In recent years, under the influence of national policies supporting the production of heavy chemical equipment, the machinery manufacturing sector of large enterprises has experienced a surge in demand. The market for industrial goods is facing shortages, but with orders coming in like snowflakes, both the steam turbine and heavy-duty motor industries, as well as state-owned large and medium-sized compressor companies, are struggling to meet delivery deadlines. Despite a continuous increase in the number of orders, these enterprises have not seen corresponding improvements in profitability.
State-owned enterprises have been competing by lowering prices, which has led to a distorted understanding of market competition. Instead of focusing on user needs, technological advancements, and competitor strategies, many company leaders have concentrated on outmaneuvering rivals and securing contracts. This short-sighted approach has hindered the industry's long-term development.
For example, Shenyang Gas Compressor Factory adopted a strategy of developing profitable hydrogen compressors as a competitive edge, while also aggressively bidding below cost in the fertilizer industry to eliminate smaller competitors. This kind of low-price competition is common across the sector.
In 2001, during a tender for a 230,000-ton synthetic ammonia project in Zhejiang, Shenyang Gas Compressor won the bid at 7.68 million yuan, far below other bidders’ offers. Similarly, Shanghai Dalong Machinery Factory repeatedly secured contracts through aggressive pricing, eventually becoming a top player in the industry by 2003. However, despite high sales figures, their profit margins remained low.
Shandong Weifang Shengjian Compressor Factory also gained a foothold by leveraging low labor costs and quality assurance, winning bids at prices that many considered unsustainable. Their rapid growth raised concerns about the sustainability of such practices within the industry.
Due to misaligned strategies and special industry policies, the large and medium-sized compressor industry has faced intense competition, leading to declining profits. Industry insiders have questioned where the future lies for this sector.
Meanwhile, private enterprises have entered the market, focusing on high-margin compressor parts. By addressing the operational challenges of state-owned firms, they have built trust with users and gradually expanded into the main compressor manufacturing market.
Private companies have also benefited from flexible business models and efficient capital use. Their ability to quickly respond to market demands has given them an edge over state-owned enterprises.
The long production cycles and high capital requirements of large compressors create financial pressure. Companies often face delays in receiving payments, which further strains their cash flow. Without sufficient funds, research and development suffer, and outdated equipment becomes a major obstacle.
Despite these challenges, some companies have taken steps to improve. Sichuan Huaxi General Machinery withdrew from unprofitable bids in 2004 and focused on high-value products. Wuxi Compressor Co., Ltd. refused to bid below break-even costs, maintaining a strong business philosophy and investing in technology and management systems.
Shenyang Gas Compressor has restructured, joining Shenyang Blower Group, while Shanghai Compressor Stock completed its reorganization with Dresser-Sandland. These changes reflect the ongoing transformation within the industry.
After facing numerous challenges, these companies have begun to address their core issues and adapt to market changes. With a renewed focus on sustainable growth, the compressor industry is gradually moving toward a more stable and prosperous future.
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