one industry which continues to hold its head high even in an environment of industrial slowdown is...

8/7/2019 One industry which continues to hold its head high even in an environment of industrial slowdown is information te

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One industry which continues to hold its head high even in an environment of industrial

slowdown is information technology (IT) - with annual growth rates of software value hovering

between 20% and 30%. Growth rates for the industry earlier were as high as 40% to 60%. The

soft-ware industry is supported, on the one hand, by the hardware industry - computers,

peripherals and components, and on the other, by IT-related services. Software exports have been

a source of strength for the economy as a whole and for the hardware segment.

The industry recorded an exponential annual growth rate over 24% in the years from Rs 801 bn

in 2001-02 to Rs 2,911 bn in 2007-08. IT and electronics exports at Rs 305 bn in 2000-01 were

up 64% from Rs 185 bn in 1999-2000. During the period 2001-02 to 2007-08, exports of

software increased from Rs 365 bn in 2001-02 to 1630 bn in 2007-08, recording a CAGR of over

28%.

At the time when Indian PC market is experiencing slowdown, market players are focusing on

new growth drive through low price laptops 'notebooks'. While the average price of a PC is Rs20,000, the price of an entry level notebook starts from Rs 35,000.

With several sectors reeling under the impact of global slowdown, expenditure on IT is ex-

pected to decline 3.7% in 2009. A survey by research firm, Gartner says that budgets for IT

hardware will bear the brunt of cuts of almost 14.9%.

The advent of the sub-Rs 10,000 PC, it is expected, will help India achieve the 80 mn PC usage

target by 2010 from 15 mn right now. Taking into account the annual population growth, this

means PC sales as well as penetration in the country will more than double every three years.From 3.77 mn in 2004-05, PC sales in the country increased by 32% to cross the 5 mn mark in

2005-06. In the following year, 2006-07, the number rose to 6.34 mn. The PC sales - notebooks

and desktops - registered a growth rate of nearly 16% in 2007-08 over 2006-07 registering sale

of 7.34 mn.

The market was led by high growth in notebook segment at 114% with sale of over 1.8 mn units,

while desktop increased by a slightly over half a per cent with sale of 5.52 mn units in 2007-08.

Desktops accounts for less than 75% of total personal computer market while laptop had 25%

share. The ratio of desktop-to-note book sale has declined from 10:1 in 2005-06 to 3:1 in 2007-

08. Note book vendors like Lenovo, HP, LG, Acer, HCL, Dell and Toshiba have launched new

models with value added features.

According to IDC, over the next five years, India's laptop market is expected to grow at a CAGR

of 30%. By 2010, India will have 1.75 million laptops market in unit terms. In value terms, it

would translate into nearly three fold growth to USD 1.87 bn or 24% of the market, up from


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USD 671 mn which is about 20% of the total desktop in 2005.

HP commands 41% of the laptop market. In PC segment, Dell accounts for a market share of

7.3% while HP has 20.3%, HCL has 13.9% and Lenovo 9.4

The business segment accounted for about 74% of the total PC sales, registering a growth rate of

18% year-on-year. The home PC market expanded at a growth rate of 23%. The sales to large

enter-prises witnessed a growth of 69%. The implementation of various e-governance projects

led to an increase of 126% in government usage. The young segment aged between 18-30 years

constitutes 50-60% of the market. By 2009-10, the young buyers are expected to account for 70-

80% of the overall market. The emergence of user segments like the household professionals are

driving the growth. Household professionals accounted for 40% of the total demand in the

segment. While SMEs (small and medium enterprises) accounted for 43% of total sales, the rest

was accounted for by large cor-porates or organizations. The share of large corporates owninglaptops has come down from 56% in 2006-07 to 44% in 2007-08.

The high income segment of consumer household recorded a 21% growth in demand and

continued to dominate the market with 55% share in the overall household segment. The middle

level segment registered a 16% growth in sales and accounted for 29% in the segment.

