SlideShare a Scribd company logo
1 of 15
Download to read offline
Market size of refrigerators increases fast amid tight
competition. (Industry Profile).
The country's household electric equipment industry including refrigerator industry has been
categorized as sunset industry or footloose industry because of the steady development of its
technology. If there is any change it is only in features. The technology used in refrigerator industry
is easily available as generally the industry uses sets of equipment that are generally used in the
manufacturing industries such as plastic injection molding machine, vacuum forming, steel rail
forming, various machine tools and handling equipment.
With those characteristics, electric equipment industry is easily relocated to any place where
production cost is lower or where operation is more efficient such as in place where labor cost is
cheaper, or electric tariff and tax facility are more attractive. This industry is expected to continue to
survive as its product is needed by the people especially people of middle to high class. Especially in
Indonesia with its tropical climate, refrigerators will be more necessary to preserve food.
The decline in the purchasing power of the people as a result of the financial crisis in 1998 caused a
sharp fall in the market size of refrigerators to only 399,203 units, but in 1999, the market recovered
immediately with sales rising to 582,835 units in 1999. Sales even surged to an estimated 973,775
units in 2001.
Sharp, National and Sanyo, all Japanese brands--maintained the position as the market leaders after
the crisis, but there were also factories that had to be closed such as that of PT Lippo Nelco, which
produced Mitsubishi refrigerator. There were quite many local brands of refrigerators before the
crisis hit the country, but only Maspion, Cosmos, Daichi and Polytron managed to weather the
difficult period. Other brands like Sapporo have been defunct. However, there were also new brand
appearing during the crisis such as Sanken. Sanken uses two local brands but its components are
imported from China and Japan. Meanwhile Samsung, which is still imported in built-up form from
South Korea will be assembled in the country. An assembling plant for Samsung is expected to be
operational in 2004.
Process of producing refrigerators
There are 14 phases to go in the process of producing refrigerators namely fabrication, spot
welding, painting, vacuum forming, sealing assembly, evaporator assembly, condenser assembly
(suction line), cooling unit, sub assembly and packing.
Fabrication is a process of producing parts and components using steel sheets as basic material.
Parts produced in this stage are cabinets, doors, lower cover and hinges. The process of
manufacturing begins by putting steel sheets in roll to cutting machine, followed with the production
of cabinet and other parts with bending machine.
Spot welding is the next process after fabrication namely assembling parts through welding on the
tips of the components. Welding is made with special electric welding machine. The next process is
painting. After being assembled into one unit, the cabinet of refrigerator is sent to the painting
shops to be painted. The parts to be painted are the cabinet, doors, legs and the evaporator. Before
being painted, the parts are first washed with water and chemical mixture.
The painting process is both with automatic and manual systems. Automatic painting is made in a
closed room where fast rolling disk is used to spray the paint on the components. Before and after
the process of automatic painting, manual spraying is necessary to paint parts that could not be
painted well in automatic process. After that is drying in oven.
In the process of vacuum forming, with the help of heating and molding machine, the interior
components of refrigerator are produced from ABS plastic material. In this process the basic
material is cut and molded to have the desired form. The doors and the cabinet are fixed, to be
followed with the process of sealing and door assembly that is part of painting shop which is fixed
with condenser pipe and then insulated. Inner liner and inner door are then fixed before being ready
to be filled with urethane.
Urethane is filled into insulator through injection. Insulator is necessary to maintain the temperature
in the refrigerator. The process is by fixing mold in the cabinet and then put into machine to be
injected with a mixture of premix, cyclopentane isocyanate. The process will take one hour.
TIG or aluminum welding material in the production of evaporator is welded first before being sent
to the assembling unit. Evaporator is a place for freezing to produce ice. The material for evaporator
is produced not in the factory. Suction is fixed in this section and is welded with copper. Plastic
cover is then provided and molded with bending machine. Copper pipes are cut with automatic
machine for condenser assembly (suction line) and then plastic cover is provided.
In the cooling unit, there are four types of activities namely fixing of compressor, vacuuming, gas
filling and wiring or cable connection. After the compressor has been fixed, the connecting pipe is
covered with vaseline. After the pipe has been welded there is the process of vacuuming using
special equipment. After that it is filled with cooling gas, to be followed with the process of
connecting with cable and tying the cables with plastic.
In the sub assembly or cabinet assembly the process of assembling refrigerator from half finished
components will take place. After being filled with urethane, the cabinet is put over a falet and then
the legs which are already painted, hinges, control box and the evaporator are fixed. For a two door
refrigerator, coil and fan are used. The last is the fixing of doors.
Final assembly--This process includes cleaning, fixing of accessories, final check and packaging or
cleaning with cloth and air. Accessories fixed inside include racks for egg, ice cubes and vegetable,
freezing section and meat cover and drinking water section. Fixing outside include sticker and
directory book. The last process sis packing with carton box and small plate and Styrofoam to
function as cushion.
Machine, equipment and basic materials
The main machines to produce refrigerator are press and bending machines to produce the doors
and walls from steel plates, vacuum forming machine to produce inner parts from ABS plastic
material, urethane injection machine to produce insulator between the walls and machine producing
evaporator.
PT Sanyo has a complete facility to produce refrigerators. The factory which was built in 1995 has a
production capacity of 320,000 units in two shifts. Almost all main components are produced by the
company excepting compressor that has be produced by other company namely PT Sanyo
Compressor Indonesia.
Maspion factory has been integrated with component industry but part of its small components
especially main components are still imported such as thermostat and compressors for refrigerators
and washing machines. Sanyo has already produced compressors but the price is not competitive
against imported products. Maspion also uses several components from China. Components such as
compressors produced by LG and Samsung are imported from distributors in Singapore.
The main basic materials for refrigerator could be categorized into steel plate, ABS plastic and
urethane. See the following table.
Most electric industries including refrigerator industry began as assembling industry before being
developed into full manufacturing industry, but no factory is able to produce all components as it
would not be efficient. The manufacturing levels of factories are not the same.
Multinational companies from Japan and South Korea generally have production facilities in various
countries that it is not necessary to produce all components in a country. Sanyo has compressor
factory in Indonesia to supply its refrigerator factory in the country. National has a compressor
factory in Singapore, therefore the Indonesian branch has to import the component from Singapore.
It is not also necessary for a company group to produce all components. Some of the components
could be bought from other companies. Sharp, for example, uses compressors produced by Sanyo or
LG. Similarly with the case of injection moulding.
Capacity 1.88 million units
Based on data at the industry and trade ministry, the country has 12 companies actively producing
refrigerators with a total capacity of 1,884,000 units per year. Six of the companies are PT Sharp
Yasonta Indonesia, PT national Gobel, PT Sanyo Industries Indonesia, PT Harapan Daya Utama, PT
Sumber Berkah Sakti, PT Top Jaya Antariksa and PT Astra Summit Electric.
They assemble components from various suppliers or components imported in a complete set. Those
assembling component s imported in complete set are PT Harapan Daya Utama with the brand of
Daichi and PT Sumber Berkah Sakti using the brand of Sapporo & Ariston. The two brands are South
Korean brands.
Those assembling refrigerators with components from different producers such as those produced
themselves as in house products and components produced under subcontract (out house), and
imported components are mainly large companies including foreign (PMA) and domestic (PMDN)
companies. The main components used by PMA companies are imported such as from Japan and
South Korea. PLDN use both local and imported components.
PT Sharp Yasonta Indonesia is a PMA with an annual capacity of 480,000 units. The majority
shareholder of Yasonta was Firma Teladan, before Sharp Corp. decided to acquire 90% of the
Yasonta Group in 1994. Firma Teladan was closed in 1995. The shareholders now are Sharp Corp.
holding 90% and Yasonta holding 10%. The company still concentrates on producing refrigerators,
television sets, washing machines and air conditioner. Lately it started producing Simba audio.
PT National Gobel in Jakarta produces refrigerators with the brand name of National since 1971. It
is the fourth largest producer with an annual capacity of 272,000 tons. It is 60% owned by
Matsushita Electric Industrial Co. and 40% by Gobel Internasional. The company also produces
electronic goods and other electronic products such as AC, electric fans, TV set, radio receivers,
tape recorders, washing machines, electric water pumps, etc.
National Gobel has succeeded in weathering the crisis and has continued to expand. It is oriented
more to domestic market and it has developed marketing networks in the country. PT sanyo
Industries Indoensia has an annual capacity of 320,000 units per year. It is 45% owned by Sanyo
