NAICS: 33-5221 Household Cooking Appliance Manufacturing
SIC: 3631 Household Cooking Equipment Manufacturing
NAICS-Based Product Codes: 33-52211525
A microwave oven is a cooking appliance that uses microwave radiation to heat and cook food. By passing microwave radiation through an item of food, molecules in the food are agitated and this motion creates heat. The agitation occurs because molecules of water, fat, and other substances in the food are dipoles; they have a positive charge on one end and a negative charge on the other. As microwave radiation passes through these molecules, it creates an alternating electrical field to which the dipole molecules in the food rotate in trying to align themselves. Thus they are agitated; the agitation causes them to heat up. The process is called dialectric heating. The molecules affected by such heating are liquid molecules—the reason why moist foods cook better than dry foods in a microwave oven.
Microwave ovens are only a part of the larger household cooking appliance sector designated by the NAICS code 33-5221. Nonetheless, the household microwave oven has grown rapidly since its initial introduction in the mid-1960s to represent one-fifth of the overall household cooking appliance sector in 2005.
Microwave ovens grew out of discoveries made at Raytheon Corporation, a supplier to the defense industry founded in 1922. Raytheon produced radar systems, among other things. Radar systems use radio waves to identify objects at great distances. Sending out an array of radio waves allows a system to monitor that portion of the wave front that runs into something and bounces back again. By making calculations based on the size of the radio wave and the return signal, one is able to determine where an object is located. This art was deployed very early to locate incoming bombers during World War II. The shorter the wavelength used, the more accurate a picture a radar system will provide. During World War II two British scientists, John Russell and Henry Boot, experimented with improving radar systems by creating shorter radio waves, microwaves. Their work culminated in the creation of a device called the cavity magnetron that produces microwaves by passing an electric current through a series of cylinder-shaped cavities bounded on either side by magnets. The magnetron is the key element of a microwave oven.
Engineers at Raytheon Corporation who were assembling and testing cavity magnetrons for the U.S. military noticed a side effect of proximity to a cavity magnetron while it was in use. They noticed the presence of heat. The legend has it that Percy Spencer, a leading engineer at Raytheon Corporation, felt heat and noticed that the chocolate bar in his pocket melted as he stood by an active cavity magnetron. What we know with certainty is that Raytheon, anticipating the end of World War II and a need for new products to market, began to explore the possibility of creating a cooking appliance based on microwave radiation in 1945. By late 1946 the company applied for a patent on using microwave radiation for food preparation.
The first microwave ovens were large, expensive, water cooled, and intended for use in restaurants and other locations where food preparation was done at an institutional scale. These ovens were not initially a commercial success. It took a long time to refine the design of the microwave oven into an appliance suitable for mass production. It also took time to convince potential buyers that such a device was worthwhile. The concept was, in a way, too novel—and seemed to replace a function already available almost everywhere, namely the kitchen stove. The real conveniences of popping something into the microwave for rapid heating had to be demonstrated. The demand had to be created. A certain amount of early resistance to the product also had to be overcome. The concept of something radiating waves brought to mind then still recent memories of nuclear explosions; radiation suggested danger. Early on microwaves were sold by demonstrating them in the home where people could see for themselves that the water-filled glass began to boil in a surprisingly short time—and nobody was harmed in the process.
In 1947 Raytheon came out with its first commercial microwave oven called the Radarange. It was a large machine intended for commercial settings. Tappan Stove Company manufactured the first microwave oven for home use in 1955. It was smaller than the Radarange and featured air cooling.
Between 1946 and 1966 these and others firms worked on the microwave oven; over time more and more companies joined in the process of designing and building microwave ovens. In 1964 Raytheon bought the high-end refrigerator maker, Amana, and began to sell microwave ovens under the Amana name. By 1970 Raytheon and other U.S. manufacturers had successfully created a market for household microwave ovens and sold 40,000 that year at a price of $300 to $400 each. The sale of microwave ovens rose quickly in the 1970s. By 1975 annual sales in the United States of microwaves had reached 1 million units and by 1985 volume had increased ten-fold.
