TURAN ERDOĞAN

Turkey 2020 | INDUSTRY | INTERVIEW

Vestel is navigating the consequences of decreased domestic demand after the devaluation of the lira in 2018, while trying to capitalize on the resulting competitive advantage in exporting its electronics overseas.

Turan Erdoğan
BIOGRAPHY

Turan Erdoğan earned his bachelor's degree in mechanical engineering from Istanbul Technical University in 1976 and his MBA from Brunel University in the UK in 1979. Following his return to Turkey, he served in managerial positions in various companies in the private sector before joining Vestel in 1988. Since 2013, Erdoğan has been serving as the CEO of Vestel Group of Companies. He served as the president of the Turkish Foreign Trade Association for two periods between 2002 and 2006. He also served as a board member of Europe's largest ICT Confederation, DIGITALEUROPE, between 2010 and 2014. He was the first Turkish citizen to be elected to DIGITALEUROPE's board.

How difficult has the development and market introduction been for Vestel's smartphone business?
The initial development was fairly difficult, though the process was aided by our experience producing television sets, smart appliances, and other devices that require processors. We invested a great deal in the R&D and production side. However, because it is a personalized item, design is extremely important. We had to develop the latest technologies in design. The introduction to market was smooth for us, as we were able to work with all of the big operators in Turkey—Turkcell, Vodafone, and Türk Telekom. Soon after release, we reached almost 10% market share, though there is now a huge influx of Chinese-made mobile phones that has reduced our market share to around 7%. Chinese mobile phone manufacturers benefit from their economies of scale and offer attractive prices. To compete with the Chinese mobile phones, as well as major players such as Samsung and Apple, we are now expanding our range and offering high-end models, entry-level models, and mid-level model phones. Our goal is to reach 20% market share in Turkey, which will allow us to benefit from the economies of scale that other large manufacturers enjoy. Once we reach that scale, we can start to export on a larger scale. Broadly speaking, having a smartphone business significantly boosts Vestel's image as a high-tech company. Our smartphones are the only fully locally designed and produced phones on the market.

How will Vestel's partnership with Google to produce Android TVs be received by the market?
We recently signed an agreement with Google to produce Android TVs, which fits in well with our broader technology strategy. For our mobile phones, we are using the same Android platform that will be used in our Android TVs. This makes production easier for us; for customers, it means if they have an Android-based mobile phone, tablet, or computer, there will be interactivity between the TV and their device.

How has the lira's depreciation affected Vestel's business?
Domestic consumption for almost every category of our products has fallen because of the depreciation of the lira. However, it helped our exports, because a great deal of the costs in our operations is in lira. A strong lira is not good for exports, and the devaluation helped all exporters, including Vestel. The depreciation is one reason why we were able to increase our exports in 2018 and turn a solid profit. We were able to significantly increase our overall combined profit in 2018, which is reflected in our share price, which saw a 100% increase after the release of our financials.

How is Vestel investing to expand in software and other high-growth sectors?
We want to position Vestel as a technology company rather than a manufacturer of appliances or consumer electronics. That is why we are increasing our investments in R&D. We have 1,600 engineers and will increase that to a minimum of 2,000. We are investing significantly in the software side, rather than hardware and manufacturing, because software allows us to increase our value-added projects. We will continue to grow our consumer electronics and white goods manufacturing and sales, though currently our emphasis is on growing our technology projects. A result of this emphasis can be seen in our investments in the automotive and healthcare industries. We recently established a company that will penetrate the automotive electronics parts market, most notably with electric car chargers. We have installed many of these already in Turkey and abroad. We are working to expand our exports to high-growth electric car markets. We are also investing significantly to improve the connectivity of medical systems. We have extensive experience with connected devices, and these digital and connected services create new areas to offer our services and devices—such as in the health and automotive industries.