Looking further into the industry of air conditioners in Indonesia.
Source: The Conversation
Air conditioners have always been considered as an essential household product, especially in a country with a tropical climate such as Indonesia. The Association of Indonesian Refrigeration Refrigeration Companies (Perprindo) stated that demand for air conditioners (AC) increased in early 2021. Demand continued to strengthen in the past three weeks when the dry season began to be felt in Indonesia.
Indonesia is a country in Southeast Asia (ASEAN) that has the dominant market share for the Heating, Ventilation, and Air Conditioning (HVAC) sector, which is set to be worth USD 13.6 billion in 2023. Due to its vast infrastructure and powerful industrial growth, Indonesia, as the country with the largest economy and population in Southeast Asia, leads the regional market and pinning a strong impact on the demand increase of the HVAC sector in Southeast Asia.
Learn more about the air conditioner industry in Indonesia through this article.
Overview of Air Conditioner Industry in Indonesia
Indonesia has the largest air conditioner market in Southeast Asia. Rising investments, public and private infrastructure developments, and government plans such as the 20-Year Development Plan and Master Plan will drive government spending in a variety of sectors including housing, infrastructure, commercial, hospitality, manufacturing, education, and healthcare.
By 2023, the Indonesian air conditioner market is expected to exceed USD 2.6 billion. Demand from an increasing number of independent households, as well as the commercial and hospitality sectors, is driving the market growth. Furthermore, the Indonesian government’s “One Million Houses Program,” which was launched in 2015, seems to have had a beneficial effect on the Indonesian air conditioners industry.
COVID-19 Impact on Air Conditioner Industry in Indonesia
Due to overcrowding, the occupancy of cooling chain facilities increased year after year during the pandemic. However, due to the Covid-19 pandemic, the production of new cooling chains fell in 2020. According to the Indonesian Refrigeration Chain Association (ARPI), cooling chain production fell by about 58 percent year on year to 50,000 tons between January and August 2020.
According to the Association of Indonesian Refrigeration Companies (Perprindo), demand for air conditioners (AC) increased earlier in 2021. Demand has continued to rise in the last three weeks, as the dry season has set in Indonesia. “In about three weeks, in my opinion, the weather will become hot, so the demand for air conditioners will increase,” said Perprindo Chairman, Iffan Suryanto, when contacted by KONTAN on Wednesday (19/5).
Although the demand for air conditioners has increased, the supply of AC products on the market has not kept pace. As a result of the limited supply of air conditioning, sales of air conditioners fell during the first four months of this year. “The issue is that there isn’t enough supply,” Iffan explained.
Global Air Conditioner Brands in Indonesia
According to TechSci Report (2021), Indonesia’s air conditioner market is mostly led by these major companies which are PT. Daikin Air Conditioning Indonesia, PT. Samsung Electronics Indonesia, PT. LG Electronics Indonesia, PT. Sharp Electronics Indonesia, PT. Berca Carrier Indonesia, PT. Panasonic Gobel Indonesia, PT. Johnson Controls Indonesia, PT. Trane Indonesia, PT. Daikin Applied Solutions Indonesia (McQuay), and Fujitsu General Limited. Some of those brands have their specialties and market. Here are some leading global air conditioner brands that have been established in Indonesia.
Daikin Indonesia is one of the largest players in the commercial industry including the HVAC industry. Daikin Indonesia originated from the Japanese HVAC company Daikin. Their most known products are AC Variable Refrigerant Volume (VRV) or central air conditioning systems for commercial buildings. This condition leads Daikin Indonesia to focus on their air conditioner product development.
The trademark of Daikin Indonesia is that the products are mainly produced in Malaysia and Thailand, and some of the spare parts are assembled in China. Daikin is also known for being the pioneer in inverter technology in air conditioning systems, R32 freon technology, and VRV system.
According to Daikin (2021), the worldwide sales growth and net worth of Daikin are in the amount of JPY 2.493 billion in March 2021. To date, Daikin Indonesia has already had 13 branches around Indonesia with 1,200 more dealers and 590 service locations to provide better access for Daikin air conditioner services in Indonesia.
Panasonic Indonesia is also one of the leading players in the air conditioner industries in Indonesia. Panasonic Indonesia became the pioneer with the largest market share in air conditioner industries in Indonesia. Along with Daikin Indonesia, Panasonic Indonesia has also already implemented and equipped its air conditioner with an inverter and R32 freon technology to reduce global warming and create environment-friendly products for customers.
The trademark of Panasonic Indonesia is the advanced technology on air conditioners with NANOE-G feature virus and bacteria-free, and ECONAVI technology. Through their technology, Panasonic Indonesia claimed to save more energy and be healthier for the environment.
