A new Samsung factory in near Jakarta has begun operations, according to a Wall Street Journal article by I Made Sentana and Jonathan Cheng. The location of the new factory is generally intended to cut costs.
There are a couple of ways that works. One is that it reduces transportation costs with respect to the growing Indonesian market. Samsung wants to maintain its lead in the country, having seen its marketshare drop from 38 percent last year to 30 percent in Q1 of this year. And now the government is pushing Samsung to stay, having introduced regulations that include higher taxes for imported smartphones and other ‘luxury’ goods. But the same regulations have also helped to create incentives for smartphone makers like Samsung to set up shop there, giving them an advantage over imports.
Sentana and Cheng note that Samsung has also opened factories in recent years in Vietnam and also India – another country where the company remains the top brand for smartphones. But the Indonesian factory could partly be defensive maneuvering, as the company had a very difficult 2014 in which it suffered from the encroachments of Apple and numerous smaller rivals. Now that its new flagship Galaxy devices are on sale and doing well, though, Samsung is on a more solid footing, and the Indonesian factory could give it an edge in the region.