IT Scan

January 29, 2004
PC sales to touch 3 million units in FY 03-04

NEW DELHI -- MAIT recently announced the findings of its industry performance review for the H1-03-04. The desktop PC market grossed 12.58 lakh units, registering a growth of 32 percent over the same period in the previous year. This is for the first time ever that the sales in the first half have crossed the one million mark. With sound macroeconomic condition and buoyant buying sentiment in the market, MAIT revised its PC sales growth projections for FY 03-04 from earlier 20 percent to 30 percent. Sales are likely to reach 3 million units. FY02-03 recorded 2.3 million units of PC sales.

Turnaround in PC sales
The turnaround in PC sales can be attributed, on one hand, to increased consumption by industry verticals such as telecom, banking and financial services, IT-enabled services as well as major e-governance and digital divide initiatives of the central and state governments. On the other hand, the highly price sensitive Indian market has responded like never before to the drop in prices, especially at the entry-level. This led significant consumption in the SMEs and in the home market. Further, the trend of increased PC purchase in smaller towns and cities, witnessed last year, continues undiminished. Entry level prices of PCs have dropped to Rs. 20,000, for notebooks to Rs. 50,000 and for servers to Rs. 1 lakh.

Assembled PCs accounted for 57 percent of PC sales in H1-03-04. In absolute terms, sale of assembled brands grew 57 percent. A proportion of the assembled PC sales grew from 48 percent in the same period, the previous year. Indian brands accounted for 20 percent of the market as against their 22 percent share in H1-02-03. Although the proportion of the Indian brands declined, the absolute consumption grew by 20 percent. MNC brands registered a fall in their market share from earlier 30 percent in H1-02-03, to 23 percent, whereas sales grew by one percent. The drop in share in the MNC brands is due to the cannibalisation of their share by the unorganised sector.

The MAIT-IMRB review reveals that PC sales to the business segment improved by 20 percent, accounting for 74 percent of the total PC consumption. Households witnessed a significant improvement in consumption, compared to that in the first half of the last year with sales growing by 88 percent over H1-02-03. The consumption in home-offices also grew by 97 percent. The surge in the unorganised sector is due to the increased consumption of the households as almost 90 percent of its consumption is from the unorganised sector. Within businesses, sales to the larger businesses (over 50 employees) grew by 21 percent and for the medium business segments by 39 percent . Sales to small enterprises remained unchanged over the same period last year. Further, amongst the verticals, the retail/outlets witnessed the maximum increase in consumption.

In terms of processor configuration, Intel P-4, which accounted for 66 percent of the market share, followed by P-III that accounted for 14 percent, dominated PC sales in H1-03-04. Proportion of AMD, Cyrix and other processors grew from 10 percent to 18 percent over the same period last year, reflecting the need for low-cost computing solutions.

In terms of usage of operating systems (OS) with PCs, 84 percent used Windows 95/98, while Linux accounted for only 2 percent. Only 10 percent of the servers owning enterprises used Linux, Unix, Novel and other non-Windows-based OS, the rest used Windows based. Windows NT accounted for 13 percent, Windows 95/98 for 45 percent, while Windows 2000 for another 25 percent.

Resurgence in DMP sales
As per the study, the overall printer sales grew by 20 percent, compared to H1-02-03. The resurgence by 22 percent in the market for dot-matrix printers due to an increased consumption in households and retails/outlets marked H1-FY-03-04. Similarly, sales of inkjet printers grew 21 percent, led by households where consumption increased by 102 percent, although sales in the business segment for inkjets dipped by 22 percent. Laser printers recorded a growth of 9 percent due to significantly high consumption in the retails/outlets.

Sales growth in smaller towns and cities continued undiminished in FY-03-04. Class B and C cities accounted for 50 percent of total PC sales, registering a growth of 42 percent, and the proportion increased from 46 percent in the same period last fiscal. Consumption of notebooks in Class B cities grew a whopping 246 percent -- accounting for 17 percent of the total market. Although the overall sales for servers registered a negative growth, Class B cities registered a growth of 206 percent and Class C cities 192 percent. Similarly, in the UPS market, sales dropped to negative in the top four cities. However, consumption increased in Class B and C towns that led to an overall growth of 9 percent.

