Rudijanto, Contributor, Jakarta

Indonesia remains a major battleground for the world's electronics giants as within many parts of the country there is still room for expansion while other Southeast and East Asian markets, except China, are already saturated.

While the Japanese, South Korean, Taiwanese and Singapore markets, for instance, depend more on repeat customers rather than first-time buyers, a large portion of the Indonesian population, especially those outside Java, Bali and Sumatra are still largely untouched by electronics companies.

With this in mind, South Korean electronics giant Samsung remains optimistic about the prospects for the Indonesian market for 2004 although many predict that there will be uncertainty in the security situation during the country's first direct presidential election in the year.

Samsung Electronics Indonesia's marketing director Christian Sudibyo estimates the market will grow by 10 percent.

With already a strong presence in Java, Bali and Sumatra, Samsung is eying Kalimantan, particularly areas with high economic growth such as Tarakan and Kutai.

Korean electronics companies have made aggressive moves in penetrating the Indonesian market, threatening the market position of and even replacing already established Japanese electronics companies in some market areas.

If Korea's LG looks aggressive in television advertising, Samsung is known for its low-price strategy. Some electronics companies even suspect Samsung of subsidizing its selling price in the Indonesian market in order to grab a greater market share.

Certainly, Samsung rejects such an allegation. Samsung Electronics Indonesia's marketing manager Budi Pramono said that what Samsung is doing is simply adjusting to Indonesia's market conditions. In spite of lower prices, Budi insists that Samsung still has a profit margin.

More established Japanese electronics giants are greatly disturbed with the aggressive approach of Korean companies. Technologically, they have a hard time maintaining their superiority over the Korean companies.

In cognizance of Korean mastery in LCD technology, Japanese company Sony Corp. approached Samsung Electronics Co. Ltd. for a partnership in manufacturing Liquid Crystal Displays (LCDs). Sony lacks its own production facilities for LCD production for large TV sets.

The company uses a lot of displays for its products such as TVs, cellular phones and digital cameras. Sony considered all possible choices before choosing Samsung to enter into a joint venture for LCD production.

LG has even claimed technological superiority in its refrigerator products over some Japanese manufacturers. LG Electronics Indonesia's national sales and marketing manager Sung Khiun reveals that the cooling system of its latest generation of refrigerator, Ice Beam Door Cooling, is already superior to Japanese brands.

PT Sharp Yasonta Indonesia's president director Kenji Okunaka admits the decline of some Japanese electronics companies due to competition with technologically savvy Korean brands.

"Japanese companies that are losing their market are those that do not have technology. But we are able to maintain our growth because we keep on developing our technology and make adjustments to local taste. For instance for our audio products, we put in higher bass and eliminate the middle sound," Okunaka said in an interview recently.

He agrees that electronics companies need to put more efforts into research and development in order to survive. Sharp's strong presence in Indonesia is partly attributed to its ongoing research and development undertakings.

But another Japanese company Toshiba believes that the Indonesian market still prefers Japanese brands. Citing the results of market research, Hery Sugiarto, product manager of Topjaya Sarana Utama (TSU), Toshiba's marketing arm, said that the Indonesian market still preferred Japanese brands over Korean ones.

"The market still perceives Japanese brands as more durable and technologically more advanced than the Korean ones," Hery said.

Samsung's Christian admits that the middle and upper market segments with a strong brand consciousness still prefer Japanese products. But he adds that for the middle and lower market segments, Korean brands have already dominated the market.

"In the long run, consumers will know that Korean products are not inferior to Japanese ones," said Christian.

Jakarta's Glodok electronics market traders and Kelapa Gading Electronic City sales personnel said in an interview that consumers no longer differentiated between Japanese and Korean brands in purchasing televisions and refrigerators.

Amid such market conditions, competition will be tougher for all brands.

In anticipation of tougher competition in the years ahead, Okunaka reveals that Sharp will increase its advertising budget by 30 percent next year.

Next year, the market is expected to be more competitive. Sharp predicts a flat growth in the Indonesian electronics market. If this market forecast is true then next year constitutes the first time since 1999 that the Indonesian electronics market will be stagnant.

In Okunaka's records, the Indonesian electronics market enjoyed steady growth since 1999 until last year partly due to an improvement in the country's economy.

One of the reasons for the predicted stagnancy of the electronics market is, according to Okunaka, lower growth in the minimum wage of 6 percent in 2004.

The minimum wage increased by 40 percent in 2001, 30 percent in 2002, and 12 percent in 2003. With an expected growth of 6 percent next year, Okunaka said that people will have less money to spend on electronics.

In such a situation, Okunaka believes that manufacturers have to adjust prices. This will result in a decline in electronics products by about 15 percent next year. However, in terms of production, there will be an increase of about 10 percent as most electronics manufacturers plan to further increase their production this year.

This year, Sharp itself increased its refrigerator production to 600,000 units from 420,000 units as well as its TV production to 1 million units from 720,000 units.

Sharp also increased significantly the production of its audio products.

Another manufacturer, Samsung Electronics Indonesia, has also raised this year's TV production by between 20 percent and 25 percent from 350,000 units to 500,000 units. The company also increased its refrigerator and washing machine production from 15,000 units to 20,000 units.

With the increase in production and the expected stagnant growth in sales, will the Indonesian market be saturated next year? Not at all. Okunaka still believes that Indonesia still has room for growth, especially since present TV sales have only penetrated 50 percent of the total market, refrigerators 37 percent and air-conditioners 5 percent.

As the market remains largely undeveloped compared to other East Asia and Southeast Asian markets, giant electronics companies can expect a long, fierce battle to gain a sizable foothold in the Indonesian market.

The battle to win the electronics market depends on technological superiority. That is why, in spite of the small market for technologically advanced plasma TVs, manufacturers feel the need to sell them in the Indonesian market.

Plasma TV technology will certainly boost a manufacturers' image. Plasma TV has become the new symbol of technological mastery.

"The fact that we can produce Plasma TV will boost our image, which will positively affect our other products in the market. Consumers will think that if we can manufacture technologically superior products such as Plasma TVs, then they will have no doubt in our other products," Sung Khiun said.

The Indonesian electronics market hold promise in the years ahead as a large portion of the country remains untouched. There is certainly room for growth for major players but, of course this is for the winners in the high-tech war without which the fate of electronics companies is already sealed.