In May 2013, Samsung Electronics opened its first factory in the Middle East in Beni Sueif, Upper Egypt. Since then, it has proven to be a valuable addition to the economy, with total investments of $270 million and 1,800 jobs created for local engineers and workers. Manufacturing LED, Ultra High Definition (UHD) and SUHD screens, smart electronic banners and display screens for businesses, the factory’s total production capacity has reached about 6 million screens annually.
Like many businesses in Egypt, Samsung Electronics Egypt experienced some hardships and sales declines just after the float of the local currency in November 2016, yet its Chief Commercial Officer Sherif Barakat argues that the step was “inevitable.”
Barakat spoke to Business Today Egypt about the float, market demand bouncing back to normal rates, and how his company’s market share in the domestic market hiked to 42% in 2017, compared to 38% one year earlier.
How was Samsung Electronics’ production volume last year and how much did you export?
Our exports from the Beni Sueif factory to 36 countries recorded $550 million in 2016, constituting the biggest share of technology sector exports.
How have your business and sales volumes been affected by the exchange rate liberalization?
The liberalization of the exchange rate was an inevitable step, as Egypt was suffering from a hidden currency subsidy to keep its pound fixed at a certain price. Removing this subsidy (floating the pound), thereby allowing its price to be determined according to its real value, had a positive impact on the Egyptian economy over the medium and long term despite the short-term negative impact it had on our sales during the first few months following the float. Consumers were shocked at the beginning, but consumption rates eventually readjusted, leading to a return to pre-float rates during the second half of 2017.
Has the pound flotation decision affected Samsung Electronics’ future plans in Egypt?
Before the flotation, there was high fluctuation in the exchange rate, which hindered pumping any new investment into the market. But after the exchange rate liberalization, it became much clearer for businesses to calculate investment cost according to precise studies, without exchange rate risks.
Are there any expansion plans for Samsung’s Beni Sueif factory to present new products?
We always consider the possibility of increasing the number of our products manufactured in Egypt, and there are serious studies to produce other products that will be disclosed very soon.
Do these plans include the production of Samsung cell phones here in Egypt? If not, what is hindering this step?
There are no obstacles to manufacture Samsung mobile phone locally, but this issue is subject to the volume of demand locally as well as globally. Our production meets global demand and there is no need, at the time being, to establish new production lines.
How big is your market share in the Egyptian market today?
Samsung’s market share in Egypt rose to 42% last year, up from 38% in 2016, according to reliable global statistics. We aim to further increase our share in 2018.
What about Samsung’s plans to provide centers for after-sales services?
As cell phone prices almost doubled after the float, the consumer is considering the device as an investment, making the after-sale services very important. So far, we opened 55 branches to provide maintenance and after-sale services in governorates and shopping malls. Samsung’s integrated after-sales centers fix all the company’s products.
Can you tell us about the demand for Samsung Galaxy Note 8 in Egypt?
Samsung was the first international company producing Note devices, and our competitors believed at the time that it is not a successful product, but now there is high demand for it. Samsung’s Note 8 has many advantages, especially the digital pen and its screen provided with the infinity display technique. This phone has attracted a lot of consumers, and its sales have been at high rates since its launch.
Does Samsung still hold the lion’s share of smartphone sales in Egypt?
Yes, we are still number one in smartphone sales in Egypt.
To what extent are smart devices widespread in Egypt? And what is the expected market growth for the upcoming period?
Around 75% of Egyptians are using smartphones, as calculated at the end of December. In the past, there was a growing increase in demand for smartphones, but now the rate is stable as some users still prefer the traditional feature phones for their affordable and cheap prices. Some users depend on feature phones as a backup device, and the older age bracket also favors these simple devices.
What are the details of launching Samsung’s initiative to support education in Egypt?
Since it entered the Egyptian market, Samsung has been keen on participating in social responsibility projects. The first project aimed to support scientific research in Egyptian universities by establishing the Sonar labs in the universities of Mansoura, Cairo, Alexandria and Ain Shams to promote doctors’ skills in using the latest technologies, because we are a technology firm and therefore we should play a role in bringing in the latest technology to Egyptian society.
Recently, we noticed that there is a focus [on the part of] the government on the development of both primary and preparatory education. So we thought about developing schools in Egypt’s governorates as the company seeks to leave its fingerprint on society, but we decided to focus on Upper Egypt, as it is an area with a high poverty rate. We developed a school in Beni Sueif next to our factory there, with the aim of establishing the project as a model for promoting education in all of Upper Egypt’s schools. Perhaps what we have implemented so far is minimal [in comparison to what needs to be done], yet we hope that one of these schools would help bring up a prominent scientist like the late scientist and Nobel prize winner Dr. Ahmed Zewail. We aim to do this as we provide these schools with the latest technologies, creating new horizons for students to learn and develop their skills.
Guests use the new Galaxy Note 8 smartphone during the company's launch event in New York City, U.S., August 23, 2017. REUTERS/Brendan McDermid
What is the number of schools that have been developed under Samsung’s initiative?
We developed 82 schools and we can increase the figure to around 200 to 400 schools over upcoming years. In 2018, we will develop an additional 37 schools. Until now, 65,000 students have benefited from the initiative. Yet, the involvement of other companies and the unification of their efforts to develop the rest of the schools are much more important than the figures.
We now focus on building the base of the project, which is the development of schools by updating IT labs, providing them with the necessary devices, equipment and network to be connected to the internet, in addition to providing the required number of computers and printers.
The second step is training the teachers through establishing a training center to brief them on using the devices and latest technologies.
How do you train your workers before hiring them?
Everyone working in the factory must be trained and qualified before joining, we cannot hire an engineer or a worker in a factory that exports its products to 36 countries without their being trained at the level suitable for an international company. Furthermore, our company seeks to develop the area surrounding the factory in Kom Abu Rady by employing its residents to raise their social, economic and educational levels. Then, we will expand to other areas in Beni Sueif and governorates in Upper Egypt. We call for other companies to follow suit and apply the same model.
A guest uses a new Galaxy Note 8 smartphone during the company's launch event in New York City, U.S., August 23, 2017. REUTERS/Brendan McDermid
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