Segmentation as important as price for driving the Indian PC market

The desktop PC market in India continued to register impressive gains in AMJ 2004, growing 34 percent year-over-year by units and 15 percent by value. "But contrary to the popular opinion, low pricing has not been the sole accelerator for this growth," commented IDC India computing products research group Sr. analyst Rishi
Ghai. 

An analysis of the average selling values of desktops shows a drop of 19 percent since 2000. Increased activity at the low end of the market especially in the home, small office and small business segments has done well to increase the breadth of penetration of PC hardware in India. 

Historically, considered to be a high value spender, the large business segment also contributed significantly to the growth seen within the sub-25K market last year (2003) and accounted for nearly 12 percent of the market in this category. The price sensitive consumer market accounted for 39 percent of shipments and dominated sales in the sub-Rs 25K market for desktops.

IDC, however, views price drops in the desktop segment as a small subset of the larger positioning game that the PC market is set to witness in a not so distant time frame. Channel expansion initiatives of leading vendors to widen their reach in the
markets, testifies further of the vendors' intent.

Interestingly, while overall prices had shown a drop, it wasn't the entry-level price bracket alone that contributed to the bulk of shipments. The Rs 25,000-Rs 35,000 price bracket accounted for nearly 41 percent of overall desktop shipments in India in 2003 with unit shipments growing by 43 percent over
2002. 

IDC is of the opinion that changes in ASVs would be buffered to some extent by the vendors' initiatives in the high-end desktop segment. Desktops with LCD monitors, combo drives, DVD-writers and high-end multimedia handling capabilities would blend aesthetics with advanced
functionalities.

Year 2004 began on an appealing note as the market was caught in a surprise January 8 announcement of duty cuts by the government. The impact of the announcement has been significant as IDC expects a stronger than expected 2H 2004 that will be primarily lead by increase in run rate business and several small deals within the finance and banking segments.

IDC opines that price cuts will not be as big in 2004, but this will impact the market significantly. IDC assumes that some buyers may wait and see in anticipation of further cuts in 2005. Furthermore, tariffs on IT products should be reduced to zero in 2005 in accordance with WTO guidelines. This will create a rapid accelerating effect in the Indian PC market from 2H 2005 and into 2006. But this accelerating effect will be less dramatic than previously forecasted due to the premature 2004 reductions noted above.

CyberMedia News 

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