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Desktops are here to stay

PC desktop sales remain steady despite the influx of low-cost notebooks, largely because of demand from home users, SOHO and SMBs in India, writes Nivedan Prakash

The world has already crossed the 1 billion mark as far as PCs are concerned. In addition, the industry is witnessing a growth in PC desktop sales, chiefly driven by demand in tier-II and tier-III cities. Even though laptop sales are going through the roof, desktops continue to maintain a strong hold in the market.

PC penetration remains minimal in India and there is still scope for the growth of desktop market with rising PC penetration. The market share of desktops in the overall computer sales is 50-60% on the conservative side with more desktop sales vis-à-vis laptops in non-metros. There is a growth in the desktop market space thanks to demand in C, D, and E class cities.

The shipment figures from IDC for last year state that nearly 6.5 million PCs were shipped during 2007 with notebook PC shipments touching 1.8 million units (around 27%) of the total shipments. As per the latest IDC figures, during the April-June quarter of calendar year 2008 (Q2 2008) the overall India client PC market grew 8.1% year-on-year in terms of unit shipments to record sales (shipments) of 2.085 million. Desktop PC shipments recorded a marginal drop, which can be attributed to slower sales largely due to cautious institutional buying because of the current economic slowdown.

Sumanta Mukherjee, PC Analyst, IDC India, pointed out, “With time, desktop PCs are showing a trend of moving towards a smaller chassis, brightly colored and aesthetically designed cabinets, fashionable skins, gaming accessories, and high-end multimedia graphics/speakers amongst others. During Q2 2008, the share of desktop PCs with respect to total PC shipments was 72%.”

Meanwhile, the industry is putting a greater emphasis on energy efficiency in the desktop market. Companies like Dell and Zenith have come up with green desktop solutions. Keeping in tune with these trends, Zenith Computers has launched ‘The SmartStyle PC’ and ‘The Ecostyle PC’ in India. As this concept becomes more important to customers, Dell is not only talking of higher energy efficiencies but also the use of recycled plastics on select systems as well as recyclable packaging.

Another emerging trend is small form factors in the desktop space. Here Dell’s offerings include the Optiplex 755, 740, 960 with the option of the ultra small form factor in the Optiplex 760. The other big trend is towards flexible computing that offer customers the flexibility to deploy solutions outside of traditional computing models.

Another prominent trend is that the desktop market is witnessing a slow shift towards LCD monitors over CRT. This is relevant to both SMB and SOHO users. India offers a huge market for LCD monitors. A report released by IDC in January 2008 states that sales of LCD monitors crossed 2.64 million in 2007. According to industry estimates, the LCD market share that was 14% during 2005 is expected to grow to 22% in 2008.

Diptarup Chakraborti, Principal Research Analyst, Gartner, stated that flat-screen monitors in the desktop space have taken over from CRT monitors in a big way. “There will be pockets where CRTs will sell because India is a huge country. In the enterprise segment as well as in small businesses, CRT has been taken over by LCD. The second trend is that of high-end desktops being available in large format retail outlets, as there is consumer demand. More small businesses are coming into the market. There has been growth in the last two quarters,” he said.

“In Q3 2008 the market was led by HP with 2,19,972 units being shipped, followed by HCL with 1,92,000 units, Acer with 1,09,000 units, Lenovo with 92,000 units, and Dell with 86,600 units. These are the top five vendors,” added Chakraborti.

Jaideep Kohli, COO of Novatium Solutions is, however, of the view that the growth rate of desktop sales looks discouraging as compared to notebook sales. The core technology and process behind desktop sales need to be rethought and modified in concurrence with the needs of the present day. “We need to look at the concept of computing altogether and revolutionize that,” asserted Kohli.

Growth rate of desktops

According to the 2008 Q3 sales results, Gartner said that PC shipments in India reached over 2.2 million units, registering nearly 20% year-on-year growth. Desktop PC shipments grew 7.8% in Q3 to 1.72 million, registering the highest growth in the last three quarters.

In addition, according to IDC, nearly 1,000 PCs shipped every hour during January-March 2008. In the first quarter of 2008, computer shipments stood at more than 2.1 million against 1.9 million PCs in the corresponding period last year. This took the total shipments during 2007-08 (April-March) beyond the 8.25 million mark, recording a year-on-year growth of 22.3%. Shipments in 2006-07 were 6.75 million. The IDC study on the domestic PC market across India found shipments of commercial PCs at 5.55 million, much higher than the 2.71 million consumers PC shipped during the year.

Mukherjee added, “Desktop PCs showed a growth of 2% sequentially in Q2 2008 over Q1 2008.

Low-cost notebooks are a recent phenomenon and have a small installed base, so it would be too early to comment on the growth rate/expected growth for this new segment.”

Nitin Chaudhry, Director-Commercial Products, Personal Systems Group, HP India, stated, “2008 was a special year for the PC market in India. It signaled a metamorphosis and hastened India’s entry into the topmost bracket of the IT-savvy world. The revolution which has been coming for some time is at a tipping point, and a cell-phone like explosion could be just around the corner.”

Time for reinvention

As mentioned earlier, desktops are crying out for reinvention. Computing needs to be technically advanced, simpler to use and affordable for the masses. Only then, can we look at robust growth in PC desktop sales. Here, computing as a service is going to be the key to the future of computing in the country, as it would let the user have access to the best technology at a cheaper price and eradicate all the complexities involved with computers.

Raj Saraf, CMD, Zenith Computers, pointed out, “The small and medium business segment has emerged as the driver of desktop PC growth in the country.”

