Logo of Phnom Penh Post newspaper Phnom Penh Post - Electronics coming of age

Electronics coming of age

Electronics coming of age

How Cambodia’s appliance importers made the move from middle man to domestic distributer

Sales jumped at least 100 percent in 2006. People were selling land and buying electronics."

Photo by: STEVE FINCH
Sony employees work at a promotional event at Phnom Penh’s Olympic Stadium this month.

The availability of electricity is one of the main factors that has contributed to increases in sales."

ALTHOUGH electronics stores are now a dime-a-dozen in Phnom Penh, the consumer electronics industry got a slow start in the city and only in recent years have household appliances become commonplace.

The birth and ensuing growth of the electronics market in Cambodia has been, as you might expect, largely influenced by supply and demand. However, for many years demand was coming from abroad and it was not only electronics products themselves that were in short supply.

A year before the country’s first democratic elections in 1993 when the borders officially opened for international trade, Sunsimexco Co Ltd had established itself as the preeminent source for electronics imports within the Kingdom.

Taing Sothearith, who is the company’s marketing director and has been with Sunsimexco since its start, said that it was not demand from within the country that made the company’s initial foray into electronics distribution successful.

“There was not a large demand for electronics in Cambodia at that point,” he said in an interview with the Post.

Instead, Sunsimexco took advantage of Cambodia’s relatively low import taxes to act as a middleman between producers in industrialised nations and an expanding consumer base in Vietnam.

Taing Sothearith estimates that in the early 1990s, 70 percent of Sunsimexco’s annual sales were being sent to Vietnam via third-party distributers. At the time a 50 percent tax was levied on the legal importation of goods into the communist country. Taing Sothearith said that a simultaneous drop in import taxes in Vietnam and a rise in demand in Cambodia at the turn of the millennium allowed Sunsimexco to gradually phase out sales across the border and turn their attention to domestic markets.

Despite the fact that both Sunisimexco and their chief rivals K-four began to expand in the early 2000s, it was really only in 2006, when Cambodia’s property market began to boom, that domestic demand allowed the consumer electronics sector to expand into something that could be called an industry.

“Sales jumped at least 100 percent in 2006,” said Taing Sothearith. “People were selling land and buying electronics.”

Although Sunsimexco and K-four – both of which declined to share sales figures with the Post – remain the only licensed electronics distributors in Cambodia, country-wide consumption of electronics, particularly televisions, has, as Sothearith Taing suggests, seen a steep rise in recent years.

According to estimates from the International Telecommunications Union and the World Bank, there was a slight increase in the number of households with televisions in the middle of the decade, with 55.2 percent in 2005 rising to 63 percent in 2007. However by the end of the decade, especially in urban areas, TVs had almost completely saturated the market. Figures compiled by Indochina Research show that 94 percent of Cambodian households in urban areas had TVs by the end of 2009.

“Nearly 100 percent of the population watches TV,” wrote Laurent Notin, general manager of Indochina Research, in an email to the Post. “So it is not surprising to see such a high incidence rate of TV monitors.”

Noeut Suntheary, assistant of marketing support for the K-four group, also says that his company began to see a steep rise in sales beginning in 2005, paralleling trends in household income and expenditures during that time.

According to internal data from Indochina Research, the number of households who were spending more than US$400 per month doubled between 2005 and 2008, from 3 percent of the population to 6 percent. Both distributers reported a drop in consumer demand in the last two years, but there are still eight Sunsimexco outlets and four K-four outlets operating in the country.

Increasing income has been the obvious driver of demand for electronics in the Kingdom, but Noeut Suntheary said that improved infrastructure has also facilitated the growth of the consumer electronics industry.

“The availability of electricity is one of the main factors that has contributed to increases in sales,” he said. “People hesitated to buy electronics when electricity in the city was irregular and weak.”

The use of electricity in the Kingdom rose from 55 kilowatt-hours (KWh) per capita in 2005 to 94 KWh per capita in 2007, according to the International Energy Agency. Although these figures still lag far behind neighbouring countries – Vietnam rose from 573 KWh per capita to 728 in this same time and Thailand’s usage increased from 1,899 KWh per capita to 2,055 – this level of development has still brought many Cambodians onto the grid and made electronics a more attractive investment.

While Noeut Suntheary says that sales of appliances such as TVs, DVD players and air conditioners saw a steep rise in Phnom Penh over the past decade, demand for other items such as computers and washing machines remained relatively low.

“For every 10 TVs we sold, I would say we sold two or three washing machines,” he said, adding that his company is now focusing on expanding sales of new technologies such as LCDs.

In an ironic twist, given the origin of Cambodia’s electronics industry, Taing Sothearith said that the next step for the industry is to eliminate the illegal importation of second-hand goods from developed countries, as well as the practice of pawning off low-priced merchandise – usually from China – as brand-name products.

“We have never proposed [legal measures] to the government before,” said Taing Sothearith. “But we will propose them soon.”

ADDITIONAL REPORTING BY PHAK SEANGLY

MOST VIEWED

  • Thousands attend CNRP-organised pro-democracy vigil in South Korea

    Thousands of supporters of the Supreme Court-dissolved Cambodia National Rescue Party (CNRP) on Saturday gathered in the South Korean city of Gwangju to hold a candlelight demonstration calling for the “liberation” of democracy in Cambodia. Yim Sinorn, a CNRP member in South Korea, said on

  • US Embassy: Chinese trade does not help like the West’s

    The US Embassy in Phnom Penh on Friday said relations between China and Cambodia did not create jobs or help industry when compared to the trade between the Kingdom and the US. “About 87 per cent of trade [with China] are Chinese imports, which do not

  • Cambodia-Thailand rail reconnected after 45 years

    A railway reconnecting Cambodia and Thailand was officially inaugurated on Monday following a 45-year hiatus, with the two kingdoms’ prime ministers in attendance at the ceremony. On the occasion, Cambodian Prime Minister Hun Sen and Thai Prime Minister Prayut Chan-o-cha travelled together from Thailand’s

  • Vietnamese land-grabbers held

    Following a provincial court order, Ratanakkiri Military Police on April 16 arrested 12 Vietnamese nationals accused of crossing the border into Cambodia and illegally clearing forest land. The accused are now being detained at Phnom Svay prison in the province. Ratanakkiri military police commander Thav Yen told