Electric Co. Ltd, 20% by Sanyo Electric Trading Co. Ltd and 35% by the family of Setiawan
Wongsodjojo. The company also produces AC, TV sets, washing machines, radio receivers and tape
recorders. Lately it produced a new brand of refrigerator Emerald using the latest technology with
anti rust PCM body and CQ compressor.
PT LG Electronic Indonesia is and Indonesia-South Korea joint venture producing refrigerator with
the brand name of LG with an annual capacity of 300,000 units. The company was first known in the
country with the name of PT Godstar Astra as a joint venture in 1990. In 1999, LG sold 51% of its
share ot Astra, but later LG took over the company again and made Indonesia as its main market
target in Asean. In 2001, TV sets and refrigerators accounted for 70% of its sales with washing
machines, AC and other products making up the rest. See the following table.
Interest in investment low
BKPM issued very few license in refrigerator industry. The agency issued no license in the last two
years. Tight competition in the market was probably one of the factors discouraging investment in
this industry.
The government has issued a series of regulations to encourage investment in the electric sector
such as a regulation allowing foreign investors to operate without partnership with local investors.
The government has also provided tax facility such as reduction of corporate tax from 35% to 30%
and exemption of import duty, surcharge, value added tax (VAT), luxury sales tax on basic material,
components and capital goods for export oriented companies operating in bonded zone/EPTE.
Facilities provided for PMA/PMDN include reduction of import duty on capital goods, basic/auxiliary
materials for two year requirement from 5% to 0% and from >50% to 50%.
The facilities are also offered for companies undergoing restructuring such as expansion,
diversification, and quality improvement and modernization of equipment. Import duty and
surcharge will be exempted for one undergoing restructuring more than 30% or more of the
investment already made. Import duty exemption on machines and equipment is offered for one
undergoing restructuring less than 30%. Tax holiday is provided for pioneer industries.
Production rising to normal level
In the 1995-2001 period, the country's production of refrigerators grew fast--from 598,000 units in
1997 to 953,270 units in 2001 or an annual growth of 16.5%.
The production plunged in 1998 when the crisis was at its worst, but in 1999, production rose to a
normal level. The production rose following the improvement in the buying power of the people
especially those of the middle class. The buying power of the consumers grew with the rupiah
strengthening against the U.S. dollar However, despite the strong growth the capacity utilization is
still low. In 2001, the industry operated at 50.6% of its installed capacity. See the following table.
According to data at the Indonesia electronic association, sales of refrigerators in the first half of
this year in the country was 481,500 units. Chinese products including non branded products, which
have begun to pose a threat to other electronic products in the country, have not gained significant
share of the market of refrigerators in the country.
Imports surging
Indonesia imports refrigerators in CBU (completely built-up) and CKD (completely knocked down)
forms. Refrigerators imported in CKD form are assembled with additional components from local
suppliers. Those in CBU form are imported by sole distributors like Cosmos from South Korea.
National Gobel, Yasonta and Samsung imports large refrigerators for middle to high class
consumers.
Imports dropped by 20.4% to 22,482 units in 1998, but in 1999, import rose again and in 2000,
imports totaled 98,804 units valued at US$ 15.15 million and it rose the figure rose further to
114,216 units valued at US$ 17.11 million.
Imported ice boxes include refrigerator-freezer combination, household refrigerator of compression
types, household refrigerators of absorption type and other types. The type import most in volume
are combination of refrigerator-freezer combination as shown in the following table.
Singapore the largest suppliers
The largest supplier of refrigerators to Indonesia in 1998 was the United States, followed by South
Korea and Japan. Japan, which had long been the main supplier, exported only 341 units to
Indonesia in 1998.
Singapore took the lead in 1999. Imports from that country totaled 30,309 units that year or 49.7%
Of the country's total imports. Now Thailand has become a major supplier accounting for 74.6% or
62,180 units of the compressor types
Import duty 15% and Luxury sales tax 10-20%
Under a deregulation measure in June 1996, the import duties and surcharge on several types of
household refrigerator were reduced. Import duty were slashed from 50% to 15%. The policy was
made ahead of the AFTA scheme to be effective in 2002. The luxury sales tax, however, was
maintained from 10% to 20%. The luxury sales tax prompted illegal imports, but smuggled products
did significantly affect the market as consumers would risk buying smuggled products without brand
as the quality is not guaranteed,
The government is expected to reduce the luxury sales tax on electric products including
refrigerators next year. Earlier the luxury sales tax on components for broadcasting companies
including radio and TV stations were reduced from 20% to 0%. The tariff cut is expected to regain
the confidence of the international community in Indonesia and reduce smuggling.
The government has also issued regulation aimed at stamping out smuggling. Under a new
regulation, the special importer identity number (NPIK) was issued as a special license to import
household electric equipment. The holders of the license are required to regularly report their
import activities. Another regulation required the issuance manual directory book in Indonesian
language with guarantee card also in Indonesian language. However, so far only 70 of those
registered NPIK holders have made registration for manual and guarantee car in Indonesian
language.
Exports surging again
Exports were not the goal of household electric equipment industry when it was first developed.
Exports began only in 1994 when many factories were built with export orientation especially those
relocated from abroad to the country from abroad. Later exports increased as shown in the following
table. There is no regulation restricting trading of electric equipment including refrigerators. The
government even encourages exports with drawback facility.
Japan the main market
The largest buyer of refrigerators from Indonesia is Japan to which exports totaled 32,092 units of
the compressor type or 38.6% of the total exports of 83,071 of the same type in 2001. Exports to
Japan are made mainly by Japanese companies operating in the country such as Sharp and Sanyo.
Other major buyers include Singapore to which exports totaled 10,335 units of the compressor type,
followed by the Philippines to which exports totaling 9,307 units, Malaysia 8,732 units and Sri Lanka
5,688 units. Non Japanese companies exporting Restaurant Refrigerator refrigerators from
Indonesia include LG Electronic Indonesia. That company exported around 2,500 units per month.
See the following table.
Phase out
In 1997, Sharp, Sanyo and Matsushita made modification of their production line to use non-HF-
-134a as refrigerant. It is estimated that the refrigerant has been used for 30% of the refrigerators
produced in the country. A presidential decree in 1992 required the phasing out of refrigerators
using chloro fluoro carbon (CFC). In 1998, the government banned the use of materials that could
destroy the ozone layer, in refrigerators and AC. The decision was in line with the Vienna
Convention banning the use of material such as CFC-12 that could destroy ozone. CFC is found in
material still used in the country like R 11 and R 12 known as freon.
The industry and trade ministry issued a regulation:
-- Banning the production and sales of products containing ODS
-- Regulating procurement of ODS for use in refrigerator industry under after sales service
-- Determining the type of product that could use ODS and the type of ODS basic materials.
Hydro carbon is potential to be used as substitute refrigerant. In Europe HC has been used as
refrigerant. The type of HC used in Europe is Iso-Butane, which is used with special compressor.
Meanwhile, Blend has been sold widely in the market as replacement for R-12.
Marketing Systems
Foreign companies notably Japanese companies generally separate producing companies from
distributors or sole distributors. Sole distributors generally have branches in various large cities. PT
Sharp Yasonta Internusa, for example, is the sole distributor for PT Sharp Yasonta Indonesia. PT
Sanjaya Sakti and PT Prima Setrindo are the distributors for PT Sanyo Industries Indonesia.
The sole agents for National, Sanyo and Sharp have wide distribution networks covering all large
cities in the country. The outlets for electric equipment in the past ten years expanded with the
opening of modern supermarkets including hypermarkets in the country such as Makro, Carrefour,
Goro, Alfa and special superstores for electric equipment and household electronic goods like Agis,
Electronic City or Hartono Electronic in Surabaya.
Modern retail companies have expanded and they have strong bargaining power facing suppliers.
National and Sharp have special marketing division to deal with hypermarkets as hypermarkets like
Maro and Carrefour will deal only with producers or sole agents. Currently modern retail companies
account for 10%-20% of the marketing of famous brands of electronic products. National, which has
a wide distribution networks, therefore, retail companies have little role in its marketing--not more
than 10%.
Tight Competition
The competition among the brands is quite tight especially among the old major brands that have
gained popularity such as Sanyo, National, Sharp and Toshiba from Japan, followed later by Goldstar
and Samsung from South Korea. The Korean products are no inferior in quality but they are sold at
lower price compared with Japanese brands.
The tightness of the competition could be seen from the intensity of promotional drives through
mass media advertisements. LG spent Rp 7.3 billion for advertisement in the first five months of
2002 to promote the sales of its TV sets and Rp2.5 billion for other electronic products including
refrigerators, TV and cellular phone. LG also opens Website--Toko LG.com--and other activities to
help promote its products.
