Ericsson Aims to Produce 5M Handphones, Despite Crisis

Posted on July 31, 1998 
Filed Under AsiaBizTech, Julian

By Julian Matthews

July 31, 1998 (KUALA LUMPUR) — Swedish telecommunications giant Telefonaktiebolaget LM Ericsson aims to make 3-5 million units of mobile phones at its Malaysian plant by the year 2000.

Ericsson Mobile Communications (M) Sdn., Bhd. managing director Olle Ulvenholm said the company hopes to achieve the target when a new plant comes onstream by mid-1999.

Ulvenholm said the 500,000 sq. ft. plant, to be built and equipped at a cost of 100 million ringgit (about US$25 million), will be adjacent to the company’s existing plant in Shah Alam.

“Despite the regional economic slowdown, the demand for mobile phones is still strong. People still need to communicate,” he said. Ulvenholm said the performance of the existing plant had exceeded expectations in terms of production quality, distribution and sales since it began operations last November.

“By the end of this year, we will have shipped more than a million phones,” he said. “Our customer base continues to expand in Asia Pacific countries such as Australia, Hong Kong and Taiwan, and the business has grown to encompass India, South Africa and Germany.”

The plant was accorded “strategic pioneer status” by the government, which is a 10-year, tax-free incentive. About 90 percent of the mobile phones manufactured at the plant is exported. The plant is one of Ericsson’s eight mobile phone factories in the world. The others are in Brazil, the United States, China and Europe.

Ericsson is the leading brand in the local digital cellular phone market and holds a 30 percent share of the estimated two million mobile phone subscribers. Ulvenholm said a new growing segment were women in their 20s, and he expects women to constitute half of the local market by the year 2000.

Ulvenholm said the strength and competitiveness of the Malaysian electronics industry for components and sub-assemblies was one of the main factors in choosing the country to locate the plant.

“We now have concrete plans to introduce Malaysian third-party components and parts, not only in the Shah Alam plant, but also in other countries, including Sweden,” he said.

Ulvenholm said Ericsson’s group of companies in Malaysia was expected to register between 1.5 billion and 2 billion ringgit in turnover this year, of which between 500 million ringgit and 1 billion ringgit would come from the export of mobile phones. “With the new factory in place, these figures are expected to grow quite substantially,” he added.

LM Ericsson recently reported a worldwide net sales rise of 14 percent in the first six months of 1998 compared with the corresponding period in 1997.

During the period, China strengthened its position as Ericsson’s single largest market, and sales to Asia increased by 6 percent. Excluding China, however, sales to Asia declined by 27 percent.

Published in Asia BizTech, Jly 31, 1998

by Julian Matthews, Asia BizTech Correspondent

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