That is largely because the 'Goldilocks' market for industrial equipment - not as pricy as these companies' premium products nor as cheap as the often shoddy offering from budget manufacturers - accounts for a huge part of Chinese domestic demand and is also growing further afield, even in the developed economies of the West.
Those who see the potential include German engineer Siemens, which has addressed this segment with an entry-level product portfolio called SMART - simple, maintenance-friendly, affordable, reliable and timely to market.
"If you want to be the market leader, you need to be in this segment," said Ronnie Leten, Chief Executive of Sweden's Atlas Copco, the world's top maker of air compressors, which can be used to fill gas cylinders or power pneumatic tools.
The lure is obvious. In, for example, the $22 billion market for metal-cutting tools, where Swedish tooling and mining equipment maker Sandvik operates, about a third of the business is in the middle segment, it estimates.
And it's a market with rare growth potential in a sluggish global economy.
"We are not doing this just to position ourselves right. It is also because this is going to be good business for us," said Jonas Gustavsson, head of Sandvik Machining Solutions, which has lined up three main brands - Dormer, Carboloy and Pramet - for its push into the mid-market.
But with lower selling prices and fierce local competition, companies need to reconfigure their business models.
Sandvik created a separate organisation to drive the mid-market brands, and divorce them from the premium maker's habit of making steadily more advanced products.
With tools based on existing technology from older premium product generations, Sandvik can limit research and development costs for its offering to a minimum, helping to keep its margins up. It also offers a slimmer product portfolio and sells solely through distributors, all helping keep a lid on costs.
DARWINIAN DEVELOPMENT
For Sandvik, the difference between premium and mid-market products includes product endurance, surface treatment or temperature tolerance.
For SKF, which makes bearings used in jet engines, cars and wind turbines, mid-market versions would be suitable for items that don't need to operate at such high speeds or where higher levels of noise and vibration are tolerated.
“It's like going to a fast-food restaurant," said SKF Chief Executive Tom Johnstone. "You still expect good food and good quality, but you don’t expect the same exotic quality in a pizza place as you would get in a Michelin star restaurant."
For all, the appeal is not just market expansion. It also protects their premium products by creating a tougher market environment for - and giving them an opportunity to learn more about - their upcoming rivals.
"One of the benefits we get is that it enables us to go head to head with some of these players and understand how they are developing," said SKF's Johnstone.
This is particularly important in China, which is moving up the quality ladder in the machinery market under the auspices of the government's 12th five-year plan and as state-owned enterprises are restructured and privatised, improving the status of the private sector.
The biggest Chinese bearings makers include Wafangdian, LYC Bearing Corporation and C&U Group.
"I would say that there is no other choice but to relate to this development. And it is really Darwinian to keep up with it, and to adapt to it," said Frederic Cho, one of Sweden’s leading China experts, who runs a consultancy firm after several years as Special Advisor on China at Handelsbanken Capital Markets.
Sandvik also hopes that new customers will eventually move up the value tree to become consumers of its premium range.
France's Schneider Electric has been in the mid-market segment for many years, and a further expansion was a key priority in its latest company programme launched in 2012.
Starting out in China, the company has become a big player in the mid-market in countries like Brazil and India, while also growing in other emerging economies.
"The profile of Schneider is to grow. We want to be a fast-growth company, so we believe that it’s very important to capture this mid-market," said Olivier Blum, executive vice president of the Retail Division at Schneider Electric.
TWO-WAY STREET
The opportunities are not only visible from the West, however.
Chinese construction equipment maker Sany Heavy Industry, a huge player in the domestic market, has expanded overseas with the 2012 acquisition of German concrete machinery maker Putzmeister an important building block.
Sweden's Volvo hitched an early ride on that same trend in 2007 by buying a majority in China's SDLG, which makes wheel loaders - giant-wheeled vehicles used to push, lift and load earth and other heavy materials. It is now eyeing global expansion of SDLG's mid-market products. Currently selling across much of Asia, Latin America and Africa, it began producing in Brazil last year, the first country outside China.
"You could say that Brazil is a bit of the reference market outside China where you also have this mid-market being quite strong," said Eberhard Wedekind, executive vice president of sales at Volvo Construction Equipment (VCE).
SDLG has also made a soft launch in North America, where Wedekind said they were reaching parts of the market that would have been inaccessible to Volvo's own pricier premium range.
Cho expects a trend towards more alliances between Western and Chinese firms in coming years, supporting Western companies' growth in China while helping Chinese firms to expand abroad and escape from the cheapest and most precarious market segment at home.
"I bet that if we meet in 10 years," said Atlas Copco's Leten, "you will have a situation in China where the mid-market becomes bigger due to the low end disappearing."
"Because that's just not 'good enough'. People don't want to have a car that breaks down too often or a car that is not safe. These things won't be accepted."
(Editing by Will Waterman)
By Johannes Hellstrom and Niklas Pollard