Households in the relatively low income bracket posted a decline in its share. Sales in this

segment declined by14%. World computer chip leader, Intel, unveiled a new processor designed

to turn a personal computer into a living room multimedia centre. Intel also announced new

ventures with other electronics producers, including Microsoft and content vendors to give a

richer Internet content experience. Intel was expected to launch small, affordable laptops forstudents, called 'Eduwise' in the Indian market by earlier of 2008. Eduwise does not have a hard

drive. It has a flash memory and can be networked through the Internet and through wired or

wireless network. Eduwise is expected to cost less than USD 400. Intel, which invested USD 700

mn in India over the past few years, has plans to invest over a in India towards R&D and other

investments.

Apple is expected to unveil the first Mac-based on Intel processors. Apple recently added some

Media Centre-like capabilities to its iMac line with a programme, called Front Row. Big Apple

Manufacturing has sold about 1300 computers priced at around Rs 7000 in about nine months.

All the hardware features are built into the monitor. The 14in colour monitor contains features

such as a Celeron 300 microprocessor (equivalent to a low-end Pentium II), 810E motherboard,

1GHz processing speed, 64 MB RAM, 10 GB hard disk drive, a 56 kbps modem with LAN card,

sound card and inbuilt stereo speakers with mike (sensitive upto 20 feet) and three USB ports. It

comes with a keyboard that has a touch-pad mouse (like the one on laptops). Along with this

package, comes 7a free Intel phone for Internet communication that can be interfaced with a web


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camera. Big Apple's computer also comes with a one-year warranty, occupying about 1.5 sft of

space. Designed specifically for BPOs and Internet browsing centres also found a market

in schools and hotels. Increasing number of schools are acquiring these computers in bulk.

Singapore-based contract manufacturing company, Flextronics Corporation, plans to manu-

facture computers in SEZ at Chennai with chip from its JV partner SemIndia. The contract

manu-facturing market for PCs in India is estimated at US USD 20 bn. Patni Computers System

and Sahara computers have chosen Flextronics as their contract manufacturer. The company

assembles PCs and manufacture the body and the mouldings for the PC and the laptops. Dell has

chosen Chennai as its first manufacturing facility in India. It has committed an investment of

USD 60 mn, including USD 30 mn expected to come in five years. Initially, it will manufacture

desktop computers, which account for 70% of its sales in India. Dell entered India in September

2000 and in 2005-06 reported a turnover of Rs 18 bn, growing at 60% per annum. Dell planned

to invest Rs 2.8 bn in its manufacturing facility near Chennai.

Dell has made its foray into small business and home segment in India and in already generating

15% of its revenues from this segment. Dell is among the top 5 PC vendors in the country. Dell

introduced Dell Adamo in 2009, it is the latest to claim its position amongst the coveted svelte

devices of 2009. Lenevo launched Ideapad Y650. It is a neat multimedia notebook with latest

features. Apple computers made a dynamic entry into the notebooks' market with Intel

processors. Hewlett-Packard (HP), Fujitsu, Lenovo and even Sony have launched notebooks in

the sub-Rs 70,000 bracket. HP India has launched the HP Pavilion notebook, decked up with

HP's Imprint Finish technology. Lenovo has also introduced N100 in the notebook segment. It

gives a better impression with its processing power (Intel's core duo processor). N100incorporates a 4-in-1 multi-card reader for downloading digital pictures from multiple types of

memory cards, four USB ports (all side mounted), 4-pin Fire Wire and S-Video port.

Lenovo's Think Pad is now targeted at small and medium businesses, individuals and self

employed professionals. The Think Pad series also includes Think-Center desktops. Think Pad

has a strong business usage while the Lenovo series is more for mail chat and entertainment use.

Lenovo is planning to expand its capacity from 0.6 to 1 mn units. Lenovo had plans to set up its

second unit for manufacturing in north India. Its Puduchery plant has a capacity of 370,000 units.

In 2005-06 the turnover of Lenovo was Rs 6 bn. Lenovo has made SMB a target by introducing

new version of its Thinkpad range styled as Thinkpad 52. Dell has also come up with two new

models for SMB sector. A report by MAIT (a body representing IT hardware) showed that sales

in 2007-08 were up by a sharp 114%. In notebook sales, currently laptops account for 25% of the

computer sales.