During the 1960s the development of microwave ovens in Japan was progressing rapidly as well. The first microwave oven produced by a Japanese firm for home use was introduced by Sharp in 1966. Japanese lifestyles influenced the acceptance rate of microwave cooking in Japan. The Japanese cooking style requires reheating of food, something done very economically by microwave ovens, giving them a distinct and natural advantage in the Japanese kitchen. From its introduction into the market, the microwave gained penetration in the Japanese market more quickly than it did in the United States. Japanese manufacturers ramped up mass production of the devices to meet domestic demand and began exporting units in 1970.
The tendency in Japan is to have very small kitchens, a fact that motivated Japanese producers to aim at microwave ovens of as small a size as possible. Their innovations in design to accomplish this job, not least to cool the small units, gave Japanese producers advantages in selling devices in other markets where space was limited, including Europe, and in markets, like the American, where the microwave also had to find a spot in an already crowded kitchen.
By the turn of the century, the microwave had gone from being a new and exotic technological kitchen device to being a standard kitchen appliance found in most places where cooking took place. It had become a primary technology and was thus something to which others adapted their technologies. Frozen and prepared food makers adjusted the packaging of their products so that they could go directly into microwave ovens—a process that continues today. Thus, producers of steel cans were experimenting in the middle of the first decade of the twenty-first century to develop a microwavable can, achieved by providing the container a plastic lid that would permit microwaves to penetrate—which steel does not. Microwave ovens moved out from homes into offices as well and have long served as devices to heat up soup or frozen sandwiches. The devices are also found in commercial building snack stores, where they give clients the ability to thaw or heat items they buy before carrying them from the store. Specialized uses of the microwave oven, such as in laboratories and medical settings, are also becoming commonplace in the twenty-first century.
The market for microwave ovens is mature in most industrialized nations. Penetration rates in households within industrialized countries are in the 95 percent range, meaning that new sales are generated primarily by replacement purchases, what are often referred to as distress purchases within the industry. In the United States many homes have more than one microwave and, as already mentioned, many workplaces provide microwave ovens for use in employee kitchens and lunchrooms.
Europe was slower to adopt the microwave oven than were the United States and Japan, in particular Eastern Europe where penetration rates for microwave ovens in households were only reaching 50 percent in the year 2000. Growth potential in Eastern Europe has been, consequently, higher than in Western Europe, the United States, and Japan during the early years of the twenty-first century.
In the developing world the rates of microwave oven market penetration tend to be much lower. Consequently, these countries offer greater growth rate potential than exists in the industrialized world. In countries like China, to site an extreme example, where an estimated 100 million people made up the consumer class in 2007, this relatively well-to-do segment of the population was expected to grow rapidly over the next decade and reach seven times its 2007 size by the year 2020. Such growth in potential new customers represents an enormous potential for sales of advanced devices, not least appliances like microwave ovens.
World sales of microwave ovens were estimated to be approximately 46.2 million ovens annually in 2003 according to Appliance Design magazine. That number is expected to grow annually with the greatest growth taking place in countries with the lowest penetration rates.
In the United States, in 2005, Appliance Magazine reported sales of slightly more than 14 million microwave ovens. Of these ovens, approximately 80 percent were purchased to replace older and failing units. Appliance Magazine projected that by 2009 sales of microwave ovens in the United States will increase by 7 percent over the 2005 sales figures reaching almost 15 million units.
In terms of the total value of microwave oven shipments within the United States, the U.S. Census Bureau offers the following figures for 2005. The value of microwave ovens produced and shipped by U.S. manufacturers were valued at $243 million, of which $27.2 million were destined for export. The vast majority of microwave ovens sold in the United States in 2005 were imported machines. The total value of imported microwave ovens was $1.088 billion and represented 83 percent of all shipments for consumption within the United States that year.
