Samsung eyes Euro growth in appliances

Korean technology giant adding bulk to Poland production facility in Poland

By Kim Yoo-chul

Domestic appliances are a rare business area where Samsung Electronics admits it has been underachieving.

But the Korean technology giant doesn’t intend to keep things this way as it aspires to be a brand in white goods that it is for flat-screen televisions and mobile phones, and believes that a strengthened position in the lucrative European market would be crucial for elevating its status.

It would be a difficult challenge for Samsung to steal customers away from established brands such as Electrolux in the European markets for refrigerators, washing machines and other home appliances.

But the Koreans are bullish about their chances of becoming a top white-goods brand in Europe, as it expects to benefit from its reputation as a global leader in consumer electronics and mobile devices.

Samsung is continuing to add muscle to its domestic appliances manufacturing facility in Poland, which hires a workforce of 1,400, and expand its partnership with regional distributors to improve its penetration of key European markets.

Samsung bought the manufacturing plant from Amica Wronki, a Polish maker of refrigerators and washing machines, for about $76 million last year, making it is sixth manufacturing facility for domestic appliances following the ones in Korea, China, Thailand, Malaysia, India and Mexico.

Choi Gee-sung, Samsung’s chief executive officer (CEO), stressed that domestic appliances are becoming increasingly critical for the company as it looks to lessen its reliance on televisions and mobile phones in its lineup of finished goods.

``Since we established a legal entity here, we also injected needed energy into local communities, and this also helps us businesswise,’’ he said.

``We have some land left, about 89,000 square meters, for possible expansion. The Poland facility will be the hub for our European efforts in domestic appliances.’’

Eyeing top-dog status

A Samsung executive involved with the Poland facility confirmed that the company has been looking to boost the production capabilities of the plant.

``By 2013, the annual production capacity for refrigerators and washing machines will be expanded to 2 million units,’’ said Kim Deuk-keun, head of the Samsung Electronics Poland Manufacturing (SEPM), adding that the plant is currently capable of producing 500,000 refrigerators annually.

``Samsung will invest at least $75 million in the Polish plant and also the site for the expansion, which would be crucial for saving logistic costs and improve the accessibility to European markets. Our eventual goal is to achieve at least 10 percent market shares for both refrigerators and washing machines next year.’’

During the first six-months of 2010, Samsung’s share in the European market for refrigerators was 8.3 percent and the share in washing machines was 2.9 percent.

The company wants to achieve at least 20 percent market shares in both products by 2015, according to Kim. He also said that the company was also looking to maximize production efficiency.

``We are saving about 30 to 40 percent in the costs for inventory management and logistics since acquiring the Poland plant. The site was supplying products that reach 20 percent of all European markets at the end of the first-half of the year. By the end of 2013, this will be 70 percent.’’

Hong Chang-wan, vice president of Samsung’s home appliances division, said his unit will achieve $1 billion in sales from European markets this year.

Aside of refrigerators and washing machines, Samsung also sees growth opportunities in water purifiers, Hong said. The Samsung leadership has been granting greater autonomy to the home appliances unit, Hong said, as the company looks to get aggressive in the domestic appliances market.

The company featured more than 140 domestic appliances products at the IFA conference in Berlin.

Samsung’s home appliances division earned 360 billion won in revenue during the second-quarter, which merely accounts for a friction of what the company earned in its major markets of semiconductors, liquid-crystal displays (LCDs), televisions and mobile phones.

``Refrigerators will eventually become Samsung’s fourth product to become global top-selling brands following ovens, televisions and chips by late this year or early next year,’’ Hong said.