Household Laundry Equipment

SIC 3633

Companies in this industry

Industry report:

This classification covers establishments primarily engaged in manufacturing laundry equipment, such as washing machines, dryers, and ironers, for household use, including coin-operated equipment. Establishments primarily engaged in manufacturing commercial laundry equipment are classified in SIC 3582: Commercial Laundry, Dry cleaning, and Pressing Machines, while those manufacturing portable electric irons are classified in SIC 3634: Electric Housewares and Fans.

Industry Snapshot

Although mechanical washing contraptions existed before the start of the twentieth century, gas and electric-powered laundry equipment achieved widespread use only since the 1950s. By the early 1990s, more than 70 percent of all U.S. homes had both a washer and a dryer. In 2008 laundry equipment was the second-largest home appliance market, following refrigeration, with $4.1 billion in shipped products. There were 19 establishments operating in this industry as of 2007, and three companies--Whirlpool Corporation, General Electric, and Maytag International, Inc.--led manufacturing and sales. Increasingly, the industry majors had to compete globally with competitors Bosh Siemens, LG, Samsung, and Haier at the end of the first decade of the 2000s. Between competitive pressures and a slowly recovering economy, the laundry equipment industry shipped goods valued at about $3.5 billion in 2010, well below the $4.1 billion in shipped products in 2008. Moreover, that trend continued into 2011 with overall product shipments on the decline.

Organization and Structure

Household laundry equipment represented about 17 percent of the overall U.S. household appliance industry in the 1990s. Although ironers and mangles, or pressing machines, account for a small portion of industry sales, washers and dryers made up the lion's share of production.

Nearly 80 percent of all household laundry equipment is purchased by individuals for home use. An additional 6 percent of industry output is consumed by Laundromats, dry cleaners, and other services that use domestic laundry equipment. The remainder of the U.S. market comprised state, local, and federal government institutions, such as the armed forces and prisons.

The market for first-time purchasers of washers and dryers is relatively saturated. As a result, the industry is highly dependent on sales of replacement appliances. Most laundry equipment has a life span of 10 to 12 years. However, several factors may influence the replacement rate of washers and dryers. An increase in sales of existing homes, for example, boosts replacements because new occupants are more likely to buy new appliances. Likewise, heightened remodeling activity also spurs replacements.

Changes in home trends also may spawn early replacements. For instance, as laundry equipment was increasingly moved out of basements and closer to living areas in the 1980s, the need for quiet and attractive washers and dryers caused an influx of consumers to upgrade. Increases in repair costs in relation to price of new units also can shorten replacement cycles. Finally, because appliances are discretionary purchases that can be postponed, industry revenues are closely tied to the health of the overall economy.

Types of Products.
The three major household laundry product categories are electric washing machines, electric dryers, and gas dryers. Washers are of two types: top-load and front-load. Top-load washers have an agitator in the center of the wash tub that thrashes the water and the fabric. Front-load, or tumble-type, washers lift and drop the laundry into the wash water as the tub spins. Both washer types wring out excess water by spinning.

Although many top-loading machines are easier to access, tumble-type washers require less water and detergent to clean a load of laundry. Both types of washers are differentiated primarily by their features, which include washing actions, capacity, water temperature combinations, water levels, and noise levels. Most top-load washers range in price from $400 to $550, while front-load machines usually cost an additional $100.

Dryers are basically revolving drums which tumble clothes through heated air. Different features and product quality result in a price range of $400 to $800. More expensive dryers offer as many as three different heating cycles, extended tumble cycles, wrinkle-removal features, and sturdier construction, such as porcelain coated drums and tops. Although gas dryers are typically more expensive to purchase initially, they are often significantly less expensive to operate.

Background and Development

Numerous washer and dryer devices, ranging from washboards to hand-cranked wringers, were used to clean laundry prior to the twentieth century. The first electric washing machine was introduced in 1907 by the Maytag Company. However, it was not until after World War II during the post-war U.S. economic expansion that electric washing machines, and later dryers, realized mainstream acceptance. As the demand for all types of appliances proliferated during the 1950s, 1960s, and 1970s, the laundry equipment industry grew rapidly. The introduction of fully automatic washers and dryers in the mid-1960s propelled the industry to prominence during the following decade, as washers and dryers became standard household amenities.