Microwave ovens are divided into three categories. The first of these is the countertop microwave. These are the most popular units with sales in 2005 of nearly 10 million units. The second category is over-the-range microwave ovens and is the second largest category with sales of 4 million units in 2005. The third category is the dual-purpose oven providing both microwave and convection heating functions in a single unit. These combination ovens are the smallest category of microwave ovens based on sales within the United States of 200,000 units in 2005.
The small appliance industry, like the electronics industry more generally, is a busy, crowded place. Volatility within the ranks of the key players has been great during the period 1990 to 2005. The players are numerous and their rankings in terms of share of the market tend to change from year to year.
Asia is home to all of the leading players in the microwave manufacturing business and, within Asia, the trend in the last decade has been the rising dominance of South Korea and China and the relative decline of Japanese companies. According to Appliance Magazine, by 2003, 79 percent of microwave ovens sold worldwide were produced in China.
The three companies who have interchangeably been hailed the top worldwide producer of microwave ovens during the first six years of the twenty-first century are LG Electronics (South Korea), Galanz (China), and Samsung (South Korea). These companies are leaders in the production of microwave ovens whether for sale under their own brand names or as original equipment manufacturers (OEMs) producing ovens to be marketed under the customer's brand name. A brief description of each of these companies follows.
LG Electronics Inc.
This company is a leading global consumer electronics manufacturer and was a leader in the industrialization of South Korea. Established as a private company in 1958, LG Electronics has its headquarters in Seoul, South Korea. As of 2005 the company had more than 72,000 employees, 45 percent of them working in South Korea, the rest working in subsidiaries and marketing offices in 77 countries around the world.
The company's annual sales are in the range of $45 billion for the consolidated activities of its four business units: Mobile Communications, Digital Appliance, Digital Display, and Digital Media. LG Electronics' microwave oven production falls into its Digital Appliance unit. In 2005 domestic sales represented 23 percent of the company sales, with exports making up 77 percent of sales, up from 67 percent in 2000. The company is often referred to simply as LG and uses the words Life's Good in its logo to highlight these letters in its name.
Galanz Group Company Ltd.
Founded in 1978 as a company that raised eider ducks and produced feathers, Galanz began to produce microwave ovens in 1992 and began exporting microwave ovens in 1998. By 1999 it produced 6 million microwave ovens and established itself as the leading domestic producer in China. By 2004 Galanz was the leading producer of microwaves in the world having made 18 million units, exporting approximately 13 million and selling 5 million domestically.
Galanz employs more than 20,000 people in China and has additional employees in its overseas locations; one of these locations is the company's research and development center located in the United States. Annual sales are in the $1.7 billion range as of 2005 and it is expected to maintain a rapid pace of growth as the company moves strongly into the production of air conditioners and small electronic household appliances. Unlike LG Electronics and Samsung, the majority of Galanz's business between 2000 and 2005 was related to the production and sale of microwave ovens.
Samsung Electronics Company, Ltd.
This company was founded in 1969 as a division of the large South Korean chaebol (family-controlled conglomerate) Samsung Group which dates back to the early 1950s. In the late 1990s Samsung Electronics was officially spun-off from the Samsung Group. The word samsung means three-stars in Korean.
Samsung Electronics operates four main divisions. They include Digital Media, Semiconductors, Information & Communications, and Home Appliances. Sales for the consolidated group were $79 billion in 2005 and it was headquartered in Seoul, South Korea. Samsung Electronics produces microwave ovens under its own name brand as well as for others, like General Electric, as an OEM.
Among the many other companies that produce microwave ovens are: Daewoo Electronics, a division of Daewoo Group of South Korea; Midea, a Chinese electronics manufacturer; Sharp Corporation, founded in Japan; Sanyo Electric Company, Ltd., headquartered in Osaka, Japan; Mitsushita Electric Industrial Company, Ltd., founded in Japan in 1918; and Whirlpool Corporation, headquartered in Benton Harbor, MI, United States.
