(FORTUNE Magazine) – Zhang Ruimin has a plan for entering American homes. The chairman and chief executive of Chinese appliance maker Haier is intent on capturing 10% of the U.S. market for full-sized refrigerators within three years. It won't be easy; the market is now dominated by four familiar brands. But Zhang is confident. And central to his battle plan is a small town in South Carolina perhaps best known for a Revolutionary War battle that the colonists lost.

What Zhang has going for him in Camden, S.C., is a $40 million factory churning out 200,000 family-sized refrigerators. Haier is the only Chinese company to have a major manufacturing base on these shores, and if that seems odd--the traffic is typically in the other direction, since labor costs are so much lower in China--Haier has its reasons. First, it is expensive to ship bulky refrigerators from China. Second, Haier likes design and production to be close to its markets. (The group has eight design centers and 13 factories outside China.) A U.S. factory also allows Haier to stick a made in the u.s.a. label on its products and is a sign to retailers that the company is in America to stay.

If the strategy is unusual, even risky, that's what Zhang's all about. Seventeen years ago Zhang, now 53, took over a nearly bankrupt refrigerator factory in Qingdao, a city on China's east coast that is the home of Tsingtao beer. Today Haier is the world's No. 2 refrigerator maker, after Whirlpool, and has expanded into washing machines, air conditioners, small appliances, televisions, even computers and cellphones. It conquered its home market (29% market share for refrigerators, 26% for washing machines) by emphasizing product quality, studying customer needs, and relentlessly pressing its brand--unusual strategies for China. Now it is spreading across Asia, opening factories in Indonesia and the Philippines. With global revenues topping $7 billion, Haier has set its sights on Japan, Europe, and the U.S.

As shelf after shelf of made in china cuddly toys attest, Chinese products are hardly uncommon in the U.S. But a Chinese company selling under its own brand name is. "It's very difficult to set up a name brand," says Zhang. "But if you don't take this road, you will always work for others."

The company isn't starting from scratch. Since it began exporting to the U.S. in the early 1990s, Haier has captured about half the U.S. market for compact refrigerators, the kind seen in college dorms or hotel rooms. It also pioneered electric wine cellars--those inexpensive stand-alone cabinets for wine lovers who lack drafty ch?teaux in which to store their treasures. By finding such niches, Haier racked up U.S. sales of about $200 million last year and says it earned a profit, though it won't reveal how much.

The college dorm and oenophile markets will take Haier only so far. To reach his goal of $1 billion in U.S. sales in 2005, says Michael Jemal, head of Haier's U.S. sales arm, "we need core products to attain mass retail presence." That means mainstream items like air conditioners and washing machines and, especially, family-sized refrigerators, the product with which Haier got its start. But while Asian brand names have become common on everything from televisions to cars, the major-appliance market in the U.S. is still dominated by Whirlpool, General Electric, and Maytag. The biggest foreign player is Sweden's Electrolux, which got into U.S. kitchens by buying Frigidaire. The four companies together make 98% of the nine million standard refrigerators sold in the U.S. each year. Haier wants to nibble off 10% of that market by the end of 2005. "Given what we've done in other categories," Jemal says, "I don't see why we can't achieve that."

Getting there depends in large part on what's happening inside Haier's Camden plant. Haier is not assembling parts just from China in South Carolina. Many metal parts and the tool sets to form large forms are shipped across the Pacific, but most of the plastic parts are locally sourced. The compressor is from Brazil. Allan Guberski, a former Amana factory manager who oversees daily operations, says local content is nearly as high as that of U.S. rivals (in part because he wants to achieve NAFTA compliance), but Haier can offer greater value through better designs and production techniques. For example, Haier molds the interior lining of many models out of a single sheet of plastic and blows the insulation in all at once, instead of connecting freezer and refrigerator sections that were made separately. That reduces the possibility of leaks and improves strength.

The Camden facility was built from the ground up specifically to build refrigeration products. Raw materials enter the factory at one end and come out as full-fledged fridges at the other. Guberski is putting more equipment in place to reach 300,000 units next year. "We're very competitive right now," he says, "and we're only going to get more competitive."

To instill that competitiveness in its American workforce, Haier has imported its intense corporate culture--one designed in part to retrain Chinese workers used to the lax standards of that country's state-owned enterprises. The Camden workers are indoctrinated in the disciplines of 6-S. That's an adaptation of the 5-S quality-control movement from Japan, which takes its name from the initials of five Japanese words--seiri (discard the unnecessary), seiton (arrange tools in the order of use), seisoh (keep the worksite clean), seiketsu (keep yourself clean), shitsuke (follow workshop disciplines)--to which Haier added a sixth, the English word "safety." A large open space on the factory floor has a number of small 6-S squares drawn with yellow paint. Work team members take turns standing inside the squares to relate news or offer insights. The factory walls are lined with banners in Chinese and English: a product with defects is useless or innovation is the soul of haier culture. Also ubiquitous are posters featuring drawings and aphorisms by Haier workers in China. One poster shows a ship and reads, "An enterprise, its management system, capital, and brand are likened to a man, a soul, a boat, and a sail."

Haier's management style was something of a culture shock to the plant's American workers. (Out of 220 employees, only factory president Zhang Zinmin, a small support staff, and about half a dozen engineers are Chinese.) Zhang explains, "In China the leader decides, and the staff do. Here, the leader decides, and the staff respond with questions and suggestions." That difference led to some uncomfortable interactions between the Chinese management and American workers, but Zhang says he now appreciates the American two-way management style and hopes to bring it back in some form to China.

