'Local PCs are good but they don't sell'

'Local PCs are good but they don't sell'

By Johannes Simbolon

JAKARTA (JP): Local personal computer (PC) manufacturers claim
their PCs are better and cheaper but harder to sell than those
from overseas.

Local PCs have lost their grip on the domestic market over the
last four years.

They controlled between 75 percent and 80 percent of the
domestic market in 1992 when 200,000 PCs were sold nationwide,
according to Infokomputer magazine.

They sold half of the 280,000 PCs sold in 1994, and 45 percent
of those sold last year.

Between 1985 and 1995, the government tried to develop the
domestic computer industry through import taxes and duties on
computers and computer-related products. Government offices were
also required to buy local PCs.

But protectionism has not worked. Not only have local PCs'
sales dropped, almost all of their components are still imported.
The government eliminated import taxes and duties on computers
and computer-related products this year.

The magazine estimated local PC sales would drop to 40 percent
of the 500,000 PCs sold this year.

Local PC makers blame poor sales on image and promotion
problems.

"The public generalizes that all local PCs use fake
components, are easy to break, etc. This perception is not
entirely true," said Wiriadi Tirtariyadi, a director of PT
Multicom Persada International which produces Mugen PCs.

Wiradi told The Jakarta Post recently that retailers and
distributors gave local PCs a bad image.

The big local PC manufacturers and retailers assemble PCs from
imported components, he said. But the big manufacturers applied
strict quality controls unlike retailers.

"The PC shops (retailers) make PCs out of cheap, fake
components and sell them far cheaper than all other PCs. They
pledge long guarantees to buyers. But, after the transaction,
they disappear, or close their shop and open another one
elsewhere with a different name to avoid previous costumers," he
said.

Outdated

"This has tarnished the image of all locally made computers,"
he said.

To improve their products' image, four leading domestic PC
makers signed an agreement recently with the leading software
firm Microsoft of the United States to preinstall genuine Windows
95 operating systems in their PCs.

The four firms are PT Multicom, PT Zeuscom Indonesia which
makes Kronus PCs, PT Galva Technologies Corporation which makes
GTC computers and PT Zyrexindo MandiriBuana which produces Zyrex
computers.

The agreement benefits local PC producers by making the public
believe in their products and benefits Microsoft because it
reduces software piracy.

The four companies plan to make a similar agreement with the
leading microprocessor firm Intel of the U.S.

Wiradi said the public were largely ignorant that some local
PCs were as good, if not better, than branded PCs from overseas.

He said foreign big-brand-name manufacturers churned out
millions of PCs and waited until they were all sold before
producing more advanced models.

They sold their stock in developed countries before sending
the remains to developing countries after they had become
outdated in developed countries.

"This was the reason that many branded PCs sold in Indonesia
had outdated components," he said.

Local leading PCs makers had smaller economies of scale, each
producing about 100,000 PCs a year. This enabled them to produce
more advanced PCs with the newest components faster.

"For instance, the first computer in Indonesia using a Pentium
Pro microprocessor was a local computer, not a branded computer,"
he said.

Zatni Arbi, a computer observer, said Wiradi's statement that
branded manufacturers sent the remains of their stocks to
developing countries was no longer true. He said branded
manufacturers were now launching their newest products in
developed and developing countries simultaneously.

"I know that IBM Aptiva and Compaq Pessario were launched in
the U.S. and Indonesia around the same time," he told The Post.

Cheaper

The leading local PC makers may no longer boast that their PCs
use more advanced technology than branded PCs sold domestically,
but they insist their PCs have some advantages over branded ones.

"As far as technology is concerned, all computers are similar.
You can check that on the contents of local and branded PCs. They
are basically similar. Local PC manufactures can only take
advantage of better after-sales service and cheaper prices," said
Hendra Sutandinata, the president director of PT Zeuscom.

Some local manufacturers, he said, had around-the-clock after-
sales service to repair broken PCs, while branded PCs might have
to be sent to Singapore.

Local PCs could be between 25 percent and 30 percent cheaper
than comparable branded PCs, Hendra said.

He said no branded computer firms made PCs themselves anymore.
They ordered them from PC makers around the world, including
Indonesia. They put their brands on the PCs and raised the price.

"I know that because I once worked for a big computer firm in
the U.S. and purchased PCs from manufacturers around the world
for our company," said Hendra, a former marketing manager of
American Tandon Computers.

He said Zeuscom's factory in Kapuk, Tangerang, also made PCs
for branded PC firms abroad. He would not reveal their brands.

"So what happens is really funny. We export our PCs to the
United States. There, our customers put their brands on them and
send them to many parts of the world, including Indonesia, at a
higher price," he said.

Hendra said local manufacturers preferred selling computers
domestically with their own brands to making computers for
branded PC firms because it was more profitable.

"The profit (margin) from domestic sales can reach two digits,
while profit from sales to branded computer firms averages 2
percent," he said.

Local manufacturers found it hard to sell their products under
their own brands because they could not afford to promote them,
he said.