PC market registers a modest 11.7% growth: IDC

The PC market in India continues to move slowly on the growth path and recorded modest gains during the financial year 2002. The growth in the overall business coupled with a spurt in large tenders during the second half of the year were imperative for the higher number recorded in the year. IDC Research indicates that the total PC market (including desktops, notebooks and PC servers) totalled 2.3 million units in FY 2002 with a growth rate of 11.7 percent.

Commercial desktops

HCL led the overall market for commercial desktops in FY 2002 with 133,237 units and a marketshare of 8.9 percent. HP followed HCL to occupy the second slot in the overall commercial desktop market with 7.7 percent of the total units shipped in this space. Aman Munglani, head Computing Products Research IDCIndia said that HCL’s wide presence within the government and the financial segment helped it to reach the top spot. This could be a reality for the market as well, where an increase in run rate business coupled with a spurt in buying from the telecom and the banking segments were crucial to the increase seen in commercial desktops. "IT services as a PC buyer segment started looking promising during the second half of 2002 and did well to deliver volumes for a few MNC vendors," added Munglani.

Consumer desktops

HP dominated the consumer desktop market with 52,037 units in FY 2002. The vendor’s share was at 7 percent of the overall consumer desktop units sold in FY 2002. HCL stood second with close to 4 percent share of the total consumer desktops sold in the country in FY 2002. Some branded vendors also began shipping Linux and AMD-based systems in order to reach more customers with a low price point. HP and HCL both recorded gains in the consumer space through this effort. HP’s aggressive bundling offers coupled with innovative and catchy slogans did well to boost sales in this segment.

Portable PCs

The portable PC segment grew yet again, driven by corporate and government demand. The increase in run rate business was also crucial to the increase in overall numbers. Shipments of the top five notebook vendors (HP, IBM, Toshiba, Dell, and Acer) registered steady year-on-year growth rates. All in all, portable sales in India grew nearly 47 percent compared to a year ago. HP emerged the leader with over 32 percent marketshare and nearly 6 percent ahead of its closest competitor IBM, whose share stood at nearly 26 percent in financial year 2002. Toshiba with nearly 20 percent marketshare occupied the third position in the notebook space.

Toshiba’s focus on the education segment paid rich dividends as its shipments into this space increased nearly nine-fold while overall spending on notebooks in the education space increased nearly 800 percent. Management institutes accounted for a major chunk of these machines. Other factors that drove sales include the need for reducing price points, the increasing need for mobility and replacements in the commercial desktop space that have been a positive driver as users are progressing from using desktops to notebooks.

Intel-based servers

SIAS system shipments grew by 2.7 percent compared to FY 2001; major contributors to the growth were strong shipments into the finance and the banking segments. HP continued to lead this space with 10,289 units for a near 30 percent share of the overall market in FY 2002. IBM followed in second place with 8,748 units for nearly 25.2 percent of the market. Steady sequential growth in the large business and medium segment continued to drive the SIAS above the $25,000 segment.

Key highlights

A key highlight of the market in FY 2002 was the introduction of PC kits. These kits were primarily targeted at the assemblers, enabling them to integrate kit components with their individual offerings. Esys was first to launch kits based on VIA’s C3 processor and the Linux operating system. Tech Pacific launched its AMD- based kits, generously bundling components from Samsung. Other players in the arena include Arihant and SMC International.

Non-Intel microprocessors gained visibility during FY 2002. The market saw AMD and VIA getting aggressive in the Indian market. Promotional campaigns and incentives to channel partners did well for AMD and VIA.

Future outlook

Short term
A number of factors should contribute to shipments in the first half of the financial year. Direct deals that were to be finalised last year did not materialise, and fulfilment is now expected to carry forward to the first half of FY 2003. Channel partners were also apprehensive of carrying stock in the wake of the proposed implementation of VAT during Q1, so pent-up demand should improve volumes in the next quarter. In addition, shipments to the consumer segment are expected to receive a boost from the summer holiday season. Low-cost PC offerings based on an AMD-and-Linux combination are expected to foster unit growth in the consumer desktop space. However, overall revenues from this category will hence be negatively impacted.

Long term
"In the long run though, a more significant recovery will occur, although 2003 could be softer than expected. Fortunately, in 2005, reduction of customs under the WTO regime will help the market," says Aman Munglani. "Many e-government initiatives will be launched, like process automation, national citizen IDs, smart cards and digital education. These initiatives will push IT growth as the government is one of the largest potential IT users," he adds.

PC replacements within India are primarily concentrated on medium and large business enterprises and are essentially dependent on the state of the economy. Today’s machines are only being replaced on an as-needed basis rather than in large batches. The overall impact of the same will be moderate and companies are likely to go in for staggered replacements.