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QUARTERLY INDUSTRY PERFORMANCE REVIEW: Recovery Signs In Sight

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DQC News Bureau
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MAIT recently conducted a quarterly industry performance review for the AMJ quarter of 2002-03, which states that the first quarterly PC sales have crossed five lakh units and the industry is well on the recovery path. PC sales are

expected to cross 19 lakh units in 2002-03.

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MAIT, an apex body representing hardware, training and R and D services

sectors of the IT industry in the country has announced the findings of its

first ever ‘Quarterly Industry Performance Review’ for the April-June

quarter of 2002-03. This review was conducted by the market research firm Indian

Market Research Bureau and aims to address the hardware sector´s efforts to

manage the business environment, gauge the market potential and consumer trends.

Contribution of cities to total market in H2/ 2001-02

Product Top 4 metros Next 4 metros Otherzs
Desktop PCs 59 percent 16 percent 25 percent
Notebooks 68 percent 23 percent 8 percent
Servers 75 percent 16 percent 9 percent
Printers: DMP 40 percent 11 percent 49 percent
Printers: IJP 47 percent 11 percent 42 percent
Printers: LJP 76 percent 12 percent 12 percent
UPS 42 percent 13 percent 45 percent
Source:

MAIT

HOW THE SURVEY WORKS



The first round of the quarterly study from AMJ involved data collation from

six major vendors and 367 resellers/vendors across 13 metros in India.

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The review covers the market size estimation for desktop PCs, notebooks,

servers and peripherals like printers and UPS.

Though year-on-year comparisons have not been possible, the survey findings

lend themselves to identifying significant trends in buying and usage pattern.

In AMJ 2002-03, the desktop PCs, notebooks, DMP and laser printers have

registered sales of close to 2/3rd of their sales during the first half of

2001-02. Products like servers, inkjet printers and UPS have registered around

50 percent of the sales during H1/ 2001-02.

Typically, the JAS quarter is usually characterized by higher sales than AMJ,

thus the sales of IT products in H1/2002-03 is expected to comfortably exceed

that in H1/2001-02, showing definite signs of market recovery.

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Sales in H2/2001-02 were characterized by increased sales to smaller towns

and cities and the same continued in Q1/2002-03 as well.

PC STUMBLES TO RECOVERY



The desktop PC market grossed 5.08 lakh units ­ 63 percent of that sold in

the first-half of 2001-02. The market has shown signs of recovery, with sales in

almost all product categories amounting to two-thirds of that sold in the last

fiscal.

With the buying sentiment in the market improving, PC sales in FY 2002-03 are

expected to grow by 15 percent crossing 19 lakh units. Fiscal 2001-02 had

recorded 16.5 lakh units of PC sales.

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In the PC market, among the business segment it was primarily banks,

educational institutes, government purchases, IT sector and IT related companies

that have provided the recovery thrust to the hardware manufacturers and

vendors. In the household segment, reduced prices coupled with increased selling

efforts, like schemes, promotions and loans have been instrumental in bringing

in the recovery.

Replacement demand in PCs is also expected to enhance growth in this market.

New technology and new features, application better suited to run on latest

machines are likely to drive replacement market.

NOTEBOOKS, SERVERS AND PRINTERS



Notebook sales are still largely confined to business/ establishment market

and hence these segments would drive the current and future demand. The

corporate office, IT companies and financial service sector institutes have

emerged as the most sought after markets for notebooks.

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The server market, predictably, has been restricted to the corporate segment.

The corporate/office segment has not been able to reflect a significant increase

in the consumption of servers as in the case of desktop PCs. A significant

replacement demand does not seem imminent either.

CHANNEL AND GOVERNMENT



The channel plays an important role in reaching IT to the end-user. For the

first time, the MAIT-IMRB study attempted to understand the dynamics of this

business and focused on issues being faced by the segment. Some of the salient

recommendations from the resellers polled are:

IT Market For AMJ

2002-03

Products Estimated market

size for Q1/2002-03
Market size

H1/ 2001-02
Q1/2002-03

as percent of H1/ 2001-02
Desktop

PCs
5,08,601 8,03,057 63

percent
Notebooks/laptops 13,677 21,172 65

percent
Servers 12,694 27,007 47

percent
Dot

matrix printers
99,833 1,57,206 64

percent
Ink

Jet printers
1,04,012 2,07,115 50

percent
Laser

Jet printers
17,269 26,332 66

percent
UPS 1,03,966 1,95,986 53

percent
Source:

MAIT
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l The government should focus on a

conducive policy framework for IT consumption. The current domestic taxes viz

sales tax and excise duty make IT products significantly expensive for a

price-sensitive market like India. Further, incentives such as income tax breaks

for individuals for purchase of IT product and increased depreciation on IT

products in the corporate sector would help boost the demand.

l The Government should expedite

implementation of e-governance. Online transactions for business and individuals

would prove to be a major incentive for SMEs and individuals to use computers

thus positively impacting sales of IT products.

l Thirdly, major government

intervention is required in educational initiatives. This would provide a higher

mass of computer literate individuals.

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l The hardware players need to focus

on producing PCs at lower costs. The market still perceives the product to be

slightly above reach for immediate purchase decisions. This can be minimized by

lowering the costs.

l The availability of better support

and service from hardware vendors and manufacturers was also cited as a

significant initiative that can better the market. Establishing more service

centers, longer duration warranty, replacement options and customer training

sessions for SMEs have been suggested as some other measures to enthuse the

market.

Contribution

of cities to total market in AMJ 2002-03

Product Top 4 metros Next 4 metros Others
Desktop

PCs
63 percent 7 percent 30

percent
Notebooks 78 percent 11 percent 11

percent
Servers 74 percent 17 percent 9 percent
Printers:

DMP
34 percent 10 percent 56

percent
Printers:

IJP
37 percent 10 percent 53

percent
Printers:

LJP
62 percent 18 percent 19

percent
UPS 42 percent 7 percent 51

percent
Source:

MAIT

COMMENTS FROM MAIT



Though the entire country witnessed an economic slowdown last year, with

signs of economic recovery this year, the IT market is expected to perform

better. According to Vinnie Mehta, Executive Director, MAIT, to ensure that IT

reaches grass root levels in India, there is a pressing need to bring down the

prices of IT products.

The hardware industry, on the other hand needs to seriously contemplate

developing products for the Indian market. Fortunately, the growing market in

sub-urban India will help us validate and prove such products.

While there have been some admirable efforts in the industry in this

direction, the government needs to facilitate and encourage this process by

creating simple mechanisms for quick access to low-cost finance for product

development and pilot production.

Vinnie adds, "The performance of the industry will get a further boost

by increased IT consumption in the government." The initiatives launched by

various state governments for e-governance are encouraging, but need to gather

momentum.

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