LG the type of Expresscool for freezer, portable refrigerator, single door refrigerator, double door,
three door, side by side type, and door cooling type (the first technology in the world blowing cool
air not only from the back side but also from the door side through a ventilation in the door side).
Price varying
The prices of refrigerator vary widely between one brand and the other. The price of the Japanese
products are generally higher only because they have gained popularity and good reputation.
Luxury sales tax is a substantial element in the price of refrigerators. Luxury sales tax is stil imposed
on other electronic products like TV sets, gas oven, hair dryers, water heater, camera and washing
machine. The rupiah fall especially in 1998 sent the price of refrigerator skyrocketing as many of the
components are still imported.
Market size recorded at 1,045,238 units
The market size of refrigerators has increased considerably despite the lingering crisis. In the past
five years, sales of refrigerators grew by 17.9% annually peaking at 973,775 units in 2001 or far
exceeding the sales of 596,390 units in pre crisis year of 1997.
The market leaders for refrigerators are Sharp, LG, National and Sanyo, followed by Mitsubishi,
Hitachi and Toshiba. Toshiba is no longer produced in the country. The product is supplied through
import only. PT Lippo Melco, which previously assembled Mitsubishi has also closed its factory.
Samsung is also supplied through import from South Korea, but it is planned to be produced in the
country in 2004. Local brands still managing to survive the crisis are Maspion, Cosmos, Daichi and
Polytron. Other local brands such as Sapporo have disappeared from the market, but a new brand,
Sanken, has made an appearance, assembled in the country. Sanken is a local brand but it uses
imported components form China and Japan. Sales of Sharp has increase din the past three years-
-from 240,000 units in 2000 to 300,000 units in 2001 and to an estimated 500,000 units in 2002.
Sales of National refrigerator were valued at Rp180.44 billion in 2000 making it the second largest
contributor after audio to the total sales value of National Gobel. Sales of National refrigerator were
about 15% of the total sales of the electronic products of National Gobel in value. Sales of its audio
were valued at Rp413.64 billion or 34% of the total sales of the products of National Gobel.
According to the Electronic Marketer Club (EMC) the market size of refrigerators in the country
rose 20% in 2000 from 1.25 million units in 2001. One door type of refrigerator contributes the
largest share of 70% to the total sales of refrigerators in the country. Two door type contribute only
20% and freezer 10%.
With full line up products in various measures and models LG's Expresscool is set to grab a 24%
share of the domestic market, which according to EMC will reach 1.5 million units in 2002. LG
Electronic Indonesia is optimistic that it will has reach the highest sales target in the country this
year. LG exports part of its production of refrigerators It said demand for the type of GR-212DV and
GR-232DV has continued to increase especially in Asia. According to LG, orders have also come from
Middle East and Africa. LG sets aside 2,500 units of refrigerators for export and 5,000 units to be
disposed of on the domestic market every month.
Conclusion
The impact of the economic crisis that began to hit the country late 1997, was bad on the country's
refrigerator industry but only in 1998. That year, when the crisis was at its worst, demand was weak
resulting in a decline of 28% in production to 424,000 units from 590,000 units in the previous year.
However, the industry recovered quickly in 1999 when production shot up to 619,000 units. The
surge continued in the following two years to reach 953,270 units in 2001. The positive side of the
crisis is a leapfrog in exports--from 21,711 units valued at US$ 13.02 million in 1997 to 93,711 units
valued at US$ 20.56 million in 2001.
The progress made in the efforts toward political stability and rupiah stability and the reduction of
interest rate gave a boost to the electronic industry including refrigerator industry. The condition is
expected to continue although tighter competition is almost certain to follow the brisk market. Tight
competition will benefit consumers and give the business players a smaller margin as the
competitors will be under pressure to keep the prices as low as possible.
However, the domestic market is highly potential with the population, the fourth largest in the
world. The per capita consumption of refrigerators in the country is still among the lowest in the
world, therefore, the market is still wide open. Meanwhile, the property sector has shown signs of
revival. The revival of the property sector would contribute to increase in demand for refrigerators
especially from people of the middle to high income brackets that use the middle to high class types
of the property buildings especially in urban areas.
The market prospects, therefore, are still very encouraging for refrigerator industry in the country.
According to the Central Bureau of Statistics (BPS) the country has 50.4 million households and 34.4
million or 75% of which have enjoyed electric light. The 34.4 million households are all potential
market.
Table - 1
Basic materiala used by PT National Gobel
Description Capacity Physical form
Plastic 12.6 ton/month Solid
Metal 42.8 ton/month Solid
Corrugated box 3,206 pcs/month Solid
Styrofoam 445 kg/month Solid
Palet Wood 3,206p pcs/month Solid
Cupper Tube 1,408 kg/month Solid
Compressor 3,686 pcs/month Solid
Evaporator 3,686 pcs/month Solid
Paint 1,193 liter/month Liquid
Paint tinner 596 liter/month liquid
HCL 41 liter/month liquid
NaOH 186 liter/month liquid
Accelerator 72 kg/month Powder
C5H10 (sikoplenten) 527 kg/month Gas
Icocyanate 5.964 kg/month Gas
Premix 5.249 kg/month liquid
R134a 337 kg/month Gas
Acet, Oxy, Arg, N 300 m3/month Gas
Paper 65 kg/month Solid
Source: Data Consult
Table - 2
Producers of refrigerators and capacity, 1999
Producers Location Prod. Brand
of plant capacity
PT Sharp Yasonta Indonesia Jakarta 480,000 Sharp
PT Sanyo Industries Jakarta 320,000 Sanyo
Industries
PT LG Electronic Indonesia Banten 300,000 LG
PT National Gobel Jakarta 272,000 National
PT Kotobuki Electronics West Java
PT Maspion Indonesia East Java 100,000 Maspion
PT Asalindo Chanyu Agung West Java 100,000 -
PT Natric Jaya Industri Jakarta 41,000 -
PT Dinamika Industrial Jakarta 15,000 -
PT Hartono Istana Electric Central Java 15,000 -
PT Harapan Daya Utama West Java 13,000 Daichi
Total 1,884,000
Source: Department of Industry and Trade/Data Consult
Table - 3
Indonesia's production of refrigerators, 1997 - 2001
Year Production Growth
(units) (%)
1997 590,000 -
1998 424,600 -28.0
1999 619,000 45.8
2000 768,163 24.1
2001 953,270 24.1
Average growth 16.5
Source: Department of Industry and Trade/Data Consult
Table - 4
Imports of refrigerators by types,
1997 - 2001
(units/USS'000)
Types 1997 1998 1999 2000 2001
- Refrigerator-freezer 6,383 4,990 17,498 47,524 26,879
combination 1,216 576 2,527 6,685 3,854
- Household refrigerator 14,222 12,474 10,674 45,565 83,378
of compression type 3,778 1,734 973 5,074 11,710
- Household refrigerator 2,707 995 170 4,508 375
of absorption type 1,522 518 89 2,349 199
- Other types of 4,984 4,023 1,967 1,207 3,584
household refrigerator 1,167 1,482 725 1,045 1,344
Total 28,296 22,482 30,309 98,804 114,216
7,683 4,310 4,314 15,153 17,107
Source: CBS/Data Consult
Table - 5
Imports of refrigerators by countries of origin, 2001
Volume Value
Countries of origin (units) (US$'000)
Refrigerator-freezer Combination: 26,879 3,854
- Thailand 23,028 3,211
- Japan 1,869 267
- China 547 72
- South Korea 489 108
- Australia 276 109
- Others
Household efrigerator of Compression type: 83,378 11,710
- Thailand 62,180 8,922
- South Korea 9,308 1,810
- Japan 8,002 564
- Taiwan 1,270 173
- China 1,017 141
- Others
Household efrigerator of Absorption type: 375 199
- Germany 29 41
- Thailand 57 22
Others 289 136
Other types of household Refrigerators: 3,584 1,344
- China 603 135
- Thailand 669 395
- Others 2,312 814
Source: CBS/Data Consult
Table - 6
Taxes and import duty on refrigerators
Types Import duty VAT VAT
(%) (%) (%)
Refrigerator-freezer Combination: 15 10 10-20
Household efrigerator of Compression type: 15 10 10-20
Household efrigerator of Absorption type: 15 10 10-20
Other types of household Refrigerators: 15 10 10-20
Source: Department of Finance/Directorate General
Bea Import duty/Data Consult
Table - 7
Exports of refrigerators, 1997 - 2001
Year Volume (units) Value (US$'000)
1997 21,906 13,019
1998 47,279 11,394
1999 66,474 16,657
2000 78,251 18,796
2001 93,711 20,555
Source: CBS/Data Consult
Table - 8
Exports of refrigerators by countries of destination 2001
Country of origin Volume Value
(Units) (US$'000)
Refrigerator-freezer 5,952 1,252
Combination:
- India 4,442 895
- Japan 485 150
Others 1,025
Household efrigerator of
Compression type: 83,071 18,439
- Japan 32,092 8,506
- Singapore 10,335 2,280
- Philippine 9,307 2,280
- Malaysia 8,732 1,597
- Ceylon (Srilanka) 5,688 1,067
- Others 16,917 2,709
Household efrigerator of 561 213
Absorption type:
- Vietnam 137 35
- Philippine 118 50
Others 306 128
Other types of household 4,130 652
Refrigerators:
- Singapore 919 268
- Nigeria 397 28
- Taiwan 356 107
- Others 2,461 249
Total 93,711 20,555
Source: CBS/Data Consult
Table - 9
Prices of products of refrigerator in retailer level, 2002
Brand Code Type Price (Rp/Unit)
14 May - August 2002
LG GR 231 GVK 1 door 1,670,000
GR 191 TVG 1 door 1,509,000
LR 191 GVK 1 door 1,600,000
GR 212 DV 2 doors 2,224,500
National NRA 15 KD 1 door 1,525,000
NRA K5 ED 1 door 1,086,000
NRA K16 JD 1 door 1,553,000
NRB 18 KF 2 doors 2,492,000
Sanken SN 120 1 door 1,084,000
Sharp VR 199 1 door 1,699,000
SJ D 216 2 doors 2,742,000
SJ 58 L 2 doors 5,335,000
SJ 63 L 2 doors 5,720,000
Sanyo SR F 17 H 1 door 1,772,000
Source: Data Consult
Table - 10
Market size of refrigerators in Indonesia, 1997 - 2001
(Units)
Year Production Imports Export Market size Growth
(units) (units) (units) (units) (units)
1997 590,000 28,296 21,906 596,390 -
1998 424,000 22,482 47,279 399,203 -33.1
1999 619,000 30,309 66,474 582,835 46.0
2000 768,163 98,804 78,261 788,706 35.3
2001 953,270 114,216 93,711 973,775 23.5
Average
growth 17.9
Source: Department of Industry and Trade/Data Consult
COPYRIGHT 2002 P.T. Data Consult, Inc.
No portion of this article can be reproduced without the express written permission from the
copyright holder.
Copyright 2002 Gale, Cengage Learning. All rights reserved.

