Electronics firms plan to stay on top with high-end products
Leony Aurora, The Jakarta Post, Jakarta
Korean producers have come to dominate Indonesia's electronics market and they intend to maintain this dominance by introducing new high-end products featuring the latest technological advances.
It has been 13 years since PT LG Electronics Indonesia (LGEIN) and PT Samsung Electronics Indonesia (SEIN), the local subsidiaries of the Korean firms, began constructing factories in Tangerang, Banten and Cikarang, West Java.
Yet in that relatively short time the companies have managed to overtake Japanese manufacturers such as Sony, Panasonic and Sharp in Indonesia's electronics industry.
Samsung, for example, ranked only fifth in Indonesia in sales of television sets six years ago. Today, it is the leading player in flat televisions, which use liquid crystal display (LCD) technology.
"People's concept (of electronics) has changed from only Japanese branding to include Korean brands as well," said SEIN director Lee Kang Hyun.
SEIN's domestic sales have risen steadily from US$170 million in 2002, to $280 million in 2003 and $350 million last year. The company is targeting $500 million in sales within Indonesia this year and another $1 billion in exports.
LG, which exports 35 percent of the refrigerators and televisions it produces in Tangerang, has taken over the hearts of many housewives, claiming the number one spot in washing machine sales.
"On average, we see about a 30 percent increase in sales per year," said LGEIN president director Kee-Ju Lee. LG's sales, domestically and foreign, rose from US$275 million in 2003 to $322 million last year, and are expected to rise to $420 million this year.
LG's motto, "Life is Good", strikes a chord as the economy slowly recovers from the monetary crisis -- the country enjoyed 5.1 percent growth last year.
And the increase in the availability of consumer financing is also helping sales. For a down payment of between 10 percent and 20 percent, customers can happily take home the consumer product they want and worry about the installment payments later.
However, the competition has gotten tougher as cheaper electronics goods from China and Taiwan have begun to arrive here.
"China is a big challenger. You cannot beat the Chinese in commodity items," said Lee from LGEIN. "Our strategy is to move to premium items."
LGEIN plans to start a new production line for high-tech, high-end plasma televisions in Tangerang in July this year. Another local LG company, LG Display Indonesia (LGDI), will start producing LCD televisions in June.
The company is developing a wide range of products. Lee said LG was the only manufacturer producing all kinds of television sets, including conventional, flat, projection and plasma.
"That way, if the market wishes for one type to develop faster, we already have the technology," he said.
Samsung sees the situation from a similar point of view. "We will focus on our branding. Compared to other countries, high-end products are not as attractive here. But it is developing," said SEIN's Lee.
With updated technology and the appetite of Indonesian consumers for top-end products, it seems that Korean electronics will indeed continue to be a major force in Indonesia.