Abidin Fan, 55, founder and president director of PT Sat Nusapersada knows his way around well in his maze-like electronic assembling facility in Batam. In the factory, smartphones from different brands are assembled from scratch, loaded with software and packaged ready to be sold—a one stop shop for his clients. Abidin walks fast but his sharply focused eyes can spot even a single hair on the floor, which he then picks up himself and throws into the trash. Cleanliness is criticl in a factory assembling electronic parts, and visitors and employees must wear caps and shoe covers. Some areas are off limits—accessible only to selected clients such as Epson, Asus, Xiaomi and Foxconn. The last two are the latest clients to use Sat Nusapersada to assemble their smartphones sold in Indonesia. Abidin says a tour of the entire facility—spread over five hectares—can take a visitor more than six hours.
Over the last two years, Sat Nusapersada has been rapidly growing its smartphone manufacturing on the back of the government’s local content regulation. The regulation, launched last year, requires products sold in Indonesia within the 4G spectrum, including smartphones, to have 30% local content, both in hardware and software. This requirement amends the 2016 law that set the minimum at 20%. The government might continue to raise the figure in a bid to boost domestic manufacturing—and Abidin will be ready to answer the call.
Despite many components still being imported, the assembling service offered by the company fits the 30% requirement. Thus, last year the company produced nearly three million smartphones, mostly for Xiaomi, up from 1.2 million in 2016. Abidin remains optimistic about growth, saying he plans to double smartphone production capacity to six million units in the next couple of years.
“Smartphones are the future,” Abidin says. “I like when people buy a smartphone and on it is written ‘made in Indonesia’.” Abidin built his fortune in Batam from scratch. Raised in a poor family, Abidin claims he dreamt to have a factory when he still in third grade—his last formal education was junior high school. Batam has long been an industrial hub, with factories outsourced from Singapore to access Indonesia’s cheap labor and land. Despite his lack of higher education, Abidin has always kept up with the latest trends with a daily habit of reading the news. In 1986, Abidin began to work as a supervisor at the electronic assembling service company PT Hi-Tech Agratektron Sempurna, and within six months became general manager. He stayed for three years before moving to another electronic company PT Singafirm, working there for one more year before deciding to set up his own firm. His experience at the two companies allowed him build business relationships with Japanese electronic clients.
Among Sat Nusapersada’s first clients were Panasonic and Sony. At the time the VHS video player was popular, so Sat Nusapersada assembled that product for the brands. Over time the company expanded its business from just assembling printed circuit boards to metal stamping and plastic molding. With these added capabilities, Sat Nusapersada could start building a wider range of products. Abidin also improved its assembling technology as well, as electronic components shrunk, the company acquired surface mount technology to install smaller components automatically using special high-tech machines.
In terms of governance, Abidin wants the company to be sustainable. To improve transparency, he took the company public in 2007, selling 10% of the shares to the public, with the rest owned by Abidin, his family and within the company. Hee says the listing also helped professionalize the firm—even his own son had to start as a supervisor with a standard salary when he joined the company.
The next big step came with smartphone. When Abidin saw the iPhone in 2007, he saw the potential of smartphones. “I already realized that in the future people will do many things through their smartphones,” he says. So he started to focus on that product, and in 2014, the company produced its first 4G LTE smartphones for the local brand IVO. As local content rules were introduced, orders from other companies came to Abidin. Despite the regulation, the company still has to show vendors that it is a capable and trustworthy partner. For example, despite already building Asus and Huawei smartphones, Abidin says it took him two years to convince Xiaomi to make its smartphones. “The Chinese and Japanese vendors has also different characteristics,” Abidin notes. “Japanese vendors put quality first while the Chinese firms are more concerned with quality, cost and production speed.”
Another prospective business the company is looking into is battery production, especially manganese coin batteries used for watches and sensors. Despite assembling smartphones from scratch to packaging, Abidin prefers not to produce smartphone batteries because of the higher risk, noting the example of the Samsung Galaxy Note 7 exploding battery. Also, Abidin says the Chinese authorities are expected to make tire-pressure monitoring systems mandatory from 2019 for new vehicles and in 2020 for new vehicle registrations—and these systems use coin batteries. As China is the world’s largest car market, Abidin hopes to tap into a huge new opportunity. “We expect that there will be a surge in demand for coin batteries which we hope translates into higher sales from the coin battery division,” he says.
However, the fast-moving nature of the tech industry requires the company to continually invest in technology to meet clients’ demands. One assembly line for example can cost $4 million to build, but then company has to update it to keep up with technology. The company has installed the newest X-ray machines that can accurately spot a tiny misplaced component, which he claims the only such machine in the country. This need for constant re-investment means the company has an unstable financial performance. In 2016 for example, the company bottom line rocketed to $1.1 million from around half a million dollars in the previous year—but then last year, revenue fell to only $235,665 due to high depreciation value from several new investments. By 2020, Abidin says the company plans to spend Rp 500 billion in capex to expand smartphones and batteries production. The investment will be financed from internal and bank loans. Abidin claims that after the investment, the company’s financial performance should become more stable as it will have more capacity and efficiencies. Longer term, the company plans to use more automation and robotics. “If the government applies the same local content regulation for laptops and computers, we’re ready now,” he says.