More Related Content

Similar to Refrigerator Industry Profile: Market Size Surges amid Competition

Fridge manufacturing in videocon
Fridge  manufacturing in videoconFridge  manufacturing in videocon
Fridge manufacturing in videoconPPT4U
 
industrial training internship report
industrial training internship reportindustrial training internship report
industrial training internship reportTariqJamil19
 
Internship report dawlance
Internship report dawlanceInternship report dawlance
Internship report dawlanceImtiaz Ahmed
 
Carbon fiber heating construction, clothing
Carbon fiber heating construction, clothingCarbon fiber heating construction, clothing
Carbon fiber heating construction, clothingYoungTae (Henry) Huh
 
Profile of the saravana global energy ltd
Profile of the saravana global energy ltdProfile of the saravana global energy ltd
Profile of the saravana global energy ltdKumar TS
 
IRJET- Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...
IRJET-  	  Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...IRJET-  	  Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...
IRJET- Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...IRJET Journal
 
Vapor compression cyclic refrigerators
Vapor compression cyclic refrigeratorsVapor compression cyclic refrigerators
Vapor compression cyclic refrigeratorsAlyDawod
 
Know about injection moulding copy
Know about injection moulding   copyKnow about injection moulding   copy
Know about injection moulding copyBhushan Gadilohar
 
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...svfd1721
 
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...svfd1721
 
PEL Internship report (UET Lahore)
PEL Internship report (UET Lahore)PEL Internship report (UET Lahore)
PEL Internship report (UET Lahore)Saboora Khatoon
 
About Thermocol and It’s Advantages in Current Manufacturing Industries
About Thermocol and It’s Advantages in Current Manufacturing IndustriesAbout Thermocol and It’s Advantages in Current Manufacturing Industries
About Thermocol and It’s Advantages in Current Manufacturing IndustriesNutech Thermopack
 
Report about start-up of the Plant Sublidecor 700 double panel wall 1x10
Report about start-up of the Plant Sublidecor 700 double panel wall 1x10Report about start-up of the Plant Sublidecor 700 double panel wall 1x10
Report about start-up of the Plant Sublidecor 700 double panel wall 1x10George Vamvakousis
 
Lego Blocks ( Material Engineering )
Lego Blocks ( Material Engineering )Lego Blocks ( Material Engineering )
Lego Blocks ( Material Engineering )Usama Ansari
 
Reflow Oven for SMT line E8
Reflow Oven for SMT line E8 Reflow Oven for SMT line E8
Reflow Oven for SMT line E8 Mark Tung
 
IRJET- Plastic Injection Moulding Machine
IRJET- Plastic Injection Moulding MachineIRJET- Plastic Injection Moulding Machine
IRJET- Plastic Injection Moulding MachineIRJET Journal
 
