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Hardware: Way to go

Dec 18, 2000

In a deviation from global trends the hardware industry grew by 49% (in unit terms) in 1HFY01 YoY. The primary drivers for the growth are the increasing PC penetration (the PC penetration in country being only 2.7 per 1,000) and the rising popularity of the Internet. The number of Internet subscribers shot up from 1.3 m in March to 2.6 m in December this year. Gradually individuals are turning to the computer for a host of services from job search to matrimonial search to cinema tickets. Also, as always the commercial segment did play its part. High growth rates were seen in PC sales (63%). This segment owes its growth to the SOHO (small office and home office) segment. These purchases are not only coming from individuals but from businesses like cyber cafes. Another trend is that small and medium sized industries (SME) are now turning to IT for improved efficiency in operations. This is evident from the fact that the sale of commercial PCs shot up by 58%. SMEs have been the worst affected due to India opening its doors to the outside world. Also, ERP (enterprise resource planning) solutions providers are expecting good revenues from SMEs.

Corporate India is on the move. The sale of notepads grew by 68% (in unit terms). The networking equipment market grew by 65% thanks to ISP and call center businesses growing. But the area that showed the highest growth was peripherals that grew by 104%. This segment included hard disks and monitors.

The Indian hardware manufactures are expecting this second half earning to be as good. IDC projects the PC markets to grow from Rs 76 bn in FY00 to Rs 204 bn by FY03 a growth rate of 28%. The PC segment accounts for an estimated 60% of the total hardware market.

To recall, according to the figures released by the Manufactures Association of Information Technology (MAIT) and Indian Market Research Bureau (IMRB) in July this year, the domestic PC market touched 1.4 million units during FY00 registering a growth of about 37% (in unit terms) over FY99. One of the primary drivers was sighted to be the increased availability of Internet connectivity. In a study, which for the first time correlated PC sales to Internet connections, found that 52% of the first-time buyers in the business segment and 60% in the household segment bought PCs along with Internet access.

The assembled PCs, including unbranded systems, continued to hold their share of 58%. The share of the MNC brands grew slightly from 22% to 23%, while Indian brands slipped from 25% to 19%. The industry also saw the entry of the global heavy weight Dell into the Indian markets. Dell is one of the pioneers of e-business. Customers can order for customised PCs through Dells website and track the order status.

The major issues for this sector are infrastructure, logistics and procedural hassles in imports and exports. The hardware sector that had been long ignored by the government is now finding favour. The ministry of IT is planning to give more concession to the hardware industry. Mr Pramod Mahajan said recently that he would ask the finance ministry to give special consideration for the hardware industry in the budget for FY02.

The major challenge facing the Indian hardware sector is to create an image of quality and reliability. This will make its products acceptable all over the world. As far as competition is concerned it will be fierce with MNCs having the volume advantage. But for India to become the IT superpower the hardware industry needs to do its bit.

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