Xl Axiata Axis Capital Group Update: Samsung Announces Production in Indonesia

Jakarta, Indonesia - Samsung Electronics Co Ltd, the world’s largest smartphone maker, announced that it plans to set up a factory to produce mobile phones mainly for Indonesia. Samsung has been discussing with the Indonesian government since early 2014. The reason for their expansion is perhaps they see Indonesia as one of the fastest growing markets for mobile devices in the world, to meet local consumers’ demand more effectively.


Budi Darmadi, director general of high-tech industry at Indonesia’s industry ministry, states that Samsung plans to build up a factory just outside Jakarta at West Java that will start at a monthly capacity of 100,000 units this year and slowly reach up to 900,000 units per month in the future. The reviews are still not sure if Samsung plans to produce both cellular and smart phones at the factory.


Mahendra Siregar, the head of Indonesia's Investment Coordinating Board, which is tasked with promoting and issuing investment licenses, said he couldn't provide details on the potential investment size, or on specifics about potential products that could be produced there but it would definitely be a legit subsidiary of Samsung and not a fraud as so many people hints.


Along the years, the country’s youthful and growing population, low smartphone penetration and higher disposable income make Indonesia as an attractive market for Smartphone manufacturers. 20% of the country’s population below 30 years old use smartphones. The young people make up more than half of Indonesia’s 240 million populations. It is estimated that before the end of the decade, smartphone usage will rise to 50%.


The Indonesian government is considering imposing a 20% tax for smartphones retailing at USD 428.38 (IDR 5 million) and above. Government data show Indonesia imported $2.8 billion of cellphones last year, the second-largest import after crude oil and oil products.


According to Counterpoint's figures, Samsung accounted for 22% of the smartphones sold in Indonesia in June, down from the 30% it sold in the year-earlier period.


While Apple Inc. has also slipped, to just 6%, increased competition is coming from Chinese brands like Lenovo Group Ltd. , and domestic brands that are virtually unknown outside the country, such as Advan Digital, which accounted for 7% of sales in June.


Telecommunication companies, on the other hand, are now getting prepared for the deeper penetration of smartphones and the continuous technological advancement of Indonesia.


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