Challenges & Opportunities: Memory Scaling New Heights

Despite the strong gray market component, channel partners are positive about the growth of Indian mobile memory segment. Most brands are introducing local warranty, Indian pricing and educating customers about fake products to capture this burgeoning market

With the memory market in India showing exponential growth over the past few
years due to the entry of new players, the need for expanded memory has become a
necessity. There are a host of devices like MP3 players, portable computer
drives and even gaming devices, that store large amounts of data, and the
majority of these devices require extended memory products. The memory market
has a huge offering that includes hard disk drives, motherboards, graphic cards,
memory cards, memory modules and USB storage.

Market in India

Broadly speaking, there are three kinds of memory products available in the
market, namely USB drives, camera cards and mobile cards. The increasing demand
for memory products is also due to the growth in the overall handset market and
increase in sales of multimedia phones and digital lifestyle products such as
MP3 players, digicams etc. One of the key reasons for growth has been the fall
in prices of smart memory.

“Today the consumption per house is seen to grow over 512MB and India follows
similar trend with the usage capacity being almost similar. With Kingston memory
modules, flash memory and USB drives playing a pivotal role in modern digital
lifestyle applications, our customers feel reassured that Kingston's support
infras­tructure is within reach at the time of need. The new service support
policies are firmly in place, therefore customers are now able to secure prompt
information regarding nearest Kingston sales outlets, authorized service
centers, product warranty and other technical issues,” said Rajesh Panicker,
Country Manager-India, Kingston Technology.

Kingston offers lifetime warranty for its memory modules-ValueRAM, HyperX and
Kingston system-specific memory and Flash memory cards like Secure Digital,
CompactFlash, MultiMediaCard. The company offers five-year warranty for its USB
drives and one-year warranty for its KPEX personal media players.

Manisha Sood, Country Manager, SanDisk Corporation added, “Currently, the
demand of storage devices is in the growth phase. In the entire sub-continent,
there is already a high-level of awareness and the market has matured. The
margins for SanDisk products are however higher than most of the competitors.”

Sunil Kukreja of Kukreja Electronics stated, “Almost all types of memory
products for desktops and laptops, memory cards for mobile would sell in the
Indian market and we are retailers of brands like Kingston and Transcend. The
margins while selling these products account for up to five to eight percent.”

Currently 60 percent of Kingston's business comes from the channel and the
company is very aggressive with regard to pricing of its products.

SanDisk has introduced SanDisk Mobile Premier, a new line of
performance-oriented microSD memory cards aimed specifically at the mobile phone
market. The cards allow consumers to transfer content to and from their mobile
phones as well as increase storage for videos, music, ringtones, digital images
and other files.

The demand for memory products is due to the growth in handset sales and digital lifestyle products

Challenges and opportunities

Panicker believes that IT retailers can boost their margins, increase footfalls
and ensure repeat customers by selling memory products. Resellers can make at
least 15 to 20 percent margins on flash memory. Agreeing with him Sood said,
“The bottomline is good in this segment. A partner can easily make 20 percent on
USB drives, though this is a bit lower on cards.”

Although most brands have introduced local warranty and India pricing, the
gray market component continues to be high. Apart from higher import duties, the
other reason is rampant counterfeiting by the unorganized channel.

“Most of these products are available only in gray market. Some dealers
import these products but are unable to compete with the larger players in the
market. We sell most of our products in the corporate sector and are working on
low margins to cope with gray market. Also there is no proper channel or
authorized distri­butor for most memory products,” added Kukreja.

Devendra Baid of Megabyte Corporation said, “The gray market still continues
to be dominant and controls over 60-70 percent of the market. The cumulative
import tariff on cards is still very high at 21 percent, so till this difference
is rectified, the gray market will continue to be an issue. However, with a good
customer database these challenges can be counteracted.”

SanDisk is in the process of launching an end-user campaign against fakes.
“We will educate customers regarding fake products and the fact that they are
not reliable and don't carry warranty. We have special packaging and come out
with new models every 20 days to ensure that faking is tough. Another pressing
matter is price volatility. So, we decided to rationalize on a single MRP,” said
Sood.

The road ahead

“The future for memory products looks bright and promising since the economy
as well as the usage of cell phones and laptops in India is growing. SanDisk
plans to rollout a bootable option with pendrives and go strong with its mail
synchronization software in memory products for customers. Apart from desktops
and laptops, memory requirement has shot up even in digital cameras, mobiles and
MP3s. The growth is estimated at

50 percent YoY,” said Sood.

Panicker added that players in the memory market are evidently experiencing a
continuous rise in demand for memory products and upgraded versions of memory
drives and flash drives due to newer graphics-intensive applications, Blackberry
and mobile video. The channel partners as well as the market in general will see
an exponential growth since the phone base in India is on immense growth scale.

“Flash products are now fast being accepted as portable storage devices over
traditional storage media and has a bright future in India, since none

of the laptops or desktops can operate without memory,” added Baid.

Despite challenges, the players are expecting growth in the memory market for
mobile phones and the demand for memory not alone from individual end-users, but
also from across enterprise verticals. They anticipate higher margins in the
near future, as the percentage of profit will increase.

Rashmi Raveendran

rashmir@cybermedia.co.in