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Samsung to open Handset Manufacturing Facility in Indonesia

August 18, 2014 - Written By Peter Holden

Samsung may be seeing a slow-down in growth in its more established markets, but that doesn’t mean it is sitting on its hands hoping the situation will change by itself. Following on from the news that it is opening a new manufacturing site in South Africa last month, the Korean Tech giant has also announced that it plans to build a handset manufacturing facility in Indonesia.

Why Indonesia? Well, its one of the worlds fastest growing markets for handsets, Indonesia has a population of around 240 million people, with around 120 million people under the age of 30, of which only 20% of which own a smartphone. Analysts estimate that that figure will rise to 50% by 2020. The youthful population, higher levels of disposable income and relatively low  represents a huge sales opportunity for Samsung, and is a show of confidence for Indonesia’s new business-friendly President, Joko Widodo, who is due to take office in October. Other companies such as Foxconn are waiting for this to happen before making a decision in regards to investing in Southeast Asia’s largest economy.

In an emailed statement, Samsung said that “We have been discussing with the Indonesian government of our plan to produce mobile phones for the domestic market, so that we can meet local consumers needs more effectively”. What this means is that Samsung have been procuring incentives from the Indonesian government, quite often this means a lower tax rate in return for opening up a new facility, or even the Indonesian government subsidising the cost of the plant in return for the jobs it creates. Something else that may inadvertently help Samsung with its sales is the rumour that the Indonesian government is considering introducing a 20% import duty on imported smart phones costing 5 million Rupiah ($428) or more. It’s an understandable move to secure both employment for its population as well as earning income from the resulting tax and growth in its economy.

According to Budi Darmadi, the Director-General of High-Tech Industry at Indonesia’s Industry Ministry, Samsung plan to build the manufacturing facility in West java, initially producing 100,000 units per month building up to 900,000 units in time. It’s unknown exactly which models the facility will produce at this present time, something that isn’t helped by the overwhelming array of handsets that Samsung have to choose from.