One of the world's largest residential air-conditioner manufacturers Gree Electric has updated company's patent list with a new foldable phone design on a corporate data platform Tianyancha, a move coming amid the gloomy sales of its third generation smartphones since last September.

The Guangdong-based company has topped the world for 12 years in terms of production and sales volumes of air conditioners, and has remained China's leading household electric appliances manufacturer for 14 years, with its revenues edging up to 15 billion U.S. dollars in 2015, according to the company.

Read more: How Chinese air con maker Gree conquered China and the world

Gree started its smartphone business in 2015. In the following three years, three generations were released in succession, but all ended up with unsatisfying sales performance. The total shipment of three generations combined was less than 100,000.

Why are Gree continuing to make smartphones?

With "Made in China 2025" engineering a shift for traditional companies from being low-end manufacturers to high-end producers of goods, Gree and many other domestic brands have started trying to transform and diversify their product portfolio.

Dong Mingzhu, chairwoman of the company, told the media in 2018 that the reason Gree had made inroads into the smartphone industry was not to secure a share of the current market, but instead to use the smartphone as a tool to tap the potential of smart home appliances.

Since the product launch of its second generation of smartphones, the company has touted the IoT chips embedded in its devices as a key selling point. A smartphone can serve as a remote control, a switch and a thermostat, all connected to Gree's smart home appliances.

Read more: Outcome of the one billion bet to be unveiled, Lei Jun on the heel of Dong Mingzhu

Haier Group, major competitor of Gree Electric, has set up the country's first industrial Internet platform COSMOPlat to speed up its business transformation.

Local brand Aucma, previously known as a leading maker of refrigerators and freezers, has also begun to develop advanced equipment in recent years, such as ultra-low temperature cooling systems and driverless trucks equipped with dual vision and AI driving systems.

Midea, also one of the big names in China's home appliance market, has announced M-Smart, a smart home system designed for the future of family living. The company said they have invested 20 billion yuan to set up 17 research centers in eight countries, recruiting more than 10,000 research and development employees and filing patents for 26,000 technologies.

According to Statista, the sales volume of China's smart home market reached 1.18 billion U.S. dollars in 2016, an increase of 74.92 percent over 2015. It is estimated that the market size of China's smart home will reach 13.43 billion U.S. dollars by 2021, accounting for 16.94 percent of the global market size.