By the early 1980s, the laundry equipment industry was shipping more than $2 billion worth of goods annually and employing more than 16,000 workers. Well over 50 percent of U.S. households had both a washer and a dryer. Strong home construction and appliance replacement markets, moreover, allowed producers to enjoy solid gains throughout the 1980s. Industry revenues grew at an average annual rate of more than 5 percent between 1982 and 1990, despite an economic slowdown in the late 1980s. Sales surged past $3.2 billion in 1990, stagnated in 1991, and grew about 3 percent in 1992.

An important dynamic that characterized the laundry equipment industry during the 1980s was consolidation. As the vigorous growth of the late 1960s, 1970s, and early 1980s waned, producers tried to achieve economies of scale though mergers and acquisitions. By the end of the 1980s, only 16 competitors remained, compared to over 25 at the start of the decade. The top two companies controlled nearly 70 percent of the market, and the top four manufacturers accounted for about 80 percent of sales. Antitrust laws enacted during the 1980s succeeded in slowing the rate of consolidation by the early 1990s.

Positive demographic trends and healthy housing starts helped boost household laundry equipment sales more than 50 percent between 1980 and 1990. Although industry participants suffered the effects of recessed construction markets and economic malaise in the early 1990s, sales were rebounding in the mid-1990s and analysts predicted that shipments would continue to grow at a rate of 1 percent to 3 percent through the end of the decade. By 1997 shipments were valued at $3.7 billion.

To boost sales and profits in 1994, washer and dryer manufacturers were striving to develop new and better appliances that would spur replacement sales, while also scrambling to comply with new federal environmental regulations. In addition, most were seeking growth outside the United States in such regions as Asia and Mexico.

Manufacturers were able to boost unit shipments faster than revenues and retain profit growth through productivity gains. Hefty capital investments in automation and information systems during the 1980s helped the appliance industry become one of the most efficient businesses in the United States. As the value of washer and dryer shipments grew 50 percent during the 1980s, unit prices remained stable in real dollars and unit volume soared. Despite a huge surge in real output, industry employment actually declined slightly during the decade. Efficiency gains contributed to the industry's dominance of the domestic market, of which it controlled a whopping 85 percent.

In addition to short-term economic factors and production efficiencies, laundry equipment manufacturers also benefited from long-term demographic factors and buying patterns in the mid-1990s. Importantly, the baby boom generation, aged 35 to 54 years, was becoming wealthier and was investing a greater share of its income in home-related goods. Because this important market segment also was spending an increasing amount of time working and having children, analysts expected boomers to begin spending a greater proportion of their income on conveniences, such as washers and dryers.

Augmenting renewed sales were new distribution and customer service programs, which manufacturers were initiating. Many producers, for example, were strengthening their support for retailers with training and service programs. Likewise, customer relationship initiatives were helping manufacturers to cultivate consumer loyalty. Whirlpool, for example, announced early in 1994 that it was going to replace its system of independent distributors with factory-direct distribution.

Laundry industry sales grew about 2 percent annually from 1990 to 1997. Unit volume grew annually at a steady 2 to 3 percent. Increased sales were largely the result of an increase in housing starts and escalating consumer expenditures following the recession. The replacement market for washers and dryers was a constant, and in 1996, 3.4 million washing machines were replaced.

Federal Regulation.
New U.S. Department of Energy Standards (DOE) initiatives, which took effect in May 1994, required machine makers to lower rinse-water temperatures, reduce water consumption, and install energy-efficient motors and insulation. In a 1996 study conducted by a Maytag R&D team, it was discovered that a high-efficiency washer can save from 3,500 to 6,000 gallons of water per household per year. In the mid-1990s, manufacturers strove to meet the challenge. They started using solid concrete weights in washers to steady the machine during the spin cycle. Previously, energy-intensive iron casts weighted laundry machines. New washers also offered wash programming, to allow the user to program the washing machine to start the wash during non-peak electric hours. New methods also included recycling the dirty wash water into clean rinse water, increasing the use of enzymatic detergents and reducing foaming detergents, and spray rinse cycles instead of deep rinse.