IRJET- Plastic Injection Moulding Machine
IRJET-  	  Plastic Injection Moulding MachineIRJET-  	  Plastic Injection Moulding Machine
IRJET- Plastic Injection Moulding MachineIRJET Journal
 

Similar to Refrigerator Industry Profile: Market Size Surges amid Competition (20)

REPORT BY ANIQUE
REPORT BY ANIQUEREPORT BY ANIQUE
REPORT BY ANIQUE
 
Dalwance
DalwanceDalwance
Dalwance
 
Fridge manufacturing in videocon
Fridge  manufacturing in videoconFridge  manufacturing in videocon
Fridge manufacturing in videocon
 
industrial training internship report
industrial training internship reportindustrial training internship report
industrial training internship report
 
Internship report dawlance
Internship report dawlanceInternship report dawlance
Internship report dawlance
 
Carbon fiber heating construction, clothing
Carbon fiber heating construction, clothingCarbon fiber heating construction, clothing
Carbon fiber heating construction, clothing
 
Profile of the saravana global energy ltd
Profile of the saravana global energy ltdProfile of the saravana global energy ltd
Profile of the saravana global energy ltd
 
IRJET- Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...
IRJET-  	  Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...IRJET-  	  Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...
IRJET- Smart Way to Reduce Car Cabin Temperature by using Thermoelectric ...
 
Vapor compression cyclic refrigerators
Vapor compression cyclic refrigeratorsVapor compression cyclic refrigerators
Vapor compression cyclic refrigerators
 
Know about injection moulding copy
Know about injection moulding   copyKnow about injection moulding   copy
Know about injection moulding copy
 
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
 
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
Walk in cooler & freezer cold room plant & refrigerated cold storage warehous...
 
PEL Internship report (UET Lahore)
PEL Internship report (UET Lahore)PEL Internship report (UET Lahore)
PEL Internship report (UET Lahore)
 
Injection, blow molding
Injection, blow moldingInjection, blow molding
Injection, blow molding
 
About Thermocol and It’s Advantages in Current Manufacturing Industries
About Thermocol and It’s Advantages in Current Manufacturing IndustriesAbout Thermocol and It’s Advantages in Current Manufacturing Industries
About Thermocol and It’s Advantages in Current Manufacturing Industries
 
Report about start-up of the Plant Sublidecor 700 double panel wall 1x10
Report about start-up of the Plant Sublidecor 700 double panel wall 1x10Report about start-up of the Plant Sublidecor 700 double panel wall 1x10
Report about start-up of the Plant Sublidecor 700 double panel wall 1x10
 
Lego Blocks ( Material Engineering )
Lego Blocks ( Material Engineering )Lego Blocks ( Material Engineering )
Lego Blocks ( Material Engineering )
 
Reflow Oven for SMT line E8
Reflow Oven for SMT line E8 Reflow Oven for SMT line E8
Reflow Oven for SMT line E8
 
IRJET- Plastic Injection Moulding Machine
IRJET- Plastic Injection Moulding MachineIRJET- Plastic Injection Moulding Machine
IRJET- Plastic Injection Moulding Machine
 
IRJET- Plastic Injection Moulding Machine
IRJET-  	  Plastic Injection Moulding MachineIRJET-  	  Plastic Injection Moulding Machine
IRJET- Plastic Injection Moulding Machine
 