The Chinese staff's nose-to-the-grindstone work ethic also impressed American colleagues. "They're very moral people," says factory purchasing agent Gary Stone, a native South Carolinian who occasionally dines at the house where many of the Chinese bunk together. "I tell them, 'Please don't become too Americanized.' " Outside the factory, Camden hasn't thought twice about hosting the first significant Chinese employer in the U.S. In April 2001, around the time a U.S. spy plane collided with a Chinese jet, sparking an angry diplomatic dispute, Camden city officials and Zhang Ruimin were having a celebration to rename the road to the factory Haier Boulevard. Nelson Lindsay, director of the local economic development office, which helped attract Haier to Camden, said he received just one phone call expressing concern about the arrival of a Chinese company in town.

Just as the Camden facility reflects Haier's determination to fit into the American market, the company's sales headquarters in Manhattan represent another attempt to put down roots. Haier spent $15 million to buy the former Greenwich Bank building, a 1924 landmark that embodies solidity. In addition to offices and research labs, the company plans to put a showroom and a restaurant in the former banking hall. Haier likes to see itself as different. "We can't just do me-too products," says Jemal. "The competition is much more established, with great brands and distribution, so if we're like them, we'll be crushed." The fridges from Camden, for example, are your basic white boxes. But the company points to distinctive features like see-through vegetable crispers and door shelves that hold gallon jugs--small things, but Haier hopes these touches will help to distinguish the refrigerators in the entry-level market segments they're in.

Innovation that sells products is critical for a new brand to win credibility with retailers, says marketing chief Sharriff Khan. One tactic is specialization, like designing compact refrigerators with locks for the student market. Another is targeting underserved markets--assisted-living residences, for example, which want reliability in smaller-sized units. Such steps have helped Haier win shelf space in Wal-Mart, Lowe's, and Best Buy.

Haier combines innovation with rapid execution. Michael Jemal recalls giving Zhang Ruimin a back-of-the-napkin sketch of the freezer of his dreams during a visit to headquarters. The freezer would open from the top but also have a bottom drawer that kids could reach to grab an ice cream. The two compartments would have different temperatures--very cold for storage and not-so-cold for more frequently used products. And the whole unit would be small and stylish enough to be in the kitchen rather than banished to the basement or the garage.

It was just an idea. Engineers, designers, and marketers, Jemal knew, would have to consider the idea first, then flesh it out, a time-consuming process. But the next day Zhang, barely able to control his glee, ushered Jemal into a conference room and unveiled a working model of Jemal's fantasy freezer. "I knew he liked to work fast," Jemal says, "but I was still amazed." Ten months later the waist-high Access Plus freezer, in an array of vibrant colors, was on sale at the Lowe's retail chain across America. And while the product went from concept to kitchen improbably fast, it is no rush job. Good Housekeeping has given the freezer its seal of approval.

As it ventures out of niches into the mass market, Haier is starting to do consumer advertising. Previously most of its ads were limited to brand promotion on billboards and airport luggage trolleys. Now it wants to reach shoppers directly, so that someday people will no longer wonder, "Haier who?" But the company's first effort, a product ad for the Access Plus freezer in the September issue of Good Housekeeping, looks old-fashioned--the advertising equivalent of a basic white box.

American appliance makers are aware of Haier's plans, though they're not trembling. "I take it very seriously," says GE Appliances chief executive Jim Campbell. "They may be producing only 200,000 refrigerators per year now, but that's going to get bigger." Yet listening to Campbell list GE's strengths only shows how far Haier has to go. GE has unrivaled brand recognition. It offers every type of major appliance so that a customer can equip an entire kitchen and laundry room with GE products. It has a nationwide service network. Perhaps most important, GE and other American companies remain technology leaders. While U.S. manufacturers could not match Japanese transistor radios in the 1960s or fuel-efficient cars in the 1970s, they suffer no similar vulnerability in home appliances.

It is also unclear how Haier plans to pay for its expansion. The group's finances are a black box. The Haier Group is government-owned, but Zhang runs it with a free hand. It is made up of dozens of companies, only one of which is listed on the Shanghai stock market. The listed unit--refrigerator and air conditioner maker Qingdao Haier--is under pressure from stiff domestic competition. In July it reported that net profit in the six months through June fell 45% to $26 million, while sales fell 3.7% to $760 million. The Haier Group earned $112 million on revenues of $4 billion, according to an Information Industry Ministry report, but no details are available. Within China, Haier is highly regarded, easily winning the equivalent of FORTUNE's Most Admired Company ranking in a recent survey. But the press has become more critical of late, questioning whether Haier is diversifying too much and whether it is taking on excessive debt. Zhang Ruimin was recently quoted saying the group's total debt was a manageable 55% of assets.

Nonetheless, Haier's bid to take a chunk of the American market is a serious one. "Over five years," says analyst Nicholas Heymann of Prudential Securities, "it could become a force." With good-quality products and low prices--a Haier 14-cubic-foot unit costs $370, about $50 less than a Whirlpool--it is not fanciful that Haier could break into America the way Sony did in the 1950s or Samsung did in the 1980s. In one important way, Haier has an advantage over the earlier Asian pioneers. Marshall Meyer, of the Wharton School of Business, notes that given China's vast geography, disparate markets, and multiplicity of national and local authorities, Haier has dealt with many of the problems of globalization without leaving home.

"Haier has meticulous planning like a Japanese company and execution like GE," says Camden general manager Guberski. "And when these guys decide to do something, boy, do they act fast." Whirlpool, GE, and Maytag had better watch their backs.

FEEDBACK jsprague@fortunemail.com. Stories from the Industrial Management & Technology section can be found at fortune.com/imt. Executives in manufacturing and research and others eligible to receive FORTUNE's Industrial Edition can subscribe by calling 888-394-5472.