Manufacturers also were under pressure to increase the recyclability of their machines. Two congressional bills that failed to pass in 1992 would have mandated product material content, recycling rates, and packaging. In anticipation of new laws, some producers were striving to improve the recyclability of their machines by making them out of components that could be recovered, restored, and reused.

Besides baby boomer patterns, overall U.S. household formations rose during the 1990s, resulting in steady growth of first-time appliance buyers. Furthermore, because a large percentage of existing washers and dryers were purchased in the early 1980s, some observers expected replacement sales to increase in the late 1990s as old machines wore out. For these reasons, the value of industry shipments hit $4.42 billion 1998. The following year, however, shipments declined to $4.16 billion, but they increased slightly to $4.25 billion in 2000. Employment followed a similar pattern, spiking to 16,740 workers in 1998 before dropping to 15,503 workers in 2000.

In 2002 the laundry equipment industry shipped $4.6 billion in products, which increased to more than $4.9 billion in 2003. The trend was for ongoing increasing sales, as consumers in the middle of the first decade of the 2000s demanded more from their appliances, and items that used to be considered "features" had quickly become requirements. According to research from the National Association of Home Builders in 2004, growing consumer trends called for high-end, energy efficient, "smart," quiet, large-capacity laundry equipment. Appliance magazine stated that manufacturers were being forced to anticipate what consumers might want in the future in order to start developing those products immediately.

In 2007 there were 19 establishments operating in this industry, employing 11,741 workers, down from 14,468 in 2006. Approximately 70 percent of companies had less than 10 employees, and the industry shipped $4.62 billion in goods, decreasing to $4.1 billion in 2008.

Current Conditions

According to the Association of Home Appliance Manufacturers, the industry shipped 14.3 million automatic washers and dryers in 2009, increasing slightly to 14.5 million automatic washers and dryers in 2010 valued at about $3.5 billion. Of the 14.5 million units, 8.0 million constituted automatic washers and dryers numbered 6.5 million units. The U.S. imported $2.2 billion from 51 countries, while the U.S. exported $8 billion in goods to 148 countries.

Manufacturers of laundry equipment blamed not only the struggling global economy, but also the increasingly higher costs of electric, natural gas, and oil as the causes of the decline in U.S. factory shipments of washers and dryers through 2011. During September 2011, a total of 1,342,500 electric and gas dryers and washing machines were shipped, a decline of 6 percent compared to the same time in 2010. For the first nine months of 2011, electric and gas dryers and washing machine unit shipments totaled 10,131,600, a 6.2 percent decline compared to the same time in 2010. As a result, laundry equipment manufacturers continued to consider energy efficiency as their top priority in the area of product development.

Emerging competitor Haier America introduced a line of front-load laundry appliances in the United States in mid-2011. One of its washing machine models offered a "Green Wash" cycle that cut energy consumption 80 percent when used with Tide's HE coldwater detergent versus using top-loaders and warm water. More and more appliance manufacturers and detergent manufacturers were developing products based on "cold-water technology."

Unfortunately, one industry leader, Whirlpool Corp. planned to downsize its workforce by more than 5,000 employees, about 1,200 of whom comprised salaried employees. By mid-2012 Whirlpool planned to consolidate its Fort Smith, Arizona, operation with other manufacturing plants in North America. Chairman and CEO Jeff M. Fettig told " Appliance Magazine, in October 2011 "�we experienced weaker than expected global industry demand and elevated material costs," adding that "We are taking necessary actions to address a much more challenging global economic environment." Whirlpool stated further steps will follow to "enhance organizational efficiency" in both North America and Europe. Whirlpool's goal was to cut its production by about 6 million units.

Both gas and electric dryers last an average of up to 12 years before having to be replaced. According to a report in Appliance Magazine in June 2011, 5.09 million electric dryers and 1.48 million gas dryers will be ready to be replaced in 2012. Going forward into 2013, another 5.11 million electric dryers and 1.38 million gas dryers will be reaching their 12 year mark.

