(Yicai) Jan. 10 -- Honor, the Chinese smartphone maker that Huawei Technologies spun off four years ago, has linked arms with Indonesia's largest handset and electronics retailer Erajaya Swasembada to enter the high-end market in the Southeast Asian country.

Honor's strategy in Indonesia will focus on the USD300 mid to high-end segment, covering phones, tablets, computers, and sound devices, the company announced yesterday.

Honor plans to enter 300 to 500 Erajaya premium stores in Indonesia this year, targeting the county's high-end phone market, Li Jing, president for the South Pacific region at the Shenzhen-based company, told Yicai.

Entering the Indonesian market is "definitely not a rash decision," Li noted. The country is predominantly a low-end market, but about 15 percent is mid to high-end, equal to around 5 million units, which Apple and Samsung Electronics mostly dominate, Li said.

Honor will launch initial sales this quarter and open more than 10 brand experience stores in Indonesia along with its coverage of Erajaya outlets, Li added.

Regarding local production, Honor will initially ally with established local factories and optimize local production capabilities based on business development, market demand, and government requirements, Li said. Overseas sales accounted for more than half of the total late last year, with the firm achieving profitability in multiple regions, Li added.

Indonesia's phone market grew 11.3 percent in the third quarter of last year from a year earlier, with Chinese manufacturers holding a 70 percent share, mainly in the mid to low-end segment, according to market researcher Canalys. The country's phone shipments reached 8.7 million units, making up 35 percent of the Southeast Asian market.

Indonesia is highly price-sensitive, with 85 percent of the market dominated by devices priced under USD200, said Zhu Jiatao, senior analyst at Canalys. However, the mid to high-end market is less crowded, with Samsung and Apple performing best in the above-USD300 segment in the first three quarters of last year, Zhu added.

However, substantial investments in localization and marketing are necessary for the small but attractive premium market, Zhu pointed out. Since late 2022, phones priced above CNY5,000 (USD680) cannot be imported as complete units, Zhu said.

New entrants such as Honor must use 35 to 40 percent domestic components in their production to meet Indonesia's Tingkat Komponen Dalam Negeri, or domestic component level, standards, leading to high operating costs affecting profitability, according to Zhu.

Editor: Martin Kadiev