The U.S. microwave oven market is dominated by imports. Based on sales of microwave ovens in the United States in 2005, LG Electronics held a 35 percent market share according to Appliance Magazine. Sharp was the second leading market share holder with 20 percent of the market, followed by Samsung with 12 percent and Daewoo with 9 percent. The remaining 24 percent of sales in 2005 were split between Matsushita, Whirlpool, Galanz, Midea, and other smaller producers.
MATERIALS & SUPPLY CHAIN LOGISTICS
A microwave oven consists of four elements: a cooking chamber, a magnetron, a waveguide, and standard control circuits.
The cooking chamber itself is an enclosure formed by material of a conductive nature—or by a mesh of such material. This enclosure is designed to prevent the microwaves from escaping into the surrounding environment. A plastic or glass layer is usually all that the user can see from the surface of the enclosure. Normally, microwave oven doors include a glass panel. The glass used is multi-layered with a conductive mesh layer used to maintain the shielding. Because the size of the openings in the mesh is smaller than the wavelength of 12 centimeters, the microwave radiation cannot pass through the door. Light, however, with a shorter wavelength, passes unobstructed through the mesh shielding in the glass door insert and allows the user to monitor the cooking action within the oven while it is in use.
The most technically complex part of a microwave oven is the magnetron. A cavity magnetron is a high-powered vacuum tube that generates coherent microwaves. The magnetron is shaped like a cylindrical object, with the two ends of the cylinder capped with magnets. The central axis is a hollow cathode (the negative pole of the electrode). The outer surface of the cathode carries electron-emitting materials, primarily barium and strontium oxides in a nickel matrix. Such a matrix is capable of emitting electrons when current flows through the heater inside the cathode cylinder. At a radius larger than the outer radius of the cathode is a concentric cylindrical anode (the positive pole). The anode has two functions. It collects electrons emitted by the cathode and stores and guides microwave energy. The anode has a series of small cavity resonators arranged around the cathode. The waveguide in a microwave oven is the hollow metal tube through which microwave energy is transported into the cooking chamber. The waves of energy travel through the rectangular shaped waveguide by bouncing through the chamber in a zigzagging path.
Materials consumed by microwave producers are metals, plastics, electronic circuits and wiring, glass, timers, and latches and hinges. The proprietary element of microwave ovens is the magnetron. For this reason the logistical structure of the industry, from the supply point of vantage, centers on the magnetron producer. The manufacturer typically makes the magnetron in-house and may acquire many of the other components from vendors, the parts flowing to the manufacturer in finished or semi-finished forms ready for modification or assembly. Analogously to most other high tech electronics products—in contrast, for instance, to capital goods like autos or single-material, mass products like metal cans—microwave ovens do not require major, heavy-duty transportation or warehousing support. Producers, however, tend to be located in major industrial hubs to have access to technical componentry and skilled labor.
Microwave ovens typically reach the ultimate consumer in a classic three-tier distribution system in which products move from the producer to the wholesaler, from wholesaler to retailer, and then from the retailer to the consumer. The wholesaler may be a major factor in the market such as Kmart, Wal-Mart, and others who act as wholesalers and also are the retailer. Alternatively, smaller retailers will obtain their products from electronics wholesalers who buy in bulk from the producer. In the case of microwave ovens, particularly types of microwaves that are built into kitchen cabinetry—thus requiring custom installation including, sometimes, running high-voltage wiring to the point of attachment—it may be necessary to involve a fourth tier, namely the contractor doing the installation. Such services, of course, may be provided by the retailer using either its own people or hiring out the function to its own contractors.
At the retail level, multiple types of retailers distribute microwave ovens in a manner matching the contexts in which consumers think of the product. Thus microwave ovens are sold by stores specializing in kitchen appliances; in department stores that carry a great variety of merchandise; in electronics stores as yet another electronic product alongside television sets, radios and CD players, computers and peripherals; and also by home improvement chains such as Home Depot and Lowe's.
