🟦 1. The Event (FACT)
In December 2025, major Chinese air-conditioner brands—including Haier, Midea, Hisense, TCL, Aux, and Xiaomi—signed a self-discipline convention to promote replacing copper with aluminum in air-conditioner components.
The move is driven by rising copper costs, reliance on imports, and growing domestic aluminum production.

🟨 2. Affected Channels (MECHANISM)

• Cost: Reduced material cost by substituting copper with cheaper aluminum

• Supply: Shift in raw material sourcing from copper to aluminum

• Technology/Production: Need for innovation in welding, corrosion resistance, and heat exchanger design

• Sentiment: Perception of product quality may influence consumer preference

🟩 3. Malaysia Exposure (WHO)

• Exposed sectors: Air-conditioning, HVAC, household appliances, aluminum and copper supply chains

• Company types: Malaysian appliance distributors, manufacturers sourcing components from China, copper/aluminum traders

• Geographic relevance: Chinese manufacturing hubs with export links to Malaysia

🟧 4. What to Watch (SIGNALS)

• Announcements of aluminum-based air-conditioner product launches for domestic and export markets

• Changes in raw material procurement patterns (aluminum vs copper) by appliance manufacturers

• Updates on manufacturing process innovations and efficiency improvements

• Price adjustments for copper vs aluminum air-conditioner models in regional markets

• Import/export volumes of aluminum components and finished air conditioners between China and Malaysia

1. Core Insight — What is really happening?

This is not a simple “cost-cutting move”.
It is a forced structural response to three converging pressures:

1.1 Copper has become a strategic bottleneck, not just a raw material

Copper is now demanded by:

• AI data centres

• Power grids

• EVs & charging infrastructure

• Renewable energy

• Chips & advanced electronics

Air conditioners are low on the strategic priority list compared to these sectors.

When copper becomes scarce:

• It flows to industries with state backing

• Consumer appliances lose the bidding war

1.2 The US copper hoarding changed the game

The US absorbing >60% of global exchange inventories is not normal market behaviour — it is pre-emptive supply control.

Effectively:

• Global copper liquidity outside the US collapsed

• Prices spiked structurally, not cyclically

• China faces supply insecurity, not just price volatility

This makes substitution no longer optional.

1.3 “Replace copper with aluminum” is industrial policy disguised as tech progress

Yes, manufacturers talk about:

• Cost

• Innovation

• Materials science

But the real driver is:

“We cannot allow a consumer industry to depend on a metal we do not control.”

This mirrors:

• China’s rare earth strategy

• Semiconductor localisation

• Energy self-sufficiency

2. Impact — Who wins, who loses?

2.1 Short-term (1–3 years)

Consumers

• Cheaper entry-level air conditioners

• Higher failure risk for low-end aluminum implementations

• Bigger quality gap between brands

Manufacturers

• Margin relief in mass-market models

• Sharp increase in R&D and warranty risk

• Brand trust becomes more fragile

Copper market

• Structural demand erosion in appliances

• But more than offset by EV, grid, AI demand

• Net effect: still bullish copper

2.2 Medium-term (3–7 years)

Air-conditioning industry

• Clear product segmentation:

  • Aluminum = mass market

  • Copper = premium / industrial / long-life models

• Weak manufacturers get exposed by failure rates

• Strong manufacturers widen moat via materials engineering

Aluminum industry

• Huge upgrade opportunity

• Moves from “cheap substitute” to “engineered material”

• Demand shifts from volume → high-spec alloys & composites

2.3 Long-term (structural)

If China succeeds:

• Appliance copper demand permanently declines

• Copper becomes increasingly strategic & financialised

• Aluminum becomes a tech material, not a commodity

If China fails:

• Massive reputational damage to domestic brands

• Consumer backlash

• Export competitiveness suffers

There is no neutral outcome.

3. Interpretation — Read between the lines

3.1 This is not about matching copper performance

That is an unrealistic benchmark.

The real goal is:

• “Good enough performance”

• At much lower cost

• With domestic supply security

Expect:

• Thicker aluminum

• More complex heat exchanger designs

• Composite materials (Al + coatings + alloys)

3.2 The technician criticism is valid — for today

Welding aluminum + copper is a known weak point.
Four-way valves are sensitive.

But:

• Industry is betting failures can be engineered down

• Warranty costs are seen as acceptable transition pain

This is classic industrial upgrading logic, not consumer-first logic.

3.3 Dong Mingzhu’s stance is strategic positioning

Gree keeping copper is not stubbornness — it is premium differentiation.

She is effectively saying:

“You want durability? Pay for it.”

That positions Gree:

• Against price wars

• For long-life, commercial, and export segments

4. What Should Investors Do?

4.1 Equity investors — appliances

Be careful with this assumption:

“Lower material cost = higher profit”

Reality:

• Warranty risk rises

• Brand damage is asymmetric

• Poor execution wipes out savings

Favour

• Companies with:

  • Proven materials R&D

  • Vertical integration

  • Strong after-sales networks

Avoid

• Pure price-war players

• OEMs racing to aluminum without differentiation

4.2 Copper investors

This is not bearish for copper.

Why:

• Appliance demand is low-quality demand

• AI, grid, EV are high-quality, price-insensitive demand

Copper becomes:

• More volatile

• More strategic

• More geopolitically priced

Net bias: still bullish long-term.

4.3 Aluminum & materials investors

This is where the real optionality is.

Opportunities in:

• Aluminum alloys

• Surface treatments & coatings

• Composite connectors

• Welding & bonding technologies

• Heat exchanger redesign

This is not about smelting — it’s about materials engineering.

5. What Should Other Stakeholders Do?

Manufacturers

• Do not overpromise durability

• Segment clearly: aluminum ≠ copper

• Invest in failure-mode engineering, not marketing

Regulators

• Tighten durability and safety standards

• Prevent “race to the bottom” quality collapse

• Protect export reputation

Consumers

• Expect price-quality divergence

• Cheap aluminum units ≠ lifetime appliances

• Replacement cycles will shorten

6. Bottom Line (No Sugar-Coating)

This is industrial realism, not consumer idealism.

China is trading:

• Some durability

• Some reliability

For:

• Resource security

• Cost control

• Strategic flexibility

Copper air conditioners will not disappear —
they will become premium assets, not default products.

Aluminum air conditioners will dominate —
but only manufacturers with real materials innovation will survive the backlash.