Fujitsu's Life Book series of notebooks take a much more traditional approach. Life Book C1320


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(Rs 43,000), S2110 (Rs 63,000) and S6240 (Rs 93,000) are a bunch of modular looking

notebooks. The S6240 is powered by the Intel Pentium M750 (1.86 GHz) processor, a 60 GB

hard drive, a 13.3-inch LCD screen. Fujitsu Life Book S2110 runs on a 64 bit AMD Turion

mobile processor that runs up to three hours (with Wi-Fi on). HP is investing about Rs 1 bn in

new computer manufacturing facility in Uttrakhand. The facility will churn out 2,00,000 units of

desktops, laptops and servers a month. eSys Information Technologies has launched a range of

laptops in the Indian market with the brand name 'Wizard'. The company had also launched a PC

(e-PC) with LCD monitor. The company's Wizard 8000 series laptops had just 12in screen,

which suited to all computing needs of professionals, while keeping the notebook lighter to

carry. The company has plans to launch the Wizard 6000 series laptops with 15in screen at a cost

of less than Rs 50,000.

Allied Computers International (ACI) launched an sub-Rs 30,000 laptop in 2005-06. In the last

one year the brand managed to sell 10,000 laptops. The company uses Via Processor chips in

laptops. It has introduced a laptop for Rs 20,000, a good Rs 8,000 lower than market leaderHCL's cheapest offering. LG launched the Express series of notebooks which is hailed as one of

the thinnest ranges of laptops in the Indian market. The ultra-thin range of notebook is based on

Intel's Sonoma mobile platform, a part of Intel's Centrino brand which includes a Pentium M

processor chipset and a Wi-fi card. The notebooks are embedded with ATI Mobility Radeon

X6000 graphics card that supports up to 128MB of graphics memory and a PCI Express interface

that offers four times faster graphics performance compared to the existing models. This series

and LS70 Express series are equipped with DVD super multi-driver (SMD), which supports most

DVD formats. With freebies and exchange schemes, leading brands, including Compaq and

IBM, are ban-king on the replacement market. The existing base of notebooks is close to 300,000

and with newer software applications coming into the market, the old machines would requirehigher replacement. Reduced prices and exchange schemes will expand the market for notebook

PCs.

Nearly 5 mn non-PC companies or 22% of small enterprises in India, have plans to invest in

computers for the first time. It has been revealed by the Study of New York-based Access

Markets International (AMI) that this will boost investments in other IT categories, such as

software, security.

Laptop Computers

Demand : Past & Future

Year

th no.


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1995-96

15

1996-97

20

1997-98

26

1998-99

30

1999-00

35

2000-01

40

2001-02

45

2002-03

51

2003-04

89

2004-05

177

2005-06

432


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2006-07

851

2007-08

1822

2008-09

1950

2009-10

2200

2010-11

3125

2011-12

4300

2012-13

5800

2013-14

7750

2014-15

10230

2019-20

35760

Lead Players

Company


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Share (%)

Hewlett Packard (HP)

35-40

Lenovo

15-20

Toshiba

10-12

Dell

Sony

Compaq

Acer

Market Growth Rates

1996-97-2001-02

17.60%

2001-02-2006-07

80.00%

2006-07-2011-12

38.30%

2011-12-2019-20

30.30%

Sensitivity Coefficient

9.8%


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Market Structure

Market Segmentation

Segment

Share (%)

Businesses

56

Householders

44

Small

16

Medium

47

Large

37

North

25

South

27

West

31

East

17


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Leading Brands

Toshiba, HP, Dell, Tecra, Satellite, IBM Thinkpad, Acer, Compaq, Armada, LG


10/13

Heres some good news. The overall PC market in India grew 20% i n FY10. And now heres some even more good news. Contrary to popular perception that desktop demand is shrinking, both desktops andlaptops recorded the same 20% growth. This indicated that both laptop and desktop can peacefully co-exist, thus laying to rest apprehensions of low cost netbooks eroding the desktop market. One of the reasons

why netbooks have not taken off in India as expected is the doubt over its usability; add to t his the fact t hat most first-time purchases are of desktops (sturdy and reliable) which can be used by all sorts of people

instead of netbooks.The desktop market on expected lines grew particularly after the arrival of All-in-One (A-I-O) PCs with integrated CPU and small form factor. IDC has estimated that by 2013, small form factors like the all-in-one

PC has the potential to make up for nearly 38% of the overall desktop market with most players like Dell, Lenovo and Acer already offering products.Meanwhile, the growth in the notebook PC shipments was driven by the consumer demand, more so for t he mini notebook series which saw a steady growth as a growing number of consumers opted for

affordable computing devices.

