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PC Industry: Strong growth

Aug 10, 2001

According to the figures released by MAIT (Manufacturers Association of Information Technology), the PC industry for FY01 showed a growth of 34% in volume terms and 26% growth in value terms. This is due to the fact that average realisation per PC came down by 5.7%. However, the trend was slightly different for the Notebook market. While the volumes grew by 26% revenues grew by 36% on the back of a significant 20% jump in realisations.

  Units Value (Rs bn)
  FY00 FY01 Change FY00 FY01 Change
Desktops 1,405,290 1,881,640 34% 49 62 26%
Notebooks 41,670 52,376 26% 4 7 52%
Realisation/PC (Rs) - - - 34,683 32,700 -5.7%
Realisation/Notebook (Rs) - - - 103,912 125,248 20.5%

This difference in price trend could be attributed to the fact that in the PC markets, the unorganized sector is dominant with a 53% market share. But since manufacturing of notebooks is far more technology intensive the only large brands like Compaq, IBM are present in this markets. However, the market share of the unorganized sector declined to 53% compared to 58% in FY00. The major gainers were the MNC brands that increased their market share from 23% to 27%. The Indian brands gained just 1%, increasing their market share to 20%.

The growth estimated by MAIT for the FY02 is 30% in volumes terms (for desktops). However, the growth in value terms would be lower as the price war between the unorganized and organised sector would continue. But the most interesting trend that was seen was that for FY01 the household market grew faster by 45% (in values terms), compared to 31% for the business segment. This has increased the share of household purchases from 20.5% in FY00 to 22% in FY01.

As realisations continue to drop the key differentiator in the PC markets is slowly becoming the quality of service offered by the vendors. This is where the unorganized sector is not able to compete with the organised sector. Not that the unorganized sector is not growing, infact it has almost doubled its size compared to FY00. MNC and Indian brands on the other hand are growing at a faster pace.

Internet usage continues to grow strongly, with the growth of PCs. According to the numbers from MAIT, 54% of the households having PC in FY01 had Internet connections. The CAGR in home connections for Internet in the past 5-year has been a significant 215%. For FY01 the growth was 73%. The share of the households at 55% for Internet connections was larger than 45% share of business segment. This could be due to the fact that for companies a single connection is distributed over users.

For the first four month of FY02, the PC sales have been sluggish and major vendors have reported a drop in sales. The vendors are hopeful that the events that could accelerate the demands could be the launch of Pentium IV processors by Intel and Microsoft’s XP. However, since India is predominately a price driven market the impact could be lower than anticipated.

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