Local industry taking over the electronics market

Illustration: TBS

Until the beginning of the last decade, Bangladesh's growing market for television sets, refrigerators or air conditioners was a sole ground for imported products. Imports of those had been a lucrative business for corporate players and the grey market traders. 

Not anymore. 

Walton, a local company that started business with low-cost television set imports, entered a bold local manufacturing venture in 2008 and the rest is a story of a perfect marriage between supportive state policies and the entrepreneurs' hunger to conquer. 

The company, starting as a cost leader and gradually transforming into an innovator, in a decade, occupied over two-thirds of the refrigerator market that grew four to five times, over one-third of the television market, and 40% of the air-conditioner market, according to its managing director and CEO Golam Murshed. 

Not only did it win the war against imports, in fact, the big name international brands the company started competing with have built their local manufacturing factories.

Thanks to the tax-VAT policies that aimed to maximise local value addition, locally manufactured electronic products now face much lower duties and taxes than imported ones.  

Singer, which has been present in the market for over a century initially with its signature product sewing machines and later leading the home appliances market with its imported products, too built their factories to catch up. 

Following the takeover by Turkey-based Arçelik, a top global name in white and brown goods, Singer re-energised itself and is building another state-of-the-art factory at Narayanganj, eyeing market leadership. 

Korean Samsung in partnership with homegrown Fair Group is manufacturing all their units of TV, refrigerator, washing machine, AC, microwave woven and even smartphones at a gigantic local factory at the east of Dhaka. 

Butterfly, a local partner of Korean LG, has also built its factory. The list of local factory owners now also includes Japanese Sony, Toshiba's local distributor Rangs Group, Hitachi's partner Konka, and Philips' partner Transcom. 

Starting with imports, Minister Group is another local manufacturer, and with its two brands Minister and MyOne, it is a big name across Bangladesh now.   

Also, local conglomerates like Jamuna, Pran-RFL with their brand Vision, and Orion have been increasing investments in their factories, eying market share. 

"Each of the factories have been saving our hard earned foreign currencies through local value addition and substituting imports; not less than $2 billion a year," said Walton's CEO while talking to TBS. 

Industry insiders said that except for the television segment, people barely buy imported refrigerators, air conditioners, washing machines, or kitchen appliances like microwave ovens. 

Murshed said very few of the rich consumers and institutions look for imported products, despite the fact that we are successfully competing with the products in the international market. 

The growing, evolving market and the industry    

The market for TV and fridge started to grow in the early 2000s with the changing scenario in families' incomes and their lifestyles amid urbanisation. 

A decade later, increasing purchasing power accompanied by the countrywide electrification prepared the base for the big leap that was brought and capitalised upon by the local manufacturers. 

Right now, 99% of the population has access to electricity and when they find locally manufactured appliances and electronics are much more affordable than a decade ago — on top of the fact that they are earning more — they do not hesitate to buy their refrigerator, television, microwave ovens and other necessary products. 

Instalment purchase facility made it even easier for the people. 

Before 2010, prior to the local manufacturing wave, the refrigerator market was seeing an annual sales of at best 7-8 lakh units. It peaked to 40 lakh in 2019, but after the pandemic and the inflation brought by the Ukraine war, the market volume has recently shrunk to around 30 lakh units a year. 

More than 95% of the refrigerators sold were locally manufactured and Walton's market share was at least 65%, according to its CEO. 

Singer and Jamuna were the closest competitors in 2020, according to a report by UCB Asset Management Research. 

In 2020, the refrigerator market size was $765 million, which was $650 million for television, $590 million for air conditioner and $345 million for home appliances. The total market of $2.4 billion is headed to a $10 billion milestone by 2030. 

After the price hike over the last 15 months, the market for cooling products, television and home appliances is estimated to have already reached over $3 billion, believes Golam Murshed. 

Air-conditioners were a luxury for the middle class 15 years ago and now it has become a necessity for almost every family able to pay the price; every year 3 to 3.5 lakh ACs are being sold.  

At least 85% of the AC market is being served by local manufacturers, be it a local brand or a foreign brand. 

Almost all the major players are manufacturing ACs locally, while a very few consumers, out of their fascination for premium ones, want to pay a higher price for imported units, said local manufacturers, despite their claims of manufacturing the most modern technology products. 

For instance, Walton's CEO said they were manufacturing the most energy saving ACs as it has grown big in research and development (R&D) thanks to its global R&D headquarter in Seoul where top global brains work with Bangladeshi engineers. 

"Our product range also includes everything a market might need," he added. 

He did observe a gradual shift in consumers' mindset, especially after his company acquired Italian brands and technology a few years back, launching smart refrigerators and ACs. 

"In fact we manufacture products for around a dozen foreign brands under contracts, and the fact helped us win the heart of some of the imported product buyers. 

Once the Bangladesh market was significantly cost sensitive and lower end products were dominating, especially in the refrigerator and air conditioner segment. Nowadays, more than two-third consumers ask for the energy-saving, eco-friendly products even if they cost more. 

And the energy crisis might result in complete removal of old-style products, industry people believe. 

Television market is still a frustration for the local manufacturers as 40% of the market is still under the control of the importers, mainly in the grey market. 

About 6-7 lakh LED television sets, most of which are smart TVs, are being sold in the market every year and local manufacturers are trying their best in terms of quality and pricing to phase out imports. 

"Both the market and the industry have been evolving towards a better life," said Murshed. 

When his competitors are investing more and more and his company, already emerging as a top 10 or 11 global name in volume, aims to be at the top five by 2030. 

Just like the matured, developed markets, brands have no room for error as the consumers here have turned futuristic. 

They hate paying excessive money unnecessarily, but are ready to pay higher for quality products.