Industry Leaders

Whirlpool overtook General Electric in 1993 to become the largest appliance manufacturer, with 2008 revenues of $18.9 billion and employment of 70,000. General Electric came in second in the industry, with 2006 sales of $15 billion and 65,000 employees. Whirlpool reported net sales of $18.4 billion in 2010, up 7 percent over 2009 with 71,000 employees. Besides Whirlpool, other brand names include KitchenAid, Maytag, Jenn-Air, Roper, Amana, and Magic Chef.

Maytag International Inc. (formerly Maytag Corporation) is credited with giving birth to the industry and had a proven reputation for supplying high quality washers and dryers. Maytag's total sales in 2006 were $33 million, following the company's sale and restructuring in 2005.

Workforce

Although the top laundry equipment producers expected to increase production, many analysts expected industry employment in the United States to decline. Heightened campaigns for greater productivity, the likely movement of some manufacturing activities to other countries, and continued management restructuring may diminish opportunities for workers in the industry. In 2007, 11,741 workers were employed by this industry.

America and the World

U.S. washer and dryer makers supplied about 30 percent of global demand going into the 1990s. Although they exported less than 10 percent of total production, domestic producers were avidly seeking to capture a greater share of the world export market. Overall appliance exports grew, continuing a trend started in the 1980s.

The leading foreign markets in this industry were Canada, Mexico, and Venezuela. In 2006 the United States incurred a trade deficit with imports totaling more than $1.7 billion and exports reaching $964 million. Nearly half of that total went to Canada ($442 million) with Mexico ($118 million) and Venezuela ($27 million) the next largest recipients. As of 2008, the United States continued to maintain a trade deficit as imports totaled $2 billion while exports numbered $1.1 billion.

Whirlpool, which derived about one-third of its revenues from overseas sales, had been the most successful U.S. exporter. It maintained substantial interests in South American countries, such as Brazil and Argentina, and was working hard at penetrating the European market. As of 2006, Whirlpool was the largest manufacturer of household laundry products and equipment and second worldwide to only Sweden's AB Electrolux. Maytag also advanced in Europe in the 1990s, and garnered about 15 percent of its revenues from foreign operations. U.S. manufacturers have reported less success in the Asian arena, which was dominated by three major Japanese appliance conglomerates.

Research and Technology

Due to increased environmental concerns, innovation from the late 1990s into the early twenty-first century was expected to focus on "greener" products and disposal methods. Designed to cut electricity, water, and gas usage, laundry products were incorporating greater technology in the manufacturing process.

Capital investments during the mid-1990s were used to develop more efficient production and distribution methods and to achieve compliance with environmental regulations and pressures. They also were used to create better and less expensive products. For example, control software that was being incorporated into machines optimized wash and dry cycles for different types of laundry, adjusted temperature and water levels during a cycle, and allowed machines to talk to users. These microprocessors also made possible many advanced features, such as self-diagnostic systems, delayed-start timers, and touch controls with cycle programming. New features were designed to maximize energy efficiency--an improvement that would expedite replacement sales.

One of the most advanced innovations under development in the 1990s involved the study of washing machines that can use "fuzzy-logic." In 1993 South Korea's Goldstar Co. claimed to have invented the first consumer product that exploited the chaos theory, which holds that there are identifiable tendencies of movement amid the apparent randomness of patterns. Goldstar analyzed the movements of water in a standard washing machine, identified those that produced cleaner and less-tangled clothes, and then designed a washing machine that mimicked the movements. Whirlpool was integrating similar technology into some of its models. In the mid-1990s, machines appeared that could use Dialogic, a new term coined by Merloni Elttrodomestici, an Italian manufacturer. The machine only needs to be loaded and told what is the most delicate garment in the wash. It then evaluates other wash factors to create the "perfect" wash--lowest possible noise, cleanest rinse, appropriate detergent, and appropriate water usage. "Smart" dryers sense the clothes' dampness, when to shut off, and what temperatures at which to dry. Laundry appliances were starting to include digital signal processors (DSP) to select wash programs and monitor the machines, and by the early years of the first decade of the 2000s, "smart" appliances were in high demand.

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