Refrigerator Industry Profile: Market Size Surges amid Competition

  • 1. Market size of refrigerators increases fast amid tight competition. (Industry Profile). The country's household electric equipment industry including refrigerator industry has been categorized as sunset industry or footloose industry because of the steady development of its technology. If there is any change it is only in features. The technology used in refrigerator industry is easily available as generally the industry uses sets of equipment that are generally used in the manufacturing industries such as plastic injection molding machine, vacuum forming, steel rail forming, various machine tools and handling equipment. With those characteristics, electric equipment industry is easily relocated to any place where production cost is lower or where operation is more efficient such as in place where labor cost is cheaper, or electric tariff and tax facility are more attractive. This industry is expected to continue to survive as its product is needed by the people especially people of middle to high class. Especially in Indonesia with its tropical climate, refrigerators will be more necessary to preserve food. The decline in the purchasing power of the people as a result of the financial crisis in 1998 caused a sharp fall in the market size of refrigerators to only 399,203 units, but in 1999, the market recovered immediately with sales rising to 582,835 units in 1999. Sales even surged to an estimated 973,775 units in 2001. Sharp, National and Sanyo, all Japanese brands--maintained the position as the market leaders after the crisis, but there were also factories that had to be closed such as that of PT Lippo Nelco, which produced Mitsubishi refrigerator. There were quite many local brands of refrigerators before the crisis hit the country, but only Maspion, Cosmos, Daichi and Polytron managed to weather the difficult period. Other brands like Sapporo have been defunct. However, there were also new brand appearing during the crisis such as Sanken. Sanken uses two local brands but its components are imported from China and Japan. Meanwhile Samsung, which is still imported in built-up form from South Korea will be assembled in the country. An assembling plant for Samsung is expected to be operational in 2004. Process of producing refrigerators There are 14 phases to go in the process of producing refrigerators namely fabrication, spot welding, painting, vacuum forming, sealing assembly, evaporator assembly, condenser assembly (suction line), cooling unit, sub assembly and packing. Fabrication is a process of producing parts and components using steel sheets as basic material. Parts produced in this stage are cabinets, doors, lower cover and hinges. The process of manufacturing begins by putting steel sheets in roll to cutting machine, followed with the production of cabinet and other parts with bending machine. Spot welding is the next process after fabrication namely assembling parts through welding on the tips of the components. Welding is made with special electric welding machine. The next process is painting. After being assembled into one unit, the cabinet of refrigerator is sent to the painting shops to be painted. The parts to be painted are the cabinet, doors, legs and the evaporator. Before being painted, the parts are first washed with water and chemical mixture.
  • 2. The painting process is both with automatic and manual systems. Automatic painting is made in a closed room where fast rolling disk is used to spray the paint on the components. Before and after the process of automatic painting, manual spraying is necessary to paint parts that could not be painted well in automatic process. After that is drying in oven. In the process of vacuum forming, with the help of heating and molding machine, the interior components of refrigerator are produced from ABS plastic material. In this process the basic material is cut and molded to have the desired form. The doors and the cabinet are fixed, to be followed with the process of sealing and door assembly that is part of painting shop which is fixed with condenser pipe and then insulated. Inner liner and inner door are then fixed before being ready to be filled with urethane. Urethane is filled into insulator through injection. Insulator is necessary to maintain the temperature in the refrigerator. The process is by fixing mold in the cabinet and then put into machine to be injected with a mixture of premix, cyclopentane isocyanate. The process will take one hour. TIG or aluminum welding material in the production of evaporator is welded first before being sent to the assembling unit. Evaporator is a place for freezing to produce ice. The material for evaporator is produced not in the factory. Suction is fixed in this section and is welded with copper. Plastic cover is then provided and molded with bending machine. Copper pipes are cut with automatic machine for condenser assembly (suction line) and then plastic cover is provided. In the cooling unit, there are four types of activities namely fixing of compressor, vacuuming, gas filling and wiring or cable connection. After the compressor has been fixed, the connecting pipe is covered with vaseline. After the pipe has been welded there is the process of vacuuming using special equipment. After that it is filled with cooling gas, to be followed with the process of connecting with cable and tying the cables with plastic. In the sub assembly or cabinet assembly the process of assembling refrigerator from half finished components will take place. After being filled with urethane, the cabinet is put over a falet and then the legs which are already painted, hinges, control box and the evaporator are fixed. For a two door refrigerator, coil and fan are used. The last is the fixing of doors. Final assembly--This process includes cleaning, fixing of accessories, final check and packaging or cleaning with cloth and air. Accessories fixed inside include racks for egg, ice cubes and vegetable, freezing section and meat cover and drinking water section. Fixing outside include sticker and directory book. The last process sis packing with carton box and small plate and Styrofoam to function as cushion. Machine, equipment and basic materials The main machines to produce refrigerator are press and bending machines to produce the doors and walls from steel plates, vacuum forming machine to produce inner parts from ABS plastic material, urethane injection machine to produce insulator between the walls and machine producing evaporator. PT Sanyo has a complete facility to produce refrigerators. The factory which was built in 1995 has a production capacity of 320,000 units in two shifts. Almost all main components are produced by the company excepting compressor that has be produced by other company namely PT Sanyo Compressor Indonesia.
  • 3. Maspion factory has been integrated with component industry but part of its small components especially main components are still imported such as thermostat and compressors for refrigerators and washing machines. Sanyo has already produced compressors but the price is not competitive against imported products. Maspion also uses several components from China. Components such as compressors produced by LG and Samsung are imported from distributors in Singapore. The main basic materials for refrigerator could be categorized into steel plate, ABS plastic and urethane. See the following table. Most electric industries including refrigerator industry began as assembling industry before being developed into full manufacturing industry, but no factory is able to produce all components as it would not be efficient. The manufacturing levels of factories are not the same. Multinational companies from Japan and South Korea generally have production facilities in various countries that it is not necessary to produce all components in a country. Sanyo has compressor factory in Indonesia to supply its refrigerator factory in the country. National has a compressor factory in Singapore, therefore the Indonesian branch has to import the component from Singapore. It is not also necessary for a company group to produce all components. Some of the components could be bought from other companies. Sharp, for example, uses compressors produced by Sanyo or LG. Similarly with the case of injection moulding. Capacity 1.88 million units Based on data at the industry and trade ministry, the country has 12 companies actively producing refrigerators with a total capacity of 1,884,000 units per year. Six of the companies are PT Sharp Yasonta Indonesia, PT national Gobel, PT Sanyo Industries Indonesia, PT Harapan Daya Utama, PT Sumber Berkah Sakti, PT Top Jaya Antariksa and PT Astra Summit Electric. They assemble components from various suppliers or components imported in a complete set. Those assembling component s imported in complete set are PT Harapan Daya Utama with the brand of Daichi and PT Sumber Berkah Sakti using the brand of Sapporo & Ariston. The two brands are South Korean brands. Those assembling refrigerators with components from different producers such as those produced themselves as in house products and components produced under subcontract (out house), and imported components are mainly large companies including foreign (PMA) and domestic (PMDN) companies. The main components used by PMA companies are imported such as from Japan and South Korea. PLDN use both local and imported components. PT Sharp Yasonta Indonesia is a PMA with an annual capacity of 480,000 units. The majority shareholder of Yasonta was Firma Teladan, before Sharp Corp. decided to acquire 90% of the Yasonta Group in 1994. Firma Teladan was closed in 1995. The shareholders now are Sharp Corp. holding 90% and Yasonta holding 10%. The company still concentrates on producing refrigerators, television sets, washing machines and air conditioner. Lately it started producing Simba audio. PT National Gobel in Jakarta produces refrigerators with the brand name of National since 1971. It is the fourth largest producer with an annual capacity of 272,000 tons. It is 60% owned by Matsushita Electric Industrial Co. and 40% by Gobel Internasional. The company also produces electronic goods and other electronic products such as AC, electric fans, TV set, radio receivers, tape recorders, washing machines, electric water pumps, etc.
