1% respectively), with sequential monthly declines. Prices recovered to 3,535 and 3,403 yuan by the fourth and fifth weeks of 2026, though the market remains influenced by subsidy mechanisms.

Color TV structural upgrades and intense action camera competition: 1) Despite declining TV demand in 2025, MiniLED TV penetration has improved since September 2024, driving retail price increases. AVC data shows 2025 China TV retail volume and value decreased 10.4% and 7.3% year-on-year respectively, while average prices rose 3.51%. December 2025 online TV retail prices reached 4,021 yuan, up 19.8% year-on-year, maintaining an upward trend since September 2024 (3,386 yuan). Offline prices remain significantly higher than online, though the upward trend is less pronounced, with average prices declining year-on-year since September 2025 due to high baseline effects from offline subsidy implementations during September-December 2024. 2) New action camera/360-degree camera products attract strong consumer interest, particularly DJI's Pocket series, with brands like Insta360, OPPO, and VIVO following similar strategies. Competition intensified in September 2025 when DJI initiated price cuts for main products like Pocket 3 and Action 5 Pro, with prices yet to recover. Insta360 responded with delayed price reductions for models like X5 360 camera, Ace Pro action camera, and Go Ultra thumb camera. 3) Insta360's Antigravity A1 360-degree drone launched with premium pricing but saw significant retail price reductions by late January. DJI maintained stable drone pricing, indicating first-generation 360-degree drones haven't impacted DJI's market dominance.

Risk warnings include market competition risks, RMB appreciation risks, and metal raw material price increase risks.