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Samsung Electronics Co (KRX: 005930) Plans To Build New Indonesia Factory

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By on Company, Technology & Software

On Monday Korean tech company Samsung Electronics Co (KRX: 005930) announced that it has plans to build a factory to produce phones for the Indonesia market, one of the fastest growing markets in the world for smartphones.

The company already has factories in Vietnam and China. It is unknown what the size of this strategic investment will be. A few months ago this year, Foxconn Technology Group, a major supplier to Apple Inc (NASDAQ: AAPL) in Taiwan, disclosed that it would possibly invest $1 billion to build a manufacturing factory in Indonesia.

According to an emailed statement from Samsung, the company has been in talks with the government in Indonesia to get approval for its plan to create phones for the domestic market.

According to Budi Darmadi, the director general of high tech industry at the industry ministry in Indonesia, Samsung’s goal is to gradually increase the production capacity at the factory in West Java, Indonesia, to 900,000 units per month. The South Korean company is expected to start with 100,000 units this year.

It was not disclosed whether Samsung will use the factory to manufacture cellular phones or smartphones, or both.

Indonesia has a youthful population, low rates for smartphone penetration, and higher disposable incomes, making the Southeast Asian country an appealing market for smartphone makers like Samsung. The company has recently experienced slowing growth of sales of is Galaxy smartphone models in established markets.

Indonesia’s population of 240 million consists of a majority of 30 year old people or younger. Just 20 percent of that demographic use smartphones. The company estimates that by the end of the decade, that percentage with climb to 50 percent.

Samsung’s attempt to enter the Indonesian market follows just months after the country elected Joko Widodo, the former governor of Jakarta. Widodo has business-friendly views, and is the president of Southeast Asia’s largest economy. His administration officially begins in October.

The government in Indonesia is currently in talks about levying a possible tax of 20 percent on smartphones that retail for more than 5 million rupiah (about USD$428.38). This is an attempt to slow the increasing influx of imported foreign goods.

 

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