In the age of the Internet the concept of electronic distribution has taken hold, both in a literal sense, meaning that consumers buy from a seller whose showroom is the Internet, and in a soft sense meaning that a portion of the sales activity itself takes place online. Both meanings of electronic distribution apply to microwave ovens. Many consumers pick the product they are seeking by comparing models, their sizes, colors, and features online using both brick-and-mortar retailers' Web sites and sites of companies selling directly online. Many opt to buy the actual model selected in a store; some, however, will order the device directly. In direct purchasing from a large online seller, the customer may be eliminating one tier of distribution, the seller acting as a wholesaler and passing along a small savings. Catalog sales of microwaves are yet another route whereby the retailer with a storefront is bypassed.
The market for microwave ovens can be broken into three parts, each representing a different user profile and thus slightly different marketing approaches. The restaurant and institutional food preparation industry is one consumer group. These users tend to be large organizations, restaurants, restaurant chains, hospitals, school systems, prisons, catering businesses, large convenience store chains, hotel chains, and the like. Purchases by these institutions, other than small restaurants, tend to be made at the wholesale level and in volume.
The nonresidential, commercial chains are another consumer group for microwave ovens. This group is made of purchasers who usually buy through the same retail outlets as residential customers, although the microwaves purchased are for nonresidential use. In this group are users such as small convenience stores, small daycare centers, and office settings.
The residential purchasers of microwave ovens are the final consumer group. These users are the largest consumer group with the most dispersed purchasing pattern already outlined under the distribution header above.
Prepared foods and frozen foods are two product types adjacent to and complementary to the microwave oven market. The demand for prepared foods can influence the demand for microwave ovens but, more importantly, the popularity of microwave ovens can increase the demand for prepared and frozen foods.
The market for frozen foods and convenience foods has changed dramatically since the microwave broke onto the scene. Initially food manufacturers and packagers were slow to produce and market items specifically for use in the microwave. In part this was due to the challenges that microwave cooking posed for many foods in the early days of the microwave oven. Meats cooked in the microwave would not always cook through. French fries and other items intended to have a crispy crust came out soggy. Breads and pastries too tended to become either soggy or gummy after heating in a microwave oven. Drying out was also a problem for many items being microwaved. These are all side effects of the dialectric heating method used in microwave ovens in which the heat is generated within the food through agitation at the molecular level and no heating of the air around the food takes place. During the 1980s and 1990s many advances were made in packag-ing foods in containers that were designed specifically to optimize the dialectric cooking method. Those advances continue to this day and are discussed further in the next section of this essay.
As better packaging became available, more microwave-ready convenience foods appeared on the market; this stimulated the sale of microwave ovens.
Another force that impacts the market for microwaves is trends in home improvement—and the wealth needed to engaged in such upgrades. In the United States home improvement has been a strong market for most of the 1990s and early 2000s due to a cultural and economic phenomenon. The economic engine behind the strong housing market has been low interest rates. Record low 30-year conventional mortgage rates in 2003 resulted in increased housing starts. The attractive interest rates also encouraged a great number of people to refinance their homes; such families often take on additional mortgage debt to remodel. Kitchens, great rooms, and kitchen family room combinations were a particularly popular target for home improvements. Among the items likely to be purchased as a part of a kitchen remodeling project is the microwave oven. A different but still essentially economic phenomenon that significantly contributed to the penetration of microwaves into virtually every kitchen has been the steady and continuing growth in the participation of women in the workforce. This has translated into busier homemakers with less time on their hands. The convenience afforded by the microwave represents a help in coping with limited time.
The cultural phenomenon that has stimulated the home improvement market is one growing out of the demographic shift occurring in the United States as the baby boom generation, those born between 1946 and 1960, has aged. Starting in the mid-1990s, Americans began to stay at home more; they entertained more at home and spent more of their free time there. This phenomenon has been referred to as cocooning. This trend led to increased spending on home improvements. Sales for items that help to create a comfortable and convenient home environment rose and among those items is the microwave.
RESEARCH & DEVELOPMENT
Improvements in microwave oven technology currently under exploration by their producers tend to fall into one of two areas. The first is aimed at reducing the amount of electrical energy consumed by the devices—potentially a strong selling-feature in an environment of sharply increasing electrical bills. The second has to do with materials used in the exterior of the machines. In order to increase the customizability of microwave ovens so that they can blend seamlessly into the overall design of the kitchen, many new materials are being tested.
