Russia brings outsourced technology back from China to Europe

Discussion in 'The Russian Economy' started by North Asian, Sep 13, 2013.

  1. North Asian

    North Asian Office Registrar (13th class)

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    Russian mobile maker looking to manufacture in the Czech Republic


    Newcomer teXet follows other CIS-based manufacturers in focusing on Europe

    Russian-based mobile phone company teXet is planning to begin manufacturing a tablet device in the Czech Republic as it aims for sales in the Czech and other European markets. The company said the reception given to mobile phones from brands linked to other ex-Soviet states, including Prestigio, owned by a company founded in Belarus, indicates the Central and Eastern European are potentially lucrative markets.

    Foxconn will produce the teXet tablet in Pardubice and will assist the Russian company with distribution for a range of recently launched devices, while a German quality assurance specialist, TÜV SÜD, has been signed up to maintain quality control. TeXet's move into Europe market reflects a trend for international expansion that has also seen Russian-based Yota Devices push its range of smartphones overseas.

    Analysts have said Russia's pool of well-trained developers and programmers are helping its technology manufacturers become more competitive.

    Alexander Pavlov, director of teXet Global SE, teXet's Brno-based offshoot, said the company planned to "make more and more of our devices in the Czech Republic."

    "European customers want good quality and prefer products produced in Europe," he said. "Our engineers are working with Foxconn in Pardubice. It's really a cooperation." The 7.8-inch tablet to be produced in the Pardubice is due to be unveiled at the IFA consumer electronics fair in Berlin in early September and is likely to go on sale at the end of the month.

    Currently, the bulk of teXet's manufacturing is carried out in China, as is the norm for the mobile phone industry. The company uses other contract manufacturers there rather than Foxconn, which is well known as a manufacturer of Apple devices.

    In the Czech market, teXet has just launched three tablets, a range of smartphones, including some that are waterproof, plus accessories. European sales began a month ago. "Our partners [such as] Prestigio are very successful in Europe. We also think we can do the same," said Pavlov. "We have focused on the Russian market. Our company has grown in Russia by 100 percent every year, but why don't we grow here?"

    As it looks to establish itself in the marketplace, teXet plans a major advertising drive, including promotional clips on televisions in Student Agency buses, from September. Pavlov said the company was aiming at the middle market.

    "We're not an A brand. We follow the biggest A brands like Sony. We use the same technology, maybe a little later, but with the expectation of good quality for good money," Pavlov said. He added that the focus in Europe would be on countries that were part of the former Eastern Bloc, including Hungary and Poland as well as the Czech Republic.

    The company is not currently looking to Asia as a potential market, as entry would require considerable investment "with money and technology." "It's easier for us to understand these [Central and Eastern European] customers and provide them with devices," he said, adding that in future teXet was hoping to focus on providing content to be used in the devices, not just on selling the actual handsets and other hardware.

    Matthew Marden, a senior research analyst at IDC in Prague, said there was probably room for a new entrant in the smartphone market in the Czech Republic. However, he said that although the example of Prestigio offered encouragement, with the company having increased sales in each of the last three quarters, its market share remained modest, at a maximum of about 2 percent.

    "The [Czech] smartphone market is still very much dominated by the big players - the Samsungs, the Sonys, the HTCs and all of those," he said. "There's quite a lot of competition at the low end … you have a lot of attractive models down there." Success for teXet would require strong tie-ups with large retailers prepared to promote the company's models, he indicated.

    Foxconn has signed a contract to supply "after-market services," which includes work such as collecting faulty devices and returning them to customers after repairs, and manufacturing accessory kits. "If a part goes defective in Europe, we can pick it up and get it back to the customer as quickly as possible," said Henk Knoop, vice president of Foxconn's Europe, Middle East and Africa global services solutions division.

    "We control the whole flow of information, making sure everything happens at the agreed times and ensuring the customer gets his product in the right way at the agreed time … We are [also] providing accessory kits - it could be a cable or an accessory."

    Oleg Spružina, CEO of the Czech branch of German-based TÜV SÜD, which like Foxconn has signed a contract to support teXet's European operations, said it was "exceptional" for a mid-market producer to involve a third-party quality assurance firm.

    "It's very clever from their side. I don't know of any other starting company coming with such a focus on quality," he said. "TeXet has found the right opportunity to get to the market with a relatively low price but good quality." Spružina said TÜV SÜD was particularly well-known among German customers, so the use of its logo on teXet products would help improve sales in Europe's largest economy.

    Worldwide, there was a 4 percent increase in the number of mobile phones sold in the second quarter of this year, with the total reaching 386 million. Growth was concentrated in Asia and Latin America, according to comments from Strategy Analytics reported by media. The number one producer is Samsung with a 28 percent market share.

    Foxconn is one of the largest employers in the Czech Republic, with a total headcount of more than 5,000.



    Random teXet products
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