Made in Penang State poised to be development hub for appliances

PENSONIC Holdings Bhd is on a mission to turn Penang into a home-appliance design and development hub for the Asean region.

Group managing director Dixon Chew said in an interview that construction work is now under way to build a RM29mil design-and-development centre on a six-acre site in the Penang Science Park.

The centre, which comes under the Federal Government’s Economic Transformation Programme (ETP), is scheduled to start operations in early 2014.

The centre’s primary activity will be focused on designing and developing innovative LED lighting and home appliances such as blenders, kitchen hoods and ovens, and microwave ovens, Chew said.

“There will also be projects with other home appliance companies.

“For example, we are working with a stainless steel cookware company to develop stainless steel rice cookers that are chemical-free.

“Conventional chemically coated rice cookers pose a danger to heath when the chemical layer peels off.

“We are also exploring, with international IT companies, the possibility of producing smart wireless home appliances that can be remotely controlled with mobile telecommunication devices,” he said.

Some of these new products will be developed under the Pensonic brand, while others will be marketed under different brands, according to Chew.

The success of the Carinae line of products in theoverseas and local market is proof of Pensonic’s ability to develop innovative household products outside the kitchen appliance range.

“Some RM5mil was spent early 2012 to develop light emitting diode (LED) products under the brand Carinae, which is sold locally and overseas.

“The group is investing another RM15mil for product design and development activities, human capital enhancement and warehouse management.

“For the group’s first quarter ended Aug 31, 2012, Carinae generated about 3% of Pensonic’s RM93.8mil revenue.

“We are aiming for the Carinae product line to generate RM10mil for fiscal year 2013 ending in May,” Chew said.

According to Chew, price remains a barrier to the adoption of LED lighting in the consumer market.

He said to speed up the adoption of LED lighting in the domestic market, Pensonic would launch new versions of LED products at very competitive prices by the first quarter of 2013.

Pensonic is focused on the retail and consumer lighting segment, where there is a huge and untapped retrofit market.

“For example, the domestic table lamp market is relatively untapped, where the majority of table lamps still use fluorescent-based lighting elements.

“They do not give very good quality of light and the heat radiated by these lighting elements, can make the reading experience less unpleasant.

“We now have a range of LED-type table lamps, with unique futuristic designs, from the lowest wattage of 4W to the top of the line 10W series.

“They look good, feel good and radiate brilliant light which makes reading a pleasant experience,” he said.

Pensonic is ready to spend about RM200mil on merger and acquisition opportunities for related businesses and to build its distribution networks overseas over the next 10 years.

“In order to succeed in an increasingly global and competitive environment, we need to create new markets and change our old business model.

“We do it by expanding our distribution network and transforming ourselves into a more global company. This why we are allocating RM200mil for merger and acquisition exercises and to build new distribution networks. Global markets require more brands and more innovative products to be developed. This is why Pensonic is enhancing its design and development capabilities, and adopting new distribution strategies,” Chew said.

Pensonic’s focus is on emerging markets, which are playing an increasingly important role in contributing to the group’s RM349mil revenue.

Due to their growing economies, emerging markets are seeing rising demand for electrical and electronic home appliances for their residential, commercial, and industrial development projects, said Chew.

“Four years ago, the contribution from overseas market was 10%. For the fiscal year 2012 ended May 31, overseas markets generated 25% of our revenue. The target is to grow the contribution to 30% for the 2013 fiscal year and then 40% in 2015,” Chew said.

Countries such as Indonesia, Thailand, Vietnam, India, Sri Lanka, Egypt, and UAE are some of the key markets that have improved on their contribution to Pensonic’s 2012 financial year.

“In Indonesia, Vietnam, and Thailand our sales grew 9%, while in India, Sri Lanka, Egypt, and UAE the growth was 100%.

“Saudi Arabia, Myanmar, Nigeria, and Angola are some of the new markets we have entered and expect to grow our presence. We have identified Myannmar and Sri Lanka as locations where we could establish local partnership directly.

“This strategy, we believe, will allow us to gain better control over brand management and service quality, and respond effectively to the local needs,” he said.

Moving forward, Chew said the Government’s ETP programme would fast-forward Pensonic’s objective to cross the billion ringgit revenue mark.

“In 2010, the Performance Management and Delivery Unit in the Prime Minister’s Department picked Pensonic to serve as the focal point for a manufacturing hub and an international distribution network for electrical home appliances (EHA).

“The project brings benefits to some 30 to 40 local small and medium enterprises, by getting them involved in the EHA supply chain, and helps raise investments from the manufacturing sector in the country.

“The target of the project is to tap into the rapidly growing Asean and Middle-East markets using a multi-brand marketing strategy,” Chew said.

Chew said the group is already working with a home appliance company to make small appliances for its subsidiaries in 100 countries worldwide.

According to a report from reseach company Marketline published in May 2012, the household appliance market for Asia Pacific is projected to grow at an compounded annual growth rate (CAGR) of 6.2% from 2011 to 2016, which is expected to drive the market to a value of US$150.2bil (RM459.2bil)by the end of 2016.

“The electrical and electronic retailers account for the largest proportion of sales in the Asia Pacific household appliances market. Sales through this channel generate 56% of the market’s total value,” it said.

The Asia Pacific household appliances market had total revenues of US$110.9bil in 2011, representing CAGR of 5.8% between 2007 and 2011.

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