The Second Quarter (Q2) ending September’06 witnessed PC sales exceeding 1.75 million units, registering a growth rate of 46 percent over the previous quarter and 19 percent year-on-year. Desktop sales crossed 1.5 million units with 48 percent sequential growth while notebook sales totalled 0.25 million units with 38 percent sequential growth.

Demand was highest from telecom, banking and financial service sectors, education, retail and BPO/IT-enabled services, and rose also on account of some major e-governance initiatives of the Union and state governments. The southward trend in pricing continued during the year. Further, significant consumption in the small and medium enterprises contributed to the industry growth and consumption in the home market remained buoyant.

Commenting on the need for a strong domestic IT market to strengthen India’s hardware manufacturing industry, MAIT Executive Director, Vinnie Mehta said: “Domestic demand is likely to gain tremendous momentum in 2007, which has been declared the ‘Year of Broadband’. We welcome the slew of encouraging policy measures announced by the Government to promote development of content in local languages. MAIT works to ensure that the growth in market translates into manufacturing opportunities and, as such, welcomes the clearance of the Fab policy. The industry is also eagerly awaiting the long overdue policy for the manufacture of IT and electronics products. The above two policies could play a critical role not only in boosting highly capital-intensive activities like the manufacture of semiconductors, LCDs, storage devices and so on, but also in expanding the consumption of IT goods and services in the country.”

Organised vs. unorganised

Multinational brands accounted for 37 percent of the desktop market in H1 2006-07, registering a growth of 14 percent over the same period last year when these accounted for 35 percent of the market. The proportion of Indian brands fell from 31 percent to 23 percent; they registered a year-on-year decline of 20 percent. Assembled PCs, the smaller lesser known regional brands and unbranded systems witnessed a growth of over 27 percent in absolute unit sales and an increase in market share, accounting for 40 percent of PC sales in H1 2006-07, up from the earlier 34 percent.

Businesses vs. household consumption

The business segment accounted for 77 percent of sales, registering a 7 percent growth on a year-on-year basis and 19 percent on a sequential basis. While sales to factory locations and also to small and medium enterprises were poor, sales to the large establishments witnessed a robust growth of 28 percent. Households accounted for 23 percent of the total desktop market with sales crossing 0.57 million units. This represents a growth of 12 percent over H1 2005-06.

Within the Households segment, SEC (socio-economic category) A continued to dominate the market with a 43 percent market share; but it witnessed a 2 percent drop in sales. SEC B accounted for 37 percent market share and 33 percent growth while SEC C registered a 12 percent growth with 20 percent of the market share. The stagnation of desktop consumption in SEC A was more than made up by increased consumption of notebooks. SEC A accounted for 80 percent of the notebook sales within the households registering a growth rate of 637 percent.

By processor sales

Desktop demand in H1 2006-07 was primarily for P4 units, which accounted for 82 percent of total sales. The recently introduced Intel dual-core processors garnered 3 percent of the market. Other branded processors like the AMD and Cyrix, among others, accounted for another 13 percent.

By town-class

The top four metros accounted for 35 percent of the total PCs purchased with 25 percent growth in consumption. PC purchases in Class B Cities accounted for 7 percent of the market witnessing a growth rate of 48 percent. In smaller towns, PC purchases increased by 14 percent to account for 58 percent of the PCs sold. Smaller towns accounted for 55 percent of the market in the same period last fiscal.

Rajendran of Acer says, “In the SMB sector the key focus will be to build up robust front-end and backend systems to support and strengthen their delivery mechanisms and connect to the supply chains of larger vendors. Computerisation will be a major focus area as this segment is expected to make up almost 33 percent of the market and will grow at a steady pace."

The coming of age of dual core CPUs is also going to happen in near future. Rajendran adds, "These technologies will also see a lot of marketing money being spend on customer awareness and education."

Highlighting taxation as another key area that will going to effect this market in 2007, Anandan of Dell stated, "It is hoped there will be further rationalisation in taxes and duties and customers can benefit from better quality computer systems from the organised sector."

Moreover, industry experts also believe that with desktops morphing into full fledged entertainment devices as technologies like VIIV from Intel will get established this year. One will also see a lot of focus from major players on smaller form factors with emphasis on minimal footprint, power saving capabilities and computing power to match.

The days of bulky beige boxes fighting for space with CRT monitors are nearing an end. While TFT monitors at reduced prices have begun to become the preferred display devices today, the computer itself has metamorphosed into a small, sleek ultra-portable that is no longer an eyesore next to a TFT screen particularly in the enterprise PC market.

PCs are used today for far critical tasks than they have ever been and no computer buyer can afford routine system downtime and data reliability concerns. Kumar of HCL says, "We are seeing the emergence of revolutionary PC restoration tools bundled with PCs from many vendors that promise continuous PC uptime and a greater reliability of data."

The other key factors that would drive the PC market are:

• The coming of large format retail where IT products would be displayed in never before seen shopping environments (as would be the case in speciality stores and large hypermarkets across the country) and ramp up of OEM retail brand shops in upcountry towns and cities.
• Massive e-governance initiatives will also see mass computerisation programs which would drive growth.
• Another major contributor to growth in this market would be the buying from the education sector especially institutes engaged in higher learning.

32-bit desktops are still the favourite among the SMBs. But the number of companies planning to go for 64-bit desktops are very high. Says K Ramaswamy, MIS (Management Information Services) Manager, The Ruby Mills, "Right now we are using 32-bit desktops, but we plan to go for 64-bit in one year because applications run faster on a 64-bit processor."

Some SMBs do go for 64-bit processors because of its technological edge. Says Rishikant Singh, EDP Officer, Haldiram Manufacturing Co, "We are using 64-bit processors because we are using a lot of ERP applications and also because of the high-level technology."

64-bit processors are not going to be ready for prime time until more 64-bit applications and operating systems are in the market. Although Windows XP Professional x64 is available, wide spread adoption is still going to take a while.

SMBs also look at things other than pricing. Says Atul Bansal, IT head, BLA Industries, "Vendors should be selected by considering their stand in the market, services provided by them and the cost they are providing." Some SMBs go for branded ones since they think branded products are more reliable because of their longer stance in the market.

Usage of RISC processor-based computers at desktop or workshop level is largely restricted to specialised processor-intensive tasks like heavy-duty graphic design, video editing, research or mathematical modelling. This space is already facing heavy competition from the CISC side and adoption is minimal at the SMB level.

• Enhanced Security - more and more users today access the internet and want a more secure browsing experience. Parents want their children to use the internet as a medium of learning and collaboration while protecting them from potentially harmful content. The new parental controls in Windows Vista allow parents to restrict the sites that children go to and control the programs and games they can use. Parents can also get easy reports on their children's browsing history. The new protected mode and phishing filter in Internet Explorer 7 allows businesses and consumers to take advantage of the internet for doing business while significantly enhancing the security of the online experience. Windows BitLocker encryption ensures that corporate data is secure even if a laptop is lost or stolen
• Reducing costs in the IT environment around deployment, maintenance and support by leveraging key benefits in Windows Vista including support for NAP (Network Access Protection); additional group policies that allow granular control over USB devices, location-based printing and centralized power management; the new imaging format that allows hardware independent imaging ensuring that organizations have to create and maintain a much smaller set of images for deployment etc
• Enhanced productivity for mobile workers including an enhanced user experience for connecting to wireless networks, Windows Sync Center, Windows Mobility Center, Windows Meeting Space for ad-hoc peer-to-peer collaboration etc.
• An Improved Search in both speed of searches, but also different ways to search for information including digital media (files, music, pictures)