Daikin Applied Has Big Plans For Future Growth
Bundled solutions and new products will help them achieve their goals
MARCO ISLAND, Florida – Daikin welcomed more than 1,300 sales representatives and customers to its biennial group sales meeting, offering attendees a vision of the future, as well as an up-close look at the global manufacturer’s newest equipment. Mike Schwartz, CEO, Daikin Applied Americas, addressed the crowd, noting that while there has been dramatic growth in the Americas business over the last 10 years, there is always room for improvement.
“Our mission today and going forward is to change who we are and to challenge ourselves,” he said. “We have been a traditional HVAC hardware provider for almost 90 years. Now as we look forward to the changes in the industry, it’s clear that we’ve got to be a much broader HVAC solutions provider that goes beyond just equipment.”
Discussing this – and other issues – were Kirk Thorne, executive vice president of sales, marketing, and aftermarket at Daikin Applied, Mike Hoppe, product leader of Intelligent Solutions® at Daikin Applied, Bill Dietrich, product general manager of chillers at Daikin Applied, and Matt Dodds, product manager of applied rooftop and self-contained systems at Daikin Applied. All four sat down with The ACHR NEWS during the meeting to chat about the opportunities and challenges that are facing the company and the HVAC industry.
ACHR NEWS: What does it mean to be a total solutions provider?
Thorne: One of our key messages is that we need to continue rapidly moving from an equipment-only business to a solutions-based business. Probably 30 percent of our reps are still focused on equipment only, be it replacement or new construction. And there's probably an equal number or a little bit greater that also do the full bundled solution with controls and other third-party products. And that's exactly the way that we see it headed. As a one-stop shop, you have to be able to provide the full solution to the end user and the contractor. There are a lot of mechanical contractors out there still wanting to break this and that out, but that’s not how to win. I think the more you can present a bundled solution and have it meet the competitive landscape, the better off you are.
Hoppe: One of the things that's a head scratcher for a lot of contractors is how to bundle controls with the equipment. We are trying to eliminate that confusion, so it’s more straightforward. We’re looking at bundles of energy, comfort, lighting, and indoor air quality, and how they address the needs of the building owner. We want to boil it down to what does the customer need first, knowing that we have a platform that we can address those needs and provide the information that is important to them without giving them too much information and overwhelm them.
ACHR NEWS: Security is a big concern as far as controls are concerned. What does Daikin do to ensure its systems are secure?
Hoppe: Security is of utmost importance and always top of mind for Daikin. We take it very seriously to the degree that our Intelligent Equipment has been third-party tested. As we introduce new solutions, we’ll continue to conduct penetration testing and use encryption protocols for data to the cloud and to the devices, including logins and permissions. It is similar to what you do when you log into your phone or company email, except we lock it down further. For example, are there technicians who can read set points or data from equipment versus those who can write? We only want those authorized personnel to ever change a setpoint, because that could really mess up the equipment. The weakest link is still the building network, and that will always be a challenge. For example, if it’s a BACnet protocol, are the firewalls in place? Security encryption? That is the key to preventing anybody from doing something harmful. It's our job to work with the contractors, so they understand what is needed to make sure that building is secure.
ACHR NEWS: Daikin recently announced that it plans to transition from R-410A to R-32 in many of its North American products. Will this include chillers as well?
Dietrich: That is our plan. We're already selling R-32 scroll chillers in Europe, and from all our research, it appears that R-32 will be a good fit for air-cooled equipment, in terms of charge level, footprint, capacity, and efficiency. I think probably one of the first places we'll be able to apply an A2L refrigerant is in an outdoor air-cooled chiller, because there won’t be any issues with leaks getting into the ductwork. We’re still waiting for building code approvals for A2L refrigerants in the U.S., and there hasn’t been the progress there that everybody would hope. Once it’s written into the UL standard, using an A2L refrigerant will become more acceptable in a lot of places, particularly in outdoor equipment.
ACHR NEWS: What are your thoughts on the economy? Do you expect a slowdown going into 2020?
Thorne: We're really bullish on the economy. There are a lot of folks out there who want to talk themselves into a downturn right now, but I look at our pricing authorization request, which is order activity that is about six to nine months out, and the slope of that curve is higher than I've ever seen it. If you take a look at 2019 on a year-to-date basis, and the number of pricing requests that we have in projects, it's probably about 20 to 25 percent ahead of what it was in the last three-year average. That’s really counter to what you're hearing in the news now. Yes, the producer price index and manufacturing index are down, but unemployment is still very, very favorable. I’m optimistic about 2020.
ACHR NEWS: What are some of the challenges and opportunities you see in the HVAC industry?
Thorne: The biggest challenge for the industry will be the workforce issue -- it's very difficult to find enough skilled, qualified labor. One of the ways that Daikin is addressing this issue is by offering modular solutions. I truly believe that the major general contractors and mechanical firms are looking for ways to simplify their approach to the job site, either through BIM or modular construction. A very small percentage of the work that's being done right now is modular, but contractors are coming to us and asking, ‘What can we do to save money on the project? How can we streamline this and make it easier?’ The end users are also more demanding in their requirements, which has opened the door for us to be able to communicate directly with the general contractor and/or the mechanicals on what is the best solution for the customer.
Hoppe: We have a hard time attracting people to our business. The trick is to make the HVAC and lighting controls easy to use and super easy to install for contractors who are having a hard time getting people on board. We have to make their lives more efficient, so they can get from job to job easily and be able to know what they're going to do each day. Can we help them prioritize their work for that day, and meanwhile, manage and monitor the equipment that was just purchased? Can we bring that all to one place -- a phone or tablet -- so that it's just so simple that an occupant, or building owner, or contractor can operate it and install it without a controls engineer? It's definitely our goal to make that whole process as simple as possible.
ACHR NEWS: Looking ahead, what major breakthroughs do you expect to see in terms of technology or energy efficiency?
Dodds: Our new packaged HVAC system, Rebel Applied, leads the industry in performance, efficiency, and lifecycle costs. With tomorrow’s cabinet and refrigeration technology, it sets a new standard in performance, configurability and lifecycle costs. We are really excited about this 30- to 55-ton unit.
Dietrich: For me, I have to wonder if there’s something beyond vapor compression that can efficiently provide cooling, like acoustic or electromagnetic. As long as we're doing vapor compression, though, we've got a lot of centrifugal and screw chillers that have really good efficiencies right now. And now that we have these efficiencies, the key is to make the systems smarter. Nothing hurts me more than going into a building that has a nice magnetic bearing centrifugal chiller, but they’re running their condenser water at 80°F. If that water were 60°F, the chiller would be running at about 30 percent less kW than it is now. So if we can make the smart controls better, that will help. But until the vapor compression goes away, I think we're going to continue to see what efficiencies we can get with the low-GWP refrigerants, because those will dominate the landscape for us.
Hoppe: I think individual comfort is going to be more key. Maybe that won’t get down to each person at their desk, but certainly smaller groups of people that perhaps through voting might have some level of control of their comfort. We already have sensors in every building that turn the lights on when you're there, so you're not using energy when you don't need to be. I think the notion is that you can have comfort on-demand as a human, just as you get information on-demand. People are expecting that. A lot of that is brought by the consumer industry, with connected thermostats that go beyond just comfort and tie into the whole home. I think it'll be really interesting to see how we approach localized comfort.