Jung Soo Shin | Slowdown in demand is a concern

Jung Soo Shin | Slowdown in demand is a concern

Armed with the understanding of the market, he has pushed Samsung’s growth rate in India and has got additional investments into the country. Edited excerpts:

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How has the consumer in India changed? What’s your view of the consumer sentiment this year?

I think, generally, thanks to the overall fast-growing Indian economy, we are catering to a lot more middle-class people than before. The adoption of new technology by the Indian consumer has improved.

The smartphones segment, for instance, has seen huge growth in the last one year. Also, although other categories that we play in, such as 3D television, LED, flat panel and smart TVs remain a niche, but the demand is going up. That’s the big difference.

Due to changing income levels, people’s preferences are changing from the basic machines to the premium line products.

Hasn’t the slowdown affected demand? Are you worried this year?

I am not worried, but it is a concern. Of course, the slowdown has affected demand. The unpredictable weather has also affected the home appliances business. Recently when I met our Korean community, they felt that the slowdown in car sales will have an overall impact.

But it’s not a big difference for us as we have a two-track strategy. We are focused on entry premium and the premium category. The slowdown has affected us, but we have been able to create new demand through products like smart televisions and smartphones that have been instrumental in maintaining reasonable growth for us.

Have you seen a drop in people moving to more expensive products because of the slowdown?

I think, generally, yes.

Which is your biggest market globally?

Countrywise, USA is the biggest market for us. But India has improved its position in terms of contributing to the global revenue. When I first came on board to head India operations two-and-a-half years back, India’s contribution (to global turnover) was 1.8%, now it’s 2.5%. We are targeting 5% in the next three years, which is quite big.

Samsung is doing some serious investment in India. How much is it and for what?

Samsung has made an investment of $160 million (around 790 crore today) in the last two years. This has been used for setting up the refrigerator plant in Chennai, the mobile manufacturing facility at Noida and for the air conditioner lines, broadly.

Refrigerators have very low penetration. That’s why I say India has huge potential. There is a fast growing local demand for mobile phones as well.

How did you convince the headquarters to put in money?

Among the BRIC (Brazil, Russia, India and China) countries, India has a huge potential next to China, and also we get very skilful workers here and good research and design engineers. Eventually, for Samsung, in the next five years, India will be a manufacturing hub for the Middle East and Africa markets and some low-end Asian markets.

What is the future of digital media technologies in India?

We have good R&D engineers, almost 6,000 in India. There are 3,500 in Bangalore and more than 2,000 people in Noida. They are creating lots of new applications and content. When it comes to being a convergence destination, within one year India can be there.

Your views on Samsung’s performance in the tablet segment.

I think we have got strong competition in that segment, but those companies are not focused on this segment in this country. Overall, we have 50% share of the market in this category. This data is as per GfK (Nielsen) reports. Of course, there are a lot of products coming from overseas that we do not account for. These are brought in by the people when they travel abroad. Currently the tablet market is very small and Samsung is the leader in the segment. The 7-inch and now the 10.1-inch tablet are in the market. We are launching another 8.9-inch tablet by the end of this month. We have prepared such a wide portfolio that I’m confident about this segment doing well for us.

What about growth in the smartphone category?

Last year, when we launched smartphones in June, our market share was 2%, today we are at 27% and we are looking at 40% soon.

Your competitor in the category?

Our strongest competition in this category is still Nokia. They are facing some trouble, therefore, the gap is narrowing.

Which product category contributes maximum to the India revenue?

Mobile phone segment plus consumer durables and home appliances segment contribute 50% each to the revenue. Within that, strong growth drivers are mobile phones and flat panel televisions.

Why is the mobile category so important?

Every year there is a demand for 150 million sets in India. Of course, we cannot compete in all the segments especially with the Chinese brands. But we cater to the mid to premium segments. Smartphones are growing fast in India.

Even for television, traditionally 90% used to use cathode ray tube (CRT) televisions, but this year although they are still demanding CRT televisions, consumers are fast shifting to LCD and LED television segment.

Personally, which is your favourite product from the Samsung line-up?

The Samsung smartphone Galaxy S II.

What are the challenges for the industry considering the input costs are going up and margins are getting squeezed.

India does not have uniform taxation levels, therefore, differential value-added tax systems across different states is challenging for companies to work with. If we move to other states, we have to pay extra excise duty. We have 34 warehouses or distribution centres across India.

Another challenge for us is to capture the rural markets, which still doesn’t know Samsung. To increase penetration levels and to cope with poor infrastructure, we need to invest a lot. Regarding the rising raw material costs, we don’t have a choice.

What were the shortcomings that you saw when you came here and what have you changed?

I spent 19 years overseas before I came to India. I brought in some new marketing strategies and gave confidence to my people. Besides, I brought the fundamentals of transparency and new management skills to this country. Different business heads hold regular employee meetings and share their business plans so that everyone is on the same page.

This is just basic, not a huge change.