DQ Estimates CyberMediaResearch

The desktop market grew owing to the arrival of small form factor All-in-One PCs while the

notebooks too grew courtesy the Mini notebook seriesThe Leaders

For the leader, HP, FY10 was a year of introspection for its PSG. Under the PSG India vision, the teams were re-organized into Emerging Businesses, IDC and Attach, Desktops and Mobility, in sync with t he new

go-to-market strategy. Learn from your enemies is what drove the PSGs decision to go the regional way, aping the Dell channel distribution model. For driving reach to untapped tier-2 and tier-3 consumers who

sometimes have to go to ot her cities to buy products, HP will over a period of time reduce business with national distributors like Redington and go wi th stronger regional distributors like Spectra, Shalimar, Savex,

etc.Long been holding the pole position, HP has been losing ground to Acer and especially Dell who have been fast catching up with their aggressive pricing, new launches and print ads. Perhaps what is more

significant is that even though Dell entered t he market only three years back, it has been posing stiff competition to HP. The poor run, some say, can also be attributed to the exit of Ravi Swaminathan who iscredited with building the HP brand a mong the partners. However, HP still has 18% of the overall systems market share, marginally ahead of Dell at 15%.


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With assembled PC market continuing to eat into the share of the industry; players need torethink their desktop strategyOn the products front, the PSG continued to roll out products especially for the consumer market. Debuting into the gaming market, HP i ntroduced HP Swing motion sensor gaming console for the gamers which

comes bundled with Pavilion desktop PC, however, with t he PC penetration low in India, the device didnt take off as expected.

Clocking Rs 2,596 crore revenue with a market share of 28% i n the laptop category, some of t he key launches included dv2 series, dv3 series, dv6 series, HP Mini 110 series, CQ 610 series and the HP ProBook. Targeting the growing women consumers, the HP Mini 11 0 was added to the Mini portfolio already including the Mini 210 and HP Mini by Studio Tord Boontje. It also launched the redesigned Pavilion

notebook range including the DM1 notebook (part of t he new Thinspiration series); the thin and light HP Pavilion dm4 notebook and the HP Pavi lion dv6 entertainment notebook.

To help service its sales channel, provide flexibility to its supply chain in I ndia and reduce time-to-market, HP for the first time in India started manufacturing business notebooks at its Pantnagar facility.In FY11, like Dell, HP too is looking to increase its direct presence from the existing 800-1,000 towns to beyond 1,000 towns.

For Dell, FY11 will be the year of reckoning. Overtaking HCL in the third quarter of 2009, Dell became the number two player with a market share of 13.6% in unit shipments. In the f ourth quarter, Dell crossed the

$1 bn revenue mark with a y-o-y growth of 52%, while the consumer and SME segment grew 100% during the fourth quarter. No wonder then Dells market share in the SMB went up from about 2.5% to 7.7% (asper IDC).

With the SMB segment a mong the top five priorities for Dell globally, its India operations were re-structured into four segmentsconsumer, large enterprise, public sector, and SMB. As part of its newly launched

SMB strategy for FY11, the Vostro range of desktops and laptops (the only PC line specifically designed for SMBs) including the 3000 series featuring Vostro 3 300one of the industrys thinnest commercial 13"laptop with an integrated optical drive and the 14" Vostro 3400 wit h upto eight hours of battery life were launched.


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As Dell threatens the leadership of HP, Acer has moved from the fourth position to thirdoutpacing Lenovo. Overall its going to be a close call for the top 3With a 25% share in the laptop market, Dell i s looking to grow in the consumer segment and is lining up a host of consumer centric products including the Adamo XPS, claimed to be the worlds thinnest laptop at

9.9mm; the Inspiron R s eries, a mobile personal entertainment hub having video playback and optional Intel wireless display feature for web on HDTV.