  • 4. National Gobel has succeeded in weathering the crisis and has continued to expand. It is oriented more to domestic market and it has developed marketing networks in the country. PT sanyo Industries Indoensia has an annual capacity of 320,000 units per year. It is 45% owned by Sanyo Electric Co. Ltd, 20% by Sanyo Electric Trading Co. Ltd and 35% by the family of Setiawan Wongsodjojo. The company also produces AC, TV sets, washing machines, radio receivers and tape recorders. Lately it produced a new brand of refrigerator Emerald using the latest technology with anti rust PCM body and CQ compressor. PT LG Electronic Indonesia is and Indonesia-South Korea joint venture producing refrigerator with the brand name of LG with an annual capacity of 300,000 units. The company was first known in the country with the name of PT Godstar Astra as a joint venture in 1990. In 1999, LG sold 51% of its share ot Astra, but later LG took over the company again and made Indonesia as its main market target in Asean. In 2001, TV sets and refrigerators accounted for 70% of its sales with washing machines, AC and other products making up the rest. See the following table. Interest in investment low BKPM issued very few license in refrigerator industry. The agency issued no license in the last two years. Tight competition in the market was probably one of the factors discouraging investment in this industry. The government has issued a series of regulations to encourage investment in the electric sector such as a regulation allowing foreign investors to operate without partnership with local investors. The government has also provided tax facility such as reduction of corporate tax from 35% to 30% and exemption of import duty, surcharge, value added tax (VAT), luxury sales tax on basic material, components and capital goods for export oriented companies operating in bonded zone/EPTE. Facilities provided for PMA/PMDN include reduction of import duty on capital goods, basic/auxiliary materials for two year requirement from 5% to 0% and from >50% to 50%. The facilities are also offered for companies undergoing restructuring such as expansion, diversification, and quality improvement and modernization of equipment. Import duty and surcharge will be exempted for one undergoing restructuring more than 30% or more of the investment already made. Import duty exemption on machines and equipment is offered for one undergoing restructuring less than 30%. Tax holiday is provided for pioneer industries. Production rising to normal level In the 1995-2001 period, the country's production of refrigerators grew fast--from 598,000 units in 1997 to 953,270 units in 2001 or an annual growth of 16.5%. The production plunged in 1998 when the crisis was at its worst, but in 1999, production rose to a normal level. The production rose following the improvement in the buying power of the people especially those of the middle class. The buying power of the consumers grew with the rupiah strengthening against the U.S. dollar However, despite the strong growth the capacity utilization is still low. In 2001, the industry operated at 50.6% of its installed capacity. See the following table. According to data at the Indonesia electronic association, sales of refrigerators in the first half of this year in the country was 481,500 units. Chinese products including non branded products, which have begun to pose a threat to other electronic products in the country, have not gained significant share of the market of refrigerators in the country.
  • 5. Imports surging Indonesia imports refrigerators in CBU (completely built-up) and CKD (completely knocked down) forms. Refrigerators imported in CKD form are assembled with additional components from local suppliers. Those in CBU form are imported by sole distributors like Cosmos from South Korea. National Gobel, Yasonta and Samsung imports large refrigerators for middle to high class consumers. Imports dropped by 20.4% to 22,482 units in 1998, but in 1999, import rose again and in 2000, imports totaled 98,804 units valued at US$ 15.15 million and it rose the figure rose further to 114,216 units valued at US$ 17.11 million. Imported ice boxes include refrigerator-freezer combination, household refrigerator of compression types, household refrigerators of absorption type and other types. The type import most in volume are combination of refrigerator-freezer combination as shown in the following table. Singapore the largest suppliers The largest supplier of refrigerators to Indonesia in 1998 was the United States, followed by South Korea and Japan. Japan, which had long been the main supplier, exported only 341 units to Indonesia in 1998. Singapore took the lead in 1999. Imports from that country totaled 30,309 units that year or 49.7% Of the country's total imports. Now Thailand has become a major supplier accounting for 74.6% or 62,180 units of the compressor types Import duty 15% and Luxury sales tax 10-20% Under a deregulation measure in June 1996, the import duties and surcharge on several types of household refrigerator were reduced. Import duty were slashed from 50% to 15%. The policy was made ahead of the AFTA scheme to be effective in 2002. The luxury sales tax, however, was maintained from 10% to 20%. The luxury sales tax prompted illegal imports, but smuggled products did significantly affect the market as consumers would risk buying smuggled products without brand as the quality is not guaranteed, The government is expected to reduce the luxury sales tax on electric products including refrigerators next year. Earlier the luxury sales tax on components for broadcasting companies including radio and TV stations were reduced from 20% to 0%. The tariff cut is expected to regain the confidence of the international community in Indonesia and reduce smuggling. The government has also issued regulation aimed at stamping out smuggling. Under a new regulation, the special importer identity number (NPIK) was issued as a special license to import household electric equipment. The holders of the license are required to regularly report their import activities. Another regulation required the issuance manual directory book in Indonesian language with guarantee card also in Indonesian language. However, so far only 70 of those registered NPIK holders have made registration for manual and guarantee car in Indonesian language. Exports surging again Exports were not the goal of household electric equipment industry when it was first developed.
  • 6. Exports began only in 1994 when many factories were built with export orientation especially those relocated from abroad to the country from abroad. Later exports increased as shown in the following table. There is no regulation restricting trading of electric equipment including refrigerators. The government even encourages exports with drawback facility. Japan the main market The largest buyer of refrigerators from Indonesia is Japan to which exports totaled 32,092 units of the compressor type or 38.6% of the total exports of 83,071 of the same type in 2001. Exports to Japan are made mainly by Japanese companies operating in the country such as Sharp and Sanyo. Other major buyers include Singapore to which exports totaled 10,335 units of the compressor type, followed by the Philippines to which exports totaling 9,307 units, Malaysia 8,732 units and Sri Lanka 5,688 units. Non Japanese companies exporting Restaurant Refrigerator refrigerators from Indonesia include LG Electronic Indonesia. That company exported around 2,500 units per month. See the following table. Phase out In 1997, Sharp, Sanyo and Matsushita made modification of their production line to use non-HF- -134a as refrigerant. It is estimated that the refrigerant has been used for 30% of the refrigerators produced in the country. A presidential decree in 1992 required the phasing out of refrigerators using chloro fluoro carbon (CFC). In 1998, the government banned the use of materials that could destroy the ozone layer, in refrigerators and AC. The decision was in line with the Vienna Convention banning the use of material such as CFC-12 that could destroy ozone. CFC is found in material still used in the country like R 11 and R 12 known as freon. The industry and trade ministry issued a regulation: -- Banning the production and sales of products containing ODS -- Regulating procurement of ODS for use in refrigerator industry under after sales service -- Determining the type of product that could use ODS and the type of ODS basic materials. Hydro carbon is potential to be used as substitute refrigerant. In Europe HC has been used as refrigerant. The type of HC used in Europe is Iso-Butane, which is used with special compressor. Meanwhile, Blend has been sold widely in the market as replacement for R-12. Marketing Systems Foreign companies notably Japanese companies generally separate producing companies from distributors or sole distributors. Sole distributors generally have branches in various large cities. PT Sharp Yasonta Internusa, for example, is the sole distributor for PT Sharp Yasonta Indonesia. PT Sanjaya Sakti and PT Prima Setrindo are the distributors for PT Sanyo Industries Indonesia. The sole agents for National, Sanyo and Sharp have wide distribution networks covering all large cities in the country. The outlets for electric equipment in the past ten years expanded with the opening of modern supermarkets including hypermarkets in the country such as Makro, Carrefour, Goro, Alfa and special superstores for electric equipment and household electronic goods like Agis, Electronic City or Hartono Electronic in Surabaya.
