Alibaba signs deal to develop 'smart' household goods with Chinese appliance maker Midea

BEIJING, March 17 Mon Mar 17, 2014 6:31am EDT

BEIJING, March 17 (Reuters) - Chinese e-commerce giant Alibaba Group Holding Ltd has joined the race to develop 'smart' household appliances, partnering with Chinese electronic goods maker Midea Group to produce home devices that talk to each other.

Alibaba, keen to expand out of its core online retail business, said on Monday its cloud computing subsidiary, Aliyun will set up a project with Midea named 'Aliyun Connected'. The partnership will seek to develop smart products across Midea's range from air conditioners to washing machines and refrigerators.

Financial terms of arrangements between Alibaba and Midea, worth about $11.7 billion by market value, weren't disclosed.

Alibaba said on Sunday its long-awaited IPO, expected to be valued at over $15 billion, will take place in the United States . The firm has been rapidly diversifying into business areas far removed from its main e-commerce platforms, like taxi booking apps, mobile games and mobile banking, as it seeks new growth opportunities.

Smart appliances, designed to talk to each other and accessible by users via cloud computing services, can help cut energy bills. Remotely controlled using smartphones, they are designed to allow consumers to perform tasks like preheating an oven, or having recipe suggestions sent to them by their fridge based on what the appliances recognises as its contents.

Technology intelligence firm Pike Research forecast that smart appliance sales will rocket to $35 billion by 2020 from just over $600 million last year. China, the world's biggest Internet market, is expected to play its part in the growth.

Midea products using smart technology are already rolling off its production lines. From March 19, a Midea device that allows users to adjust room temperature using an app on their smartphones will be available on Alibaba's Tmall e-commerce platform at a price of 3,399 yuan ($550).

Midea's shares rose 2.9 percent in trading on Monday, outpacing a 2.06 percent rise in the Shenzhen SE Composite Index .