However, Dells poor show in the desktop segment (with a 7% share) hasnt deterred it from introducing sleek and stylish desktop PCs like the Inspiron ZINO, an ultra-small factor mini desktop PC which looksmore like an over-size external HDD and the Inspiron One 19 A-I-O home PC which is capable of mounting on the wall or even taking it from one room to the other.

Dells success with channel partners has been the result of its direct engagement with distributors, thereby, forging strong channel ties and an in-depth understanding of the local market when it went the channel

way. Under the SMB st rategy, it has earmarked 200 of its channel partners who do only commercial series (the Vostro s eries).FY10 was about me for HCL as it undertook one of i ts largest marketing campaigns for establishing a re-connect with the executives on the go and the NextGen consumers. As part of the drive, HCL r e-positioned

its laptops and fifty-five Digilife stores by pumping in Rs 50 crore for re-branding including a new logo, fr esh brand identityHCL Me. However with a market share of 6% overall, the Me campaign it seems hasnt

paid off as HCL slid to the fourth position i n the systems market. Even in unit shipments, its share has tapered off from 6% in AMJ, 5% in JAS and then to 4% in OND; the situation is no better in the overall as theshare declined from 10% to 8% in OND.

However HCL under the Me campaign introduced the 3G enabled ME series netbookHCL ME 06 and the ME 45 notebook, equipped with multi-t ouch gesture touchpad and it allows users to e xpand, shrink and

rotate a picture through the movement on touchpad.Going back to the roots dictated HCLs desktop strategy as it re-launched its Beanstalk series home PCs. First launched in 1995, Beanstalk was Indias first home multimedia PC; in its re-birth, Beanstalk has

become the first desktop in I ndia based on the Intels core i- 7 processor and first to come pre-loaded with NVIDIA CUDTAM accelerated applications. The return of the Beanstalk range saw an improved HCLs

performance in the desktop category as its share in unit shipments stood at 10% i n OND. One of t he key highlights was its one-touch button feature embedded in all its products making it the fi rst company in theworld to do so.

As the worlds third largest computer maker, FY10 brought in good news in plenty for Acer. First, it moved to the third position after HP and Dell in the systems market with a share of 11% and then for the first time

ever perhaps overtook HP in the desktop category (commercial and consumer), albeit only in a single quarter ( Q1 2010), as per the Gartner India report.With business growing by 38% to touch the Rs 2,700 crore mark, the growth came on the back of some serious spendings from the government and academic institutions, its traditional customers. Intending to

grow faster than the industry average, Acer is looking to build its retail coverage by investing Rs 50 crore to grow vertically in the tier-2 and tier-3 cities.

In pursuit of a larger share of the personal systems pie, Acer continued with its flurry o f product launches and with the market bouncing back in the J AS quarter, there was no looking back. In line with its multi-brand strategy, it launched two global PC brands in IndiaGateway and eMachine targeting the premium and core value customers segment respectively.

A stand-alone brand, eMachines (including notebooks and Nettop) was until now only being sold in selected markets like Canada, the UK, t he US, Japan and Mexico; and in India, it is only being sold through an

exclusive distribution tie-up with Supertron Electronics.In the desktop market, in terms of units shipped too, Acers market share rose to 8.25% in the JAS quarter, ri ding on the back of brisk selling in the newly launched Gateway range including notebooks, netbooks

and desktops. The Gateway coupled with the Aspire Revo (a nettop desktop) has resulted in a good showing in the market, from where all t raditional PC players have been moving away. The Aspire REVO is an

ultra-small factor NVidia Ion based Nettop Desktop powered by Intels low power consumer ATOM N230 Processor. With Aspire, Acer is targeting young Internet users and the SOHO segment who are looking forlow cost, Internet-centric desktop computing devices (also known as nettop).

Serious Contenders

For the Chinese computer maker Lenovo, India is where the growth is considering its the largest market outside China. However, even though its overall PC shipments grew in JFM to 22.4 lakh units (as per IDC),it doesnt figure i n the top 3 in either the desktop or notebook category with the company lagging behind HP, Dell and Acer.

