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Vestel is navigating the consequences of decreased domestic demand after the devaluation of the lira in 2018, while trying to capitalize on the resulting competitive advantage in exporting its electronics overseas.
How difficult has the development and market introduction been for Vestel’s smartphone business?
The initial development was fairly difficult, though the process was aided by our experience producing television sets, smart appliances, and other devices that require processors. We invested a great deal in the R&D and production side. However, because it is a personalized item, design is extremely important. We had to develop the latest technologies in design. The introduction to market was smooth for us, as we were able to work with all of the big operators in Turkey—Turkcell, Vodafone, and Türk Telekom. Soon after release, we reached almost 10% market share, though there is now a huge influx of Chinese-made mobile phones that has reduced our market share to around 7%. Chinese mobile phone manufacturers benefit from their economies of scale and offer attractive prices. To compete with the Chinese mobile phones, as well as major players such as Samsung and Apple, we are now expanding our range and offering high-end models, entry-level models, and mid-level model phones. Our goal is to reach 20% market share in Turkey, which will allow us to benefit from the economies of scale that other large manufacturers enjoy. Once we reach that scale, we can start to export on a larger scale. Broadly speaking, having a smartphone business significantly boosts Vestel’s image as a high-tech company. Our smartphones are the only fully locally designed and produced phones on the market.
“We want to position Vestel as a technology company rather than a manufacturer of appliances or consumer electronics.”
How will Vestel’s partnership with Google to produce Android TVs be received by the market?
We recently signed an agreement with Google to produce Android TVs, which fits in well with our broader technology strategy. For our mobile phones, we are using the same Android platform that will be used in our Android TVs. This makes production easier for us; for customers, it means if they have an Android-based mobile phone, tablet, or computer, there will be interactivity between the TV and their device. category of our products has fallen because of the depreciation of the lira. However, it helped our exports, because a great deal of the costs in our operations is in lira. A strong lira is not good for exports, and the devaluation helped all exporters, including Vestel. The depreciation is one reason why we were able to increase our exports in 2018 and turn a solid profit. We were able to significantly increase our overall combined profit in 2018, which is reflected in our share price, which saw a 100% increase after the release of our financials.
How is Vestel investing to expand in software and other high-growth sectors?
We want to position Vestel as a technology company rather than a manufacturer of appliances or consumer electronics. That is why we are increasing our investments in R&D. We have 1,600 engineers and will increase that to a minimum of 2,000. We are investing significantly in the software side, rather than hardware and manufacturing, because software allows us to increase our value-added projects. We will continue to grow our consumer electronics and white goods manufacturing and sales, though currently our emphasis is on growing our technology projects. A result of this emphasis can be seen in our investments in the automotive and healthcare industries. We recently established a company that will penetrate the automotive electronics parts market, most notably with electric car chargers. We have installed many of these already in Turkey and abroad. We are working to expand our exports to high-growth electric car markets. We are also investing significantly to improve the connectivity of medical systems. We have extensive experience with connected devices, and these digital and connected services create new areas to offer our services and devices—such as in the health and automotive industries. ✖
Why has Atmaca chosen to focus its future strategy around TVs?
For the past 40 years, we have been in the consumer electronics sector. We have a good understanding of consumer needs. Atmaca Group has made many different kinds of electronics, but today it is specialized in the TV segment. A TV is no longer just a TV. Now, it is capable of many things, much like how smartphones have become extremely versatile devices. We feel fortunate as a company to offer something that people need. We are in a highly competitive market and are focused on staying ahead of the competition.
What role does R&D play in Atmaca’s development of smart TVs?
Technology is getting cheaper every day and, in a few years, a smart TV will be a basic item. Our advantage is that we have our own R&D center, with around 40 engineers. There are 900 R&D centers in Turkey, and we are one of them. We do all types of designs, namely hardware, software, industrial, and mechanical. From the idea to the product, it is all done inhouse. This gives us a great opportunity to cooperate with technology providers. We can easily develop the most up-todate solutions and get them to the TV. We follow the latest trends and needs.
Atmaca is one of the largest Turkish exporters of electronics. What are the regions where you
Most of our exports go to Eastern Europe. Our export business has been going well, especially since 2018. In 2017, around 5-7% of our revenue came from exports, but in 2018 it rose to 17%. In 2019, we hope it will be more than 25%. Exports are thus rapidly increasing. The main reason for this is that our quantities are increasing, which is giving us an edge on the competition.
“We are in a highly competitive market and are focused on staying ahead of the competition.”
How does the company account for tariffs when looking at potential markets?
There are high customs taxes for some countries. In those cases, the best approach is to find a partner or invest in a plant. It is easy, in theory, but not so much in practice. Entering a market by investing in a plant is not a simple decision to make. We tried to start a facility in Egypt, but scrapped these plans in 2014.
What investments have you been making in more efficient means of production?
We have an excellent maintenance and development department in our factory. We design and produce the majority of our products. We are also producing our own robots for our production lines and transportation. We have a great team focused on efficient production. There are ways to increase production, but it is important to make it ourselves, because we know our needs better than anyone else. When we design a TV, we are not only trying to make the best TV for the consumer, but one that is also most efficient to produce.
What are your goals and objectives for the year ahead?
We are trying to prepare our 8K TVs. That technology is on its way. The market is moving and we are following it. Success comes if you can follow the market and its demands. We are trying to apply the latest technology to the screen as soon as possible. We want to launch these products in 2019. ✖