Bangladeshi Consumer Electronics Brands are Expanding Globally

The Consumer Electronics Sector is one of the growing sectors in Bangladesh, having a market size of BDT 20,000 crore. The local brands now occupy most of the product categories of this once 100% import-dependent sector. With domestic brands’ success in meeting the local market demand, foreign brands have also started manufacturing locally. In fact, after meeting the local consumer demands, the domestic brands are also exporting to the global market. Walton, the country’s largest consumer electronics brand, has already ensured its global presence by establishing offices in several countries across the world. But why are these Bangladeshi consumer electronics brands focusing on international expansion?

Overview

In March 2022, Hon’ble Prime Minister Sheikh Hasina announced that 100% of the people of Bangladesh are currently under electricity coverage, which was only 47% in 2009. Moreover, in addition to increasing per capita income, rapid urbanization has also brought about significant changes in the buying pattern and consumption behavior of the people of Bangladesh. As a result, the use of consumer electronics and home appliances in Bangladesh has increased several times. The journey of the consumer electronics sector in Bangladesh started in the 1950s. By that time, radio stations were established in the country, and the use of radios was increasing. In order to meet the demand of the consumers of the country, a few private companies were established to assemble the radio sets in the country. Over the next decade, those assembly plants also began producing television sets.

However, before the 1980s, almost all the electronics appliances in Bangladesh were imported. But since the ’80s, several assembly plants have been set up in Bangladesh to manufacture small electronics appliances like radios, televisions, and audio-video cassette players. In 1997 Walton joined the electronics market of Bangladesh. Soon after, several other companies like My-One started operating in Bangladesh. According to The Financial Express, domestic companies started importing electronic components and parts to assemble them and add local value to the product. But with the growth of the electronics appliance market, these companies shifted from assembling to manufacturing. They started producing the other parts locally by importing a few technical components. In 2007, with the establishment of Walton Hi-Tech Industries LTD. Walton began manufacturing refrigerators, freezers, and air conditioners at its manufacturing plant. Therefore, when Walton Electronics and home appliance products started offering competitive prices compared to the global brands, this increased customers’ interest in purchasing Bangladeshi local branded products. 

Following Walton’s success, other domestic brands also started manufacturing home appliances on a small scale. Therefore, the local brands enjoyed competitive pricing advantages over foreign brands. As a result, to benefit from competitive pricing, several foreign brands also started manufacturing and selling their products in Bangladesh in joint ventures with Bangladeshi companies. For example, South Korean tech giant Samsung set up two manufacturing units in Bangladesh in 2017 in a joint venture with Transcom Group and Fair Electronics. In addition, another South Korean giant LG set up a manufacturing plant in 2018 in a joint venture with local partner Butterfly. In May 2021, Bangladeshi company Singer set up its washing machine manufacturing plant.

Besides serving Bangladeshi consumers, Walton has been exporting products abroad since 2010. The company currently exports locally manufactured electronic products to 40 countries, including the Middle East, Africa, Germany, Romania, and several countries in Europe. They have also ensured a global presence by establishing branches and liaison offices in 6 countries, including USA, India, Nepal, and UAE.

To further strengthen its global presence, in 2021, the company announced the establishment of a subsidiary of Walton in the USA. In addition, the company plans to expand its operations in 27 countries across the world by 2027. In addition, Vision, one of the top FMCG manufacturing companies, Pran-RFL Group’s subsidiary, is currently exporting its products to more than ten countries worldwide. Bangladeshi electronics manufacturers mainly export to South Asian countries like India, Nepal, Maldives, the Middle East, Africa, and European countries like Romania, Greece, and Mexico. In addition to local Bangladeshi companies, Samsung has already started exporting Bangladeshi-made mobiles and refrigerators to the UAE, among the foreign companies that used to manufacture products in Bangladesh in joint ventures. According to the Daily Star, another mobile brand, Symphony, has started exporting locally assembled phones to Nepal in October 2021.

Why Brands Expanding Globally

The Consumer Electronics Sector of Bangladesh is divided into three categories: Large Appliance, Electronics Appliances, and Small Appliances. Among these three categories, large appliances such as refrigerators, washing machines, air conditioners, and televisions are being manufactured locally. Besides this, companies are also exporting products abroad after meeting the demand of the local consumers. For example, Walton is currently exporting its products to 40 countries worldwide and plans to ship its products to 125 countries by 2025. In addition, Walton has the largest market share in these three categories among the local companies in the country’s electronics sector, so it is not sustainable for other companies to serve only domestic customers. As a result, other brands are also exporting products as well as serving in Bangladesh. However, only Walton exports large appliance products in these three categories, and other brands export electronics and small appliances. Therefore, Walton is also leading in electronics and small appliances in terms of exports.

According to a study by Research and Markets, the global electronics market in 2021 was over $1 trillion. By 2025, that market is expected to grow at 5% annually and exceed $1.29 trillion. According to a report by Reportlinker, the global household appliances market size is projected to reach $331.57 billion by 2021 and grow by 7% per year; it is expected to reach $436.04 billion by 2025. On the other hand, the market size of Consumer Electronics and Home Appliances in Bangladesh is only $2.32 billion. Therefore, if a Bangladeshi company holds 50 percent market share, the revenue will be less than the 1 percent market share in the global market.

Furthermore, according to the Global Data Lab, among the 160 million population of Bangladesh, only 41.3 percent of households have refrigerators, and 57.4 percent have televisions. Hence, the Bangladesh market is identified as a small market for consumer electronics. Moreover, looking at the service life of the major products in the electronics sector, it is seen that this type of product serves the consumers for a long time, so the consumers do not have to buy the same product for several years. This means, that the bigger share of this market has already been served, the penetration rate in the market is also declining, and competitors are increasing. Therefore, the growth opportunity for local manufacturers in the domestic market is constantly decreasing. So, it has become imperative for domestic brands to gradually target the international market in this context. The companies have to invest heavily to maintain quality and international standards in electronics products. To cover the cost of this investment and reduce the production hassle achieving an Economy of Scale is important for brands. However, higher production also reduces per unit production costs due to the economy of scale, which will help the domestic brands retain the competitive advantage in pricing.

But as the domestic market continues to shrink despite overproduction, it is logical for domestic brands to expand into the international market. For example, domestic FMCG manufacturing company Pran gradually started exporting after occupying one of the top positions in the country’s FMCG market. As a result, the company is exporting its products to 110 countries on five continents worldwide, namely Southeast Asia, the Middle East, Africa, Europe, and North America. If Pran had not started exporting internationally, the company’s growth rate would have declined. Due to international exports, the company has achieved economy of scale, which has given it the advantage of competitive pricing. Similarly, domestic electronics manufacturers need to expand internationally to achieve an economy of scale. 

In terms of expansion, domestic brands have mainly chosen South Asian countries like India, Nepal, the Maldives, and countries like Greece and Romania in Europe, the Middle East, and Africa. However, it will be challenging for domestic brands to compete in the international market with the already established brand image and marketing and promotion of foreign brands. This is why the domestic brands have chosen countries with relatively low entry barriers and a less competitive market for expansion. For these reasons, Bangladeshi consumer electronics brands are now moving towards global expansion.