  • 7. Modern retail companies have expanded and they have strong bargaining power facing suppliers. National and Sharp have special marketing division to deal with hypermarkets as hypermarkets like Maro and Carrefour will deal only with producers or sole agents. Currently modern retail companies account for 10%-20% of the marketing of famous brands of electronic products. National, which has a wide distribution networks, therefore, retail companies have little role in its marketing--not more than 10%. Tight Competition The competition among the brands is quite tight especially among the old major brands that have gained popularity such as Sanyo, National, Sharp and Toshiba from Japan, followed later by Goldstar and Samsung from South Korea. The Korean products are no inferior in quality but they are sold at lower price compared with Japanese brands. The tightness of the competition could be seen from the intensity of promotional drives through mass media advertisements. LG spent Rp 7.3 billion for advertisement in the first five months of 2002 to promote the sales of its TV sets and Rp2.5 billion for other electronic products including refrigerators, TV and cellular phone. LG also opens Website--Toko LG.com--and other activities to help promote its products. LG the type of Expresscool for freezer, portable refrigerator, single door refrigerator, double door, three door, side by side type, and door cooling type (the first technology in the world blowing cool air not only from the back side but also from the door side through a ventilation in the door side). Price varying The prices of refrigerator vary widely between one brand and the other. The price of the Japanese products are generally higher only because they have gained popularity and good reputation. Luxury sales tax is a substantial element in the price of refrigerators. Luxury sales tax is stil imposed on other electronic products like TV sets, gas oven, hair dryers, water heater, camera and washing machine. The rupiah fall especially in 1998 sent the price of refrigerator skyrocketing as many of the components are still imported. Market size recorded at 1,045,238 units The market size of refrigerators has increased considerably despite the lingering crisis. In the past five years, sales of refrigerators grew by 17.9% annually peaking at 973,775 units in 2001 or far exceeding the sales of 596,390 units in pre crisis year of 1997. The market leaders for refrigerators are Sharp, LG, National and Sanyo, followed by Mitsubishi, Hitachi and Toshiba. Toshiba is no longer produced in the country. The product is supplied through import only. PT Lippo Melco, which previously assembled Mitsubishi has also closed its factory. Samsung is also supplied through import from South Korea, but it is planned to be produced in the country in 2004. Local brands still managing to survive the crisis are Maspion, Cosmos, Daichi and Polytron. Other local brands such as Sapporo have disappeared from the market, but a new brand, Sanken, has made an appearance, assembled in the country. Sanken is a local brand but it uses imported components form China and Japan. Sales of Sharp has increase din the past three years- -from 240,000 units in 2000 to 300,000 units in 2001 and to an estimated 500,000 units in 2002. Sales of National refrigerator were valued at Rp180.44 billion in 2000 making it the second largest
  • 8. contributor after audio to the total sales value of National Gobel. Sales of National refrigerator were about 15% of the total sales of the electronic products of National Gobel in value. Sales of its audio were valued at Rp413.64 billion or 34% of the total sales of the products of National Gobel. According to the Electronic Marketer Club (EMC) the market size of refrigerators in the country rose 20% in 2000 from 1.25 million units in 2001. One door type of refrigerator contributes the largest share of 70% to the total sales of refrigerators in the country. Two door type contribute only 20% and freezer 10%. With full line up products in various measures and models LG's Expresscool is set to grab a 24% share of the domestic market, which according to EMC will reach 1.5 million units in 2002. LG Electronic Indonesia is optimistic that it will has reach the highest sales target in the country this year. LG exports part of its production of refrigerators It said demand for the type of GR-212DV and GR-232DV has continued to increase especially in Asia. According to LG, orders have also come from Middle East and Africa. LG sets aside 2,500 units of refrigerators for export and 5,000 units to be disposed of on the domestic market every month. Conclusion The impact of the economic crisis that began to hit the country late 1997, was bad on the country's refrigerator industry but only in 1998. That year, when the crisis was at its worst, demand was weak resulting in a decline of 28% in production to 424,000 units from 590,000 units in the previous year. However, the industry recovered quickly in 1999 when production shot up to 619,000 units. The surge continued in the following two years to reach 953,270 units in 2001. The positive side of the crisis is a leapfrog in exports--from 21,711 units valued at US$ 13.02 million in 1997 to 93,711 units valued at US$ 20.56 million in 2001. The progress made in the efforts toward political stability and rupiah stability and the reduction of interest rate gave a boost to the electronic industry including refrigerator industry. The condition is expected to continue although tighter competition is almost certain to follow the brisk market. Tight competition will benefit consumers and give the business players a smaller margin as the competitors will be under pressure to keep the prices as low as possible. However, the domestic market is highly potential with the population, the fourth largest in the world. The per capita consumption of refrigerators in the country is still among the lowest in the world, therefore, the market is still wide open. Meanwhile, the property sector has shown signs of revival. The revival of the property sector would contribute to increase in demand for refrigerators especially from people of the middle to high income brackets that use the middle to high class types of the property buildings especially in urban areas. The market prospects, therefore, are still very encouraging for refrigerator industry in the country. According to the Central Bureau of Statistics (BPS) the country has 50.4 million households and 34.4 million or 75% of which have enjoyed electric light. The 34.4 million households are all potential market. Table - 1 Basic materiala used by PT National Gobel Description Capacity Physical form
  • 9. Plastic 12.6 ton/month Solid Metal 42.8 ton/month Solid Corrugated box 3,206 pcs/month Solid Styrofoam 445 kg/month Solid Palet Wood 3,206p pcs/month Solid Cupper Tube 1,408 kg/month Solid Compressor 3,686 pcs/month Solid Evaporator 3,686 pcs/month Solid Paint 1,193 liter/month Liquid Paint tinner 596 liter/month liquid HCL 41 liter/month liquid NaOH 186 liter/month liquid Accelerator 72 kg/month Powder C5H10 (sikoplenten) 527 kg/month Gas Icocyanate 5.964 kg/month Gas Premix 5.249 kg/month liquid R134a 337 kg/month Gas Acet, Oxy, Arg, N 300 m3/month Gas Paper 65 kg/month Solid Source: Data Consult Table - 2 Producers of refrigerators and capacity, 1999 Producers Location Prod. Brand of plant capacity PT Sharp Yasonta Indonesia Jakarta 480,000 Sharp PT Sanyo Industries Jakarta 320,000 Sanyo
  • 10. Industries PT LG Electronic Indonesia Banten 300,000 LG PT National Gobel Jakarta 272,000 National PT Kotobuki Electronics West Java PT Maspion Indonesia East Java 100,000 Maspion PT Asalindo Chanyu Agung West Java 100,000 - PT Natric Jaya Industri Jakarta 41,000 - PT Dinamika Industrial Jakarta 15,000 - PT Hartono Istana Electric Central Java 15,000 - PT Harapan Daya Utama West Java 13,000 Daichi Total 1,884,000 Source: Department of Industry and Trade/Data Consult Table - 3 Indonesia's production of refrigerators, 1997 - 2001 Year Production Growth (units) (%) 1997 590,000 - 1998 424,600 -28.0 1999 619,000 45.8 2000 768,163 24.1 2001 953,270 24.1 Average growth 16.5 Source: Department of Industry and Trade/Data Consult Table - 4 Imports of refrigerators by types, 1997 - 2001
  • 11. (units/USS'000) Types 1997 1998 1999 2000 2001 - Refrigerator-freezer 6,383 4,990 17,498 47,524 26,879 combination 1,216 576 2,527 6,685 3,854 - Household refrigerator 14,222 12,474 10,674 45,565 83,378 of compression type 3,778 1,734 973 5,074 11,710 - Household refrigerator 2,707 995 170 4,508 375 of absorption type 1,522 518 89 2,349 199 - Other types of 4,984 4,023 1,967 1,207 3,584 household refrigerator 1,167 1,482 725 1,045 1,344 Total 28,296 22,482 30,309 98,804 114,216 7,683 4,310 4,314 15,153 17,107 Source: CBS/Data Consult Table - 5 Imports of refrigerators by countries of origin, 2001 Volume Value Countries of origin (units) (US$'000) Refrigerator-freezer Combination: 26,879 3,854 - Thailand 23,028 3,211 - Japan 1,869 267 - China 547 72 - South Korea 489 108 - Australia 276 109 - Others Household efrigerator of Compression type: 83,378 11,710 - Thailand 62,180 8,922
  • 12. - South Korea 9,308 1,810 - Japan 8,002 564 - Taiwan 1,270 173 - China 1,017 141 - Others Household efrigerator of Absorption type: 375 199 - Germany 29 41 - Thailand 57 22 Others 289 136 Other types of household Refrigerators: 3,584 1,344 - China 603 135 - Thailand 669 395 - Others 2,312 814 Source: CBS/Data Consult Table - 6 Taxes and import duty on refrigerators Types Import duty VAT VAT (%) (%) (%) Refrigerator-freezer Combination: 15 10 10-20 Household efrigerator of Compression type: 15 10 10-20 Household efrigerator of Absorption type: 15 10 10-20 Other types of household Refrigerators: 15 10 10-20 Source: Department of Finance/Directorate General Bea Import duty/Data Consult Table - 7 Exports of refrigerators, 1997 - 2001
  • 13. Year Volume (units) Value (US$'000) 1997 21,906 13,019 1998 47,279 11,394 1999 66,474 16,657 2000 78,251 18,796 2001 93,711 20,555 Source: CBS/Data Consult Table - 8 Exports of refrigerators by countries of destination 2001 Country of origin Volume Value (Units) (US$'000) Refrigerator-freezer 5,952 1,252 Combination: - India 4,442 895 - Japan 485 150 Others 1,025 Household efrigerator of Compression type: 83,071 18,439 - Japan 32,092 8,506 - Singapore 10,335 2,280 - Philippine 9,307 2,280 - Malaysia 8,732 1,597 - Ceylon (Srilanka) 5,688 1,067 - Others 16,917 2,709 Household efrigerator of 561 213 Absorption type:
  • 14. - Vietnam 137 35 - Philippine 118 50 Others 306 128 Other types of household 4,130 652 Refrigerators: - Singapore 919 268 - Nigeria 397 28 - Taiwan 356 107 - Others 2,461 249 Total 93,711 20,555 Source: CBS/Data Consult Table - 9 Prices of products of refrigerator in retailer level, 2002 Brand Code Type Price (Rp/Unit) 14 May - August 2002 LG GR 231 GVK 1 door 1,670,000 GR 191 TVG 1 door 1,509,000 LR 191 GVK 1 door 1,600,000 GR 212 DV 2 doors 2,224,500 National NRA 15 KD 1 door 1,525,000 NRA K5 ED 1 door 1,086,000 NRA K16 JD 1 door 1,553,000 NRB 18 KF 2 doors 2,492,000 Sanken SN 120 1 door 1,084,000 Sharp VR 199 1 door 1,699,000 SJ D 216 2 doors 2,742,000
  • 15. SJ 58 L 2 doors 5,335,000 SJ 63 L 2 doors 5,720,000 Sanyo SR F 17 H 1 door 1,772,000 Source: Data Consult Table - 10 Market size of refrigerators in Indonesia, 1997 - 2001 (Units) Year Production Imports Export Market size Growth (units) (units) (units) (units) (units) 1997 590,000 28,296 21,906 596,390 - 1998 424,000 22,482 47,279 399,203 -33.1 1999 619,000 30,309 66,474 582,835 46.0 2000 768,163 98,804 78,261 788,706 35.3 2001 953,270 114,216 93,711 973,775 23.5 Average growth 17.9 Source: Department of Industry and Trade/Data Consult COPYRIGHT 2002 P.T. Data Consult, Inc. No portion of this article can be reproduced without the express written permission from the copyright holder. Copyright 2002 Gale, Cengage Learning. All rights reserved.