With corporate consumption of PCs on a decline, Lenovo is now making a push for increasing its share in the consumer PC business. Incidentally, India was the fi rst country where Lenovo launched its consumer

PCs and notebooks. The efforts to revive sagging fortunes it seems are paying off as its market share (in units shipped) increased from 5% in AMJ to 8% in OND. Incidentally in t he desktop category, it hasslipped behind Chirag Computers, marginally ahead of Wipro.

In AMJ, Lenovo strengthened its product portfolio i n the consumer segment with a multi-segment, seven products launch including Lenovo C300 (the a ll-in-one PC), IdeaPad U350, Y450 and Y550 notebooks, the

G Series notebooks and IdeaPad S10-2 netbook; and followed it up by launching twelve new products in notebook, netbook, A-I-O and desktop categories which come under its c orporate strategy of getting closerto its customers and partners.

The flurry of product launches from Lenovo has resulted in a steady increase in its market share (in unit shipments) from 9% in AMJ to 13% in OND in the laptop category even though it lags behind at the fourth

position (in revenue terms). I n the desktop category too, there has been an increase, albeit in single digit to 5% in OND.Meanwhile it continued to cater to the enterprise customer segment, an IBM legacy, by coming out with its SMB strategy of focusing on VARs, SIs, retail and launching the ThinkPad Edge series laptops

specifically for the mainstream SMB users. For offering on-site services and support for its IdeaPad series of SMB notebooks, the company launched Lenovo comes Home program.

For building on the growth, Lenovo made changes in its management team by bringing in Rahul Agarwal as executive director, key account business (KAB), Lenovo India; Rajesh Lakhani as head, servicessupport, Lenovo India while K Ramakrishnan was appointed as country manager, marketing.

For FY11, Lenovos market strategy will be t o continue to cater to the growing consumer segment, but it will look towards protecting its commercial segment as well.

A first to its credit, Toshiba launched the worlds fir st dual touch-screen mini-notebook PCLibretto W100 and its thinnest & lightest full-function laptop Portege R700, celebrating the twenty-fifth anniversary of it slaptop business. The Indian subsidiary of Japans Toshiba is looking to invest $100 mn in FY11 in t he personal computers business to revamp its brand, including adding thirty new models to its existing portfolio o f

nine notebook models, retail expansion and brand-building initiatives.

Even though Toshibas market share (in unit shipments) only saw a marginal increase from 2% in AMJ to 3% i n OND; it clocked Rs 289 crore revenue in the notebooks. Interestingly for the same period last year,its market share was 4% in AMJ.


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Best remembered for Kareena Kapoors latest TVC, the Sony Vaio brand has been grabbing eyeballs with its range of ultra-slim notebooks (VAIO X) claimed to be the worlds lightest notebook. Its market share

too (in units shipped) too has been gradually rising to 3.65% in OND. Excited by the response, the company intends to pump in Rs 200 crore across portfolios in marketing out of which Rs 15 crore will be for VaioX.

FY10 has been a busy year fo r Kaustav Ray of Chirag Computers bagging orders from banking biggies like SBI (all over India except Mumbai), Bank of Baroda and Central Bank of India. Moreover, inclusion in

the DGS&D rate contract lis t resulted in Chirag bagging orders fro m BSNL, CISF, CRPF, ECL, Coal India, Indian Railways, Information & Broadcasting Ministry and Ministry of Defense.Looking to clock Rs 1,200 crore i n FY11, Chirag took to e xpansion as it opened its second manufacturing unit at Parwanoo, Himachal Pradesh and expanded to Jaipur, Jharkhand, Bihar and Southern India

(except Hyderabad).

On the retail front, the Chirag brand is being sold through 122 retail outlets, but this hasnt stopped Ray from inking an exclusive deal wi th the Future Group to s ell nettops in Big Bazaar and other group outlets.Its OEM deal with Intel has catapulted Chirag into the same league as HP, Dell and Lenovo wherein it will be a part of I ntels upcoming products, technology roadmap, special price consideration, joint brand

building and sales pitch for big deals.

Stuti Das

one industry which continues to hold its head high even in an environment of industrial slowdown is...

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