LG Electronics considers making LCD, plasma TV in Indonesia
South Korea's LG Electronics (LGE) aspires to attain the rank of global top 3 in the rapidly growing digital display and media sector by 2007. Global demand for plasma televisions alone is estimated to expand to 12 million units by 2007 from this year's 3.5 million. LGE needs more production bases for such products to meet the growing demand. In a recent visit to LGE's headquarters at the Twin Towers in Seoul, The Jakarta Post's Zakki P. Hakim, along with several other Indonesian journalists, interviewed LGE vice president for Display TVs in Asia, the Middle East & Africa Ken Lee and discussed prospects of making Indonesia one of its digital production bases. The following are the highlights of the interview:
Question: What do you think of Indonesia. Will LG Electronics expand its business in Indonesia? Answer: We have faith in the high potential of Indonesia, which has a vast region and a huge population. That is why we've had a television factory in the country since 1987.
Unfortunately, the country's massive market remains only potential. The country's total sales of around US$400 million contributed no more than 1 percent of LG Electronics' world wide sales.
However, we have noticed that Indonesia's market is growing at a rapid pace. Moreover, when the ASEAN Free Trade Area (AFTA) is fully established, the country would play a more important role as a production base. Therefore, we will improve our contribution in the Indonesian market.
Thus, we have decided that Indonesia will be the production base for our projection TVs for the Asian market. The production for the Asian market is expected to start next year.
In the longer term, we have plans to consider making flat panel televisions with liquid crystal display (LCD) and plasma technologies in the country.
Since flat panel TV sales in the country is not large enough at the moment, we need to wait and see before deciding to start producing LCD TV and plasma TV for the Asian market in Indonesia's factories.
Nevertheless, our factories in Indonesia already have the facilities and technology to build the flat panel TVs, so it is just a matter of time.
LG Electronics develops two kind of flat panel models, plasma displays (PDP) and liquid crystal displays (LCDs). Aren't you worried that the two models would take the other's market shares? If you noticed, LGE still produces all kinds of televisions from the conventional bulky cathode ray tubes and tubes with flat screens to the more advanced projection TV, LCD and plasma display models.
The various products would not become a kind of 'product cannibalism', as more varieties provide more choices for our customers.
Moreover, LGE will keep producing conventional TVs, because competitors are leaving this specific category, whereas the country's market is still enormous.
While more advanced TVs -- those other than the bulky tubes -- aim at certain segment of customers.
Although prices are still considerably high for plasma and LCD televisions, eventually the price tag will decrease, thus providing customers with opportunities to buy TVs based on their needs, not so much on cost.
(Currently a 42-inch plasma television costs around $3,500, while LCD technology -- which provides a smaller, more affordable flat panel TV option-- offers a 17-inch model at around $800)
How are Plasma display sales performing in Indonesia anyway?
At the moment, total demand in the country stands at around 5,000 units annually. Next year, we will push for more sales as the country's economy recovers.
We see opportunities as the country builds more and more high rise (buildings) for offices, hotels and shopping centers, as well as renovates existing buildings.
Due to its high price at the moment, our plasma displays in Indonesia sell mostly to public places such as shopping malls, although the number of individual customers is also increasing.
How is AFTA helping LG Electronics in the region? AFTA implementation definitely brings advantages for LG Electronics by cutting import duties on components. For example, import duties for television parts were cut from 20 percent to 5 percent, which then made TV and other LG products more affordable for Indonesians.
What should the Indonesian government do to attract more investment from LG Electronics?
There are several issues that have come to our attention. The first one is that the society is not yet stable in terms of security, especially due to the high number of unemployed people. The second one is currency. The rupiah is still fluctuating. The third is that foreign investment has continued to decrease over the years.
But now, after the recent successful series of elections, the country's condition is improving, especially the security condition. It is a positive improvement.
Therefore, we are now considering an increase in our activity in the country.
If Indonesia manages to stabilize its security and currency at the same time, Indonesia would consequently be a very attractive market, in addition to its abundance of workers and massive market.
I believe Indonesia will become an important base of production and sales.