According to Panasonic Global (2021), the net worth for Panasonic worldwide sales reached USD 61 billion by May 2021. Meanwhile in Indonesia, the Panasonic Indonesia market share reached 18-20% of the air conditioner market share in Indonesia. After 50 years of establishment of Panasonic in Indonesia, the company has already made more than 5 million units of air conditioners and targeted to export 10 million air conditioners in 20 years.
Sharp Electronics Indonesia
Sharp Electronics Indonesia, a Japanese electronics company based in Indonesia mostly presents their products for middle-class economic society. Their most known product is the air purifier with Plasmacluster technology which aims to clean the virus and bacteria in air circulation.
After the holding of Sharp Electronics was managed by Chinese manufacturing company Foxconn, Sharp Electronics lineup products became stronger in the low-end market, including Sharp Electronics Indonesia. Through this manufacturing capacity, Sharp Electronics launched their UCY series air conditioner in Indonesia, which became one of the competitive products in the Indonesian market.
Sharp Electronics Indonesia targeted sales growth from the air purifier AC series and YHY series in the amount of 8,000 units for AC and 10,000 units for the YHY series. Meanwhile, the sales growth of Sharp Electronic air purifiers seemed more promising during the Covid-19 pandemic with their Plasmacluster technology. However, the air conditioner sales growth of Sharp Electronic is still struggling under 10% sales growth for the Sharp Inverter series (Kontan, 2021).
LG Electronics Indonesia
LG Electronics is a Korean electronics company and has spread the business to the Indonesian market. LG Indonesia also opened their HVAC industry with a 100% lineup as an inverter technology user in their products. For the air conditioner products, LG Indonesia only offered their inverter-based technology to their customers.
Korea’s brands are less expensive than those created in Japan. Hereby, LG Electronics provided the best technology with a lower price to attract their budgeted customers to choose LG Electronics as their choice for their products, including the air conditioner.
LG Electronics worldwide sales growth has reached USD 990 million or equivalent to KRW 1.10 trillion for home appliance products including air conditioners (Korea Economic Daily, 2021). SWA (2019), also added that, in 2019, the production of LG air conditioners in Indonesia reached 25,000 units and is projected to grow up to 30% for the inverter series of LG Electronics Indonesia air conditioners.
Mitsubishi Electric & Mitsubishi Heavy Industries
Mitsubishi Electronics, a Japanese electronic company has 2 brands namely Mitsubishi in Indonesia yet established with different management and products, which are Mitsubishi Electric and Mitsubishi Heavy Industries. Both companies owned air conditioner products with their specialties and trademark.
Mitsubishi Heavy Industry recently started to switch their technology to R-410a freon technology which is more environmentally friendly for the ozone. Mitsubishi Heavy Industry also launched their other products with 2 lineups which are Deluxe and Inverter. Meanwhile Mitsubishi Electric launched their products in Indonesia with Plasma Quads Plus technology which aimed to effectively infiltrate 6 main pollutants in air circulations.
Mitsubishi Electric in 2021 has reached its share issues up to 2,147,201,551 shares. Meanwhile, Mitsubishi would always expand their market overseas with a sales ratio up to 40% since 2015 for more than JPY 23 billion or equivalent to USD 230.14 million. This improvement would be constantly developing, due to Mitsubishi’s trust in the Indonesian market for its potential economic growth.
Opportunity for Air Conditioner Brands in Indonesia
According to TechSci Reports (2018), the sales growth of the air conditioner business in Indonesia would reach USD 2.6 billion in 2023. The growth would be affected by the increasing numbers of independent households and several industrial sectors such as the public and hospitality sector who might need air conditioning in their business. In addition, In the future, technological developments in air conditioners, as well as the launch of energy-efficient air conditioners, are expected to drive demand for air conditioners across Indonesia.
The air conditioner market in Indonesia is using a bottom-up method, where data on manufacturers’ value and volume shares data for product types, such as Light Commercial Air Conditioners, Ductable Splits, Chillers, Variable Refrigerant Volume (VRV), and others. Indonesia’s growing demand for HVAC equipment coincides with optimistic forecasts of a 13% Compound Annual Growth Rate (CAGR) in air conditioner market sales through the end of 2018. Thus, the regulatory policies in Indonesia will also have an impact on the utilization of HVAC equipment (Eurovent, 2020).
According to Refrigeration & HVAC Indonesia (2021), Indonesia showed great potential and rapid growth among the other six favored emerging market countries (CIVETS) countries in the HVAC industrial sector. Indonesia is also projected to increase its energy-efficiency commercial HVAC in the amount of USD 22.9 billion in 2024, which would lead Indonesia to become a potential market to set up the HVAC business. In October 2021 there would be an exhibition for HVAC industries in Indonesia that included B2B that would prepare the business player to enter the Indonesian market. To enter the Indonesian market, hence, you might need the right local partner in Indonesia.
BRIGHT Indonesia as Your Perfect Local Partner
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*This article is written by Galih Akmal Latif, and Candy Bestari