Since the study is in its thirteenth round using identical methodologies in each round, the findings when compared across consecutive six-month and annual periods lend themselves to identifying significant trends in buying and usage pattern:

• The top four metros accounted for 50 percent of the total PCs purchased. While the proportion of sales to top four metros has decreased, as against, 53 percent in H1-02-03, the sales increased by 24 percent. PC purchase in the next four cities grew a whopping 62 percent and accounted for increase in market proportion to 13 percent from 11 percent in the H1-02-03. In other smaller towns, PC purchases increased by 36 percent to account for 37 percent of the total PCs purchased;

• In the businesses segment, although the top four metros accounted for the maximum PC sales, their share declined from 53 percent to 46 percent. The drop in share was made up by increased proportion in the next four cities and the other smaller cities. Consumption in the next four cities grew by 57 percent to account for 11 percent of the market share, and in other smaller cities, it grew by 33 percent accounting for 43 percent of the market;

• The growth of organised retailing (supermarkets, hypermarkets, shopping malls, multiplexes, etc.) and growth of retail chains resulted in growth of demand for IT products. IT consumption increased not only among the large organised retail players but also in smaller retail outlets;

• In the households segment, SEC A continued to dominate the market with 43 percent market share, followed by SEC B at 37 percent, recording a growth of 68 percent and 58 percent respectively, in H1-03-04. Sales in the SEC C segment surged by 373 percent to account for 20 percent of the market. Significant growth in the SEC C as also in other SECs was in response to the drop in prices of IT products. Significant sales in the households also resulted in large growth in the assembled market. The growth of IT consumption in the household segment is likely to remain steady as the vendors have started positioning and promoting PC as an aid for education and entertainment;

• Notebook sales bettered due to increased consumption in the medium-sized enterprises where consumption grew by 155 percent over H1-02-03, accounting for 41 percent of the market. Compared to the First-half in the previous year, sales to large enterprise grew only 7 percent, and the proportion shrunk from 51 percent to 39 percent. Notebook sales in small businesses grew by 11 percent;

• The server market registered a negative growth of 11 percent over H1-02-03 despite strong growth in Class B and Class C towns. The next four cities registered an impressive growth of 206 percent while in smaller towns the consumption grew by 192 percent. However, sales in TOP four metros slumped by 36 percent, adversely affecting the overall sales. The top four metros accounted for 65 percent of the total server sales. Server sales slumped by 12 percent in the larger businesses segment and by 67 percent in the smaller businesses; however, medium-sized businesses witnessed an increase in consumption by 48 percent. Medium businesses accounted for 56 percent of the total server market, while larger businesses accounted for 31 percent and the smaller for another 13 percent;

• In the networking market, sales of modems improved by 67 percent, while that of hubs and NICs by 6 percent and 23 percent respectively. Consumption of modems in the households grew by 47 percent accounting for 66 percent of the total modems market. Consumption in businesses segment grew only 5 percent;

• The UPS market grew by 9 percent over H1-02-03. Consumption in next four cities grew by 60 percent and that in other smaller towns by 38 percent, however, sales declined in the top four cities by 19 percent. Households accounted for 53 percent of the UPS market registering an impressive growth of 69 percent over H1-02-03. Businesses segment registered a negative growth of 22 percent resulting in 47 percent market share;

• Consumption of monitors surged to 1.25 million units with a growth of 28 percent over H1-02-03. The market witnessed growth in consumption by 74 percent accounting for 54 percent of the market; up from 41 percent in H1 last year. Proportion of 17" monitors improved from 11 percent to 14 percent registering a growth of 57 percent, while that of 14" monitors decreased from 46 percent to 29 percent, a decline of 20 percent;

• The number of active Internet subscribers increased to 1.76 million in September 2003, while the figure was 1.43 million in March 2003. The penetration of Internet among businesses was 45 percent, while that in households it was 10 percent. The businesses segment now contributes 43 percent of the total active Internet entities and households account for the remaining 57 percent. Dial-up remains the most commonly used means of accessing the Internet among businesses, although the proportion of businesses using dial-up has dropped from 71 percent in September 2002 to 61 percent in September 2003. The proportion of access through cable link increased from 9 percent to 19 percent during the same period, while that of ISDN increased from 10 percent to 13 percent, of leased lines from 6 percent to 8 percent.

Vinnie Mehta, executive director, MAIT, said: "While the mood in the industry is upbeat today, we are still lagging in terms of volumes required to be internationally competitive. In addition, this becomes even more critical when the health of the IT industry and its proliferation is a key indicator of the competitiveness of a nation. The hardware industry in India, today, has to grapple with one of the highest taxation in the world as a result of which the PC penetration is among the lowest (9/1,000) while prices are the highest; 30 percent more than that of global average.

"Low market consumption and significantly large grey market have made it unattractive for investments. To emerge as a true superpower in IT we need not only to sustain the competitiveness of the software industry through a robust hardware industry but also spur the domestic consumption and provide information access to the masses by making IT and PCs more affordable. The domestic IT is on the anvil of revolution and this can be achieved through reduction in excise duty from 16 percent to 8 percent, increase in depreciation from 60 percent to 100 percent and removal of 4 percent SAD. These recommendations are also necessary to remain competitive in the near zero duty regime which we will encounter due to the implementation of the IT agreement in 2005."

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