Another area in which a great deal of research is being done has to do with producing smart packaging in support of microwave oven use. The efforts are led by undertakings in which the packaging industry and microwave oven manufacturers jointly participate. This effort far transcends writing better instructions on the package. The research is aimed at letting the package itself communicate with the microwave oven by whispering its instructions electronically to the device. Packaging industry engineers are thus working on embedding cooking instructions right into the package in which food is purchased, the instructions designed in such a manner that matching reading devices built into the ovens can decode and interpret them without the consumer's intermediation. As this technology is envisioned, the microwave oven will come equipped with a scanner able to detect the matching label in the first place and then decode it to determine heating time and power level so that a prepackaged meal will come out with everything heated to perfection.
New trends in microwave ovens can be categorized into two areas: first, the microwave combination appliance and, second, added features. Microwave ovens combined with convection ovens have been appearing on the market in recent years. These ovens are usually designed to be built-in units with two cavities, one for microwave cooking and the other for cooking in a more traditional convection oven. More recent combination machines include a microwave oven in a drawer with a ceramic cooktop above it; such a device is being marketed by Sharp. This is a small unit ideal for installation in an island. The drawer style microwave cavity is also an innovation appearing on other kitchen appliances as well like the freezer and dishwasher. Such items belong to the high end of the market. Unit prices, as of 2007, begin at around $1,000. A less expensive combination machine is being marketed by LG Electronics in the form of a microwave oven and toaster combination which retails in the $100 range.
Trends in added features include voice activation and Internet connectivity. The voice recognition units are designed to be of use to the elderly or disabled while the Internet connected microwave oven is intended as a high end unit through which recipes can be downloaded. The Internet connected machines are often referred to as smart machines, a generic term suggesting communications features.
TARGET MARKETS & SEGMENTATION
Within the United States the target markets are buyers of inexpensive replacement models and high end and designer models intended for gourmet kitchen makeovers. Be-cause the U.S. market is already saturated with microwave ovens, the opportunities for market growth lie primarily in these two areas. Added features are helpful in encouraging people to replace their old machines, as an estimated three-quarters of microwave sales in the United States are generated by purchases to replace existing machines. The features are obviously intended to differentiate new brands from the well-established commodity-style microwave, thus ensuring the feature-provider with growth and increasing market share. Microwaves, however, are so deeply embedded in habits and are so taken for granted that buyers are not likely to exchange a working machine for one with new features, however smart it is.
In Europe the market penetration of microwave ovens is not as great yet as in the United States, but in Europe there is also growing emphasis on making units small, energy-efficient, and affordable. China, India, and Latin America are the markets most likely to see the greatest growth rates in microwave oven sales over the next two decades.
RELATED ASSOCIATIONS & ORGANIZATIONS
Association of Home Appliance Manufacturers, http://www.aham.org
Canadian Appliance Manufacturers Association, http://www.electrofed.com
China Household Electrical Appliances Association, http://www.cheaa.com
Fabricators & Manufacturers Assoc. International, http://www.fmanet.org
Microwave Technology Association, http://www.microwaveassociation.org.uk/recipes/index.htm
National Association of Metal Finishers (NAMF), http://www.namf.org
North American Association of Food Equipment Manufacturers (NAFEM), http://www.nafem.org
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Darnay, Arsen J., and Joyce P. Simkin. Manufacturing & Distribution USA. 4th ed. Thomson Gale, 2006, Volume 2, 1405-1413.
Ford, Peter. "China's Middle Class Entices Businesses." Christian Science Monitor. 2 January 2007.
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"The Share-of-Market Picture for 2005." Appliance Magazine. September 2006.
"Technological Leadership." Raytheon Corporation. Available from 〈http://www.raytheon.com/about/history/leadership/index.html〉.
"World Buys Chinese Microwaves." Appliance Design. June 2005, 10.
see also Ovens & Stoves