Fitri Wulandari
\nThe Jakarta Post
\nJakarta<\/p>\n
Samsung has seen rosy days in Indonesia, despite the economic
\nwoes that have plagued many electronics producers here in recent
\nyears.<\/p>\n
While many players in the electronics industry struggled to
\ncope with a variety of problems, including weakening demand,
\nunfavorable fiscal policies, labor disputes and corruption, PT
\nSamsung Electronics Indonesia (SEI), the subsidiary of South
\nKorean's giant firm, Samsung Electronics Co. Ltd. (SEC), has
\nenjoyed continuing growth over the past few years.<\/p>\n
Its export value grew from only US$350 million in 2000 to $600
\nmillion in 2001. This year, the exports are expected to reach
\n$750 million, accounting for 10 percent of the country's total
\nelectronics exports.<\/p>\n
Its domestic sales have followed a similar trend. It booked
\n$60 million in 2000, $100 million the following year and an
\nestimated $200 million this year.<\/p>\n
This year, the subsidiary of South Korea's fourth-most
\nvaluable company also won a bid to build a fixed wireless Code
\nDivision Multiple Access (CDMA) network worth $317.6 million,
\ncovering Central Java, Yogyakarta, East Java, Kalimantan, Bali,
\nNusa Tenggara, Sulawesi and other islands in eastern Indonesia.<\/p>\n
It is part of state-owned PT Telkom's $1.8 billion mega-
\ntelecommunications project.<\/p>\n
Entering 2002, SEI moved aggressively to expand its business
\nand increase its presence in the domestic market.<\/p>\n
This year, the business climate was not as good, as evidenced
\nby the recent decision by Japanese electronics giant Sony Corp.
\nto shut down its manufacturing plant in the country.<\/p>\n
Like Sony and other players, Samsung faced similar problems in
\ncarrying out its business in Indonesia: rampant smuggling,
\nbureaucratic red tape, labor disputes and unfavorable fiscal
\npolicies.<\/p>\n
However, Samsung managed to circumvent all the problems.<\/p>\n
\"We are not daunted by the situation. And compared with our
\ncompetitor, we dared to make a breakthrough,\" Lee Khang-hyun,
\nSEI's general manager for marketing told The Jakarta Post.<\/p>\n
\"For Samsung, Indonesia is a market with great potential. The
\npopulation is huge, manpower productivity is good and so is the
\nresearch and development,\" Lee stressed.<\/p>\n
Unlike their Japanese competitors, which entered the country's
\nmarket 20 years ago, Samsung started up here only ten years ago.
\nBy then, products from Toshiba, Sony and Sharp had flooded the
\nmarket.<\/p>\n
In the beginning, Samsung did not pay much attention to
\ndeveloping the domestic market. Most of its products were
\nexported.<\/p>\n
It started to focus more on the domestic market in 1996, with
\ntelevisions and refrigerators being the first items sold here.<\/p>\n
When the economic crisis peaked in 1998, Samsung was forced to
\nscale down its business. It closed down its television plant.<\/p>\n
As the crisis began to ease somewhat, Samsung started gearing
\nup to enter the market with new strategies.<\/p>\n
According to Lee, one of Samsung's keys to success in
\nreentering the market was its boldness in making new items for
\nthe domestic market while others were reluctant to do so because
\nof bureaucratic procedures.<\/p>\n
Government tax policy stated that an electronics manufacturer
\nmust set up a new business entity, or subsidiary division, any
\ntime it wanted to produce a new type of product, which includes,
\nof course, all the government fees and red tape involved in a new
\nventure.<\/p>\n
This policy prevented producers from using their profits to
\ncover the production costs of new products, which cut into the
\ngovernment's tax revenue.<\/p>\n
At present, the total tax on electronic goods can be as much
\nas 52.5 percent.<\/p>\n
\"But without new products, you cannot compete against products
\nsmuggled into the market. One cannot afford to continue producing
\nthe same product,\" Lee added.<\/p>\n
Globally, Samsung focuses on semiconductors, digital media,
\ntelecommunications and home appliances. Its products include
\nVCRs, CD-ROMs, DVD combos, television sets, refrigerators,
\ncellular phones, air conditioners, computer monitors and washing
\nmachines.<\/p>\n
SEI has a plant at Cikarang, West Java, with about 2,000
\nworkers, where it now produces VCRs, CD-ROMs, color televisions,
\nDVD players and computer monitors.<\/p>\n
This year, SEI started to produce DVDs for export and color
\nmonitors for the domestic market, as well as reopening its TV
\nplant. SEI also sold printers this year.<\/p>\n
In addition, Lee attributed the success of SEI to unrelenting
\nsupport from its head office in Korea.<\/p>\n
\"The headquarters has given us space to develop the business
\nhere. It hasn't hesitated to do that because it fully understands
\nthe business environment here,\" Lee said.<\/p>\n
SEI's success should also be attributed to technological
\ninnovations made by its holding company, SEC. In the past four
\nyears, SEC has managed to emerge as one of the world's most
\ninnovative electronics manufacturers by developing digital
\nconvergence technology.<\/p>\n
Thanks to this technology, SEC can make value-added
\nelectronics products equipped with information technology
\nfeatures, for example, multimedia refrigerators or PDA phones.<\/p>\n
More importantly, Samsung's products are tailored to meet
\nspecific customer needs for each market.<\/p>\n
In order to develop new, innovative products, SEC has invested
\nheavily in research and development (R&D). In 2001, its R&D
\ninvestment amounted to $1.82 billion, or 7.5 percent of total
\nsales. It has 14 R&D centers worldwide and 15,000 researchers.<\/p>\n
Another factor that has played a role in its success has been
\nits aggressive, global brand campaign. SEC increased the budget
\nthis year for the campaign by 21 percent, to more than $900
\nmillion.<\/p>\n
This year too, international consultant Interbrand named
\nSamsung among the world's fastest-growing brands, valued at $8.3
\nbillion.<\/p>\n
In Indonesia, Samsung has also launched an aggressive
\nmarketing campaign. According to AC Nielsen, as quoted by
\nbusiness magazine SWA, in 2000, SEI spent Rp 1.26 billion on air-
\nconditioner advertisements, Rp 2.64 billion for audio-video
\nproducts, Rp 2.7 billion for TVs, Rp 2.6 billion for home
\nappliances, Rp. 6.9 billion for cellular phones and Rp 1.3
\nbillion on refrigerator advertising.<\/p>\n
The marketing campaign has borne fruit, as many of Samsung's
\nproducts now lead the domestic market. Its color monitors and CD-
\nROMs now lead the market while its cellular phones are in second
\nplace. Samsung's printers have moved up to second also, behind
\nthose produced by Hewlett-Packard.<\/p>\n
In view of this, SEI believes it will achieve its $750 million
\ntarget for exports and $200 million for the domestic market.<\/p>\n
SEI, Lee said, was also confident that it would be able to
\nbeat its Japanese rivals in just a couple of years.<\/p>",
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