Growth drivers for the desktop market are first time buyers who prefer a desktop over a laptop as they are more familiar with it and it has had a significantly longer lifespan in the Indian market. Many first time buyers in India buy a PC as a device to facilitate home studies for their kids for whom they prefer a desktop over a notebook as the latter is mobile, delicate, and hence more prone to loss, theft and damage. Moreover, industrial users prefer desktops to notebooks as they are marginally more cost-effective and the fact that they are non-mobile gives a certain degree of security.

Vinay Shetty, Business Manager, Components, Asus India, explained, “The Indian buyer’s mentality is also a growth driver for desktops as the desktop service is mainly SI driven due to the large market of assembled PCs. However, the low-cost notebooks service remains chiefly vendor driven. Indian buyers, especially in the non metros, find their local SI more approachable than the vendor for service and hence trust a desktop more for after sales service.”

Partha Mukherji, Brand Marketing Manager, Dell India reminded that mobility is a significant trend in the PC industry, “We have seen a faster growth in the notebook segment as compared to the desktops. Nonetheless, segments such as government and education remain key drivers for desktops. Growth in tier-II and tier-III cities and a growing SMB market are the other important drivers in the market. We have seen a good response to our SMB-specific offering with the Vostro desktop range.”

Desktops vs. low-cost notebooks

There is lot of speculation going around that the growth of low-cost notebooks is posing a threat to the desktop market space. However, if we go by industry estimates, this is not the case. Among the various factors that have led to an exponential growth in the notebook market, the closing price gaps between desktops and notebooks have certainly played a role. Nonetheless, for many users with low mobility needs and focused concerns around manageability and low total cost of ownership, desktops continue to be an attractive proposition.

The IDC estimates predict desktops will continue to remain the largest segment in terms of unit sizes for the next three years. With the kind of PC penetration in India, there is still huge scope for desktop PCs, especially with first time buyers and the SOHO segment.

“The total market for PCs in India is growing year-on-year. This gives every segment enough potential to grow. There’s no real threat to the desktop market with the growth of low-cost notebooks,” emphasized Shetty.

Mukherjee believed that this was only partially true. First time PC buyers and those with casual computing needs such as for surfing the Net, checking personal e-mail or hobbyists and enthusiasts may be inclined to go in for low-cost notebook PCs. “Serious business users who require high processing speeds to run highly compute-intensive applications, analyze large databases, work with heavy presentations, etc., would not be inclined to experiment with low-cost, basic notebooks,” added Mukherjee.

Low-cost notebooks have a different market segment, and are generally used as second PCs or while on the move. In India, people still have a comfort level with desktops and this scenario is not likely to change in the near future. However, even though the sales figures seem to be the same, notebooks have surely taken a large slice of the pie. The growth rate of desktop sales is negligible when we compare it with the growth rate of notebooks. There is a need to align customer needs with products being created.

While low-cost notebooks score over desktop PCs on the portability front, they are overshadowed on the performance front. Even as far as portability is concerned, it is easy to come across dissatisfied users of low-cost notebooks because of the frequent recharging required for the battery. The low life expectancy of the batteries is also an issue as the replacement cost adds to the overall acquisition costs.

Vakul Bhatnagar, COO-Branded Biz Group, eSys Technologies, stated, “As such, we do not see the rise in the sales of low-cost notebooks threaten the growth of desktop PC market. We believe that first-time PC buyers and power users still prefer a desktop PC over a low-cost notebook. Hi-end notebooks could have posed a threat to desktop PCs as they can offer equivalent productivity and performance but they fail to woo an average buyer because of comparatively much higher prices.” This apart, another interesting fact is that a majority of even those who buy a notebook because of the portability advantages have a desktop at their disposal at home or at work. We do believe that the markets for both desktops and notebooks will coexist and continue to grow because of the different requirements and expectations of various target segments.

Meanwhile, the low-cost notebook segment cannot wipe out the desktop market though desktop marketing needs to be tackled more seriously now. It is not just the product but also the relevance of the product that would drive the increase in sales and overall PC penetration.

How will it evolve?

As per an IDC Q2 release, the desktop market is to grow from 6.1 million in 2008 to around 8 million in 2012. The market still holds the potential for growth because of the huge untapped SMB and consumer base along with regular buying from enterprises.

The desktop market will move from traditional computing to computing as a service model, as it will reduce costs and increase efficiency. It would give users access to the latest technologies and eliminate the risk of obsolescence. Currently the PC penetration in India is low, but the affordability and simplicity of use would show a sharp rise in coming years.

HP estimates that five years from now, computing technology will be as prevalent as cell phones are today, providing a rich media experience for a broad range of lifestyle requirements. PCs will become an integral part of our lifestyle. If not the first or second, it is bound to occupy the place of the third durable in every home. Desktops and notebooks will continue to co-exist in the market, both growing and evolving with time.

Bhatnagar concluded, “The overall desktop PC market in India is rapidly evolving with stronger sales coming from tier-II and tier-III class cities. We believe that this particular segment will drive the future growth of desktop PCs in India. However, there exists a need to offer more affordable Internet infrastructure, broadband connectivity, growing number of localized applications and Indian language content, e-commerce and education to push the penetration levels in tier-II and tier-III class cities as the majority of users prefer desktop PCs to low-cost notebooks because of performance and cost considerations. In addition, apart from individual users and households, the education vertical is emerging as another key driver for growth in the desktop PC segment in India. Privately managed schools and colleges are adopting PCs at a brisk rate and they tend to invest in desktops rather than notebooks.”

The market is seeing growth in all segments of this market. There may be a slight slowdown due to the current recession but we do not expect it to last for long. The introduction of netbooks and nettops is helping to expand the market. Coupled with the dropping prices of hardware products, the market is quite exciting for the IT hardware industry in India in the coming years.

nivedan.prakash@expressindia.com