APAC Ahead

PC vendors can heave a sigh of relief. After postingnear-zero–and in some countries, negative–growth rates

in 1998, they’ve been virtually jumping ahead in late 1999 and 2000.

The world PC market has grown an impressive 15% in unit salesin the second quarter of 2000, according to IDC.

And despite the Asian crisis of the end-1990s, the globalsurge has been led by strong demand in the Far East and countries in theAsia-Pacific region. High consumer demand in Japan, summer promotions in China,a strong government drive in Korea and affinity marketing programs in Australiahelped push up the consumer base.

Sales of portable PCs in Europe have been strong, and haveoffset the slow demand for desktops in the region. Latin America also showed ahigher than 15% rate of growth, fuelled by the recovery in Chile, Brazil andArgentina. The story in Japan was no different with it accounting for thehighest growth of all regions in the second quarter.

As expected, developed countries including USA and WesternEurope–whose growth rates have slowed down after their markets reachednear-saturation in earlier years–registered far lower rates of growth. At 7%,growth rates there was half the worldwide unit growth. This is attributed byanalysts partly to a slow adoption rate in the US of Windows 2000, and acautious approach to upgrading hardware.

A look at the past two years and the second quarter numbersappear dramatic. After two years of disappointing numbers, every market in 1999reported a positive annual growth. The annual growth rates ranged from a low of12% in Vietnam to a high of over 270% in Indonesia. Growth in markets likeIndonesia, Korea and Thailand in 1999 was artificially high–for these marketsexperienced the worst conditions during the economic downturn in the region.This growth trend

has however carried forward into 2000.

In Japan, the growth is mainly on account of a high consumerdemand for PCs, with the market for portable PCs far outstripping growth indesktops. While this is practically a worldwide trend, barring veryprice-sensitive markets like India, the gap is the most pronounced in Japan.

While details of the second quarter’s performance are yetto come in, in Q1 2000, the PC market in the Asia-Pacific region (excludingJapan) expanded to 4.2 million unit shipments, according to IDC Asia-Pacific.This was 43% higher than Q1 1999 and 5% over Q4 1999. Although countries such asAustralia, Vietnam and Malaysia experienced seasonal dips, the overall marketwas pushed up by Korea and India in particular, as well as support from Chinaand Singapore.

In the Asia-Pacific region, the top five country rankings inQ1 2000 remained the same as in Q4 1999. Korea recorded one of the highestincreases, growing at 36% which enabled it to cross the 1 million-unit shipmentmark for the quarter. As a result, it

consolidated its second place ranking, and at the same time captured anadditional 5% market share.

In comparison, the country with the largest market share,China, grew more sedately at just 2%, but nonetheless maintained a 32% marketshare, down from 34%. In third place, Australia turned in a disappointing Q1,dropping 17% as commercial spending slowed on the news that the July 1 GST(sales tax) implementation could mean substantial business savings. This led toAustralia shedding 3% market share to 10%.

India retained fourth place, finishing 13% up in the period,followed in fifth place by Taiwan. India in 1999 replaced Taiwan as the region’sfourth largest market with 42% growth, supported by healthy small businessbuying, falling prices and consumer demand. In 1999, the Indian market hadcrossed one million units for the first time.

An analysis of the first quarter presents a picture similarto that of calendar 1999. Among the region’s largest markets–China, Koreaand Australia–Korea contributed the most to regional growth with an annualshipment increase of 79% in 1999. Growth in China was more moderate in 1999, at26%. However, with a third of the region’s market share, China played a largepart in the region’s revival.

What’s led to the rebound? In 1999 and the beginning of thecurrent year, PC shipments were pushed up by the ‘Internet PC’ program inKorea, an initiative led by the government to boost PC ownership amonglower-income groups. President Kim, who was elected to power in December 1997,started this program which allows poor families to buy computers on a 36-monthinstallment plan. Further, a government directive has been issued to the mammothstate-owned firms to convert 50% of their purchasing online by next year.

This kind of government drive was most pronounced in Koreabut was also visible in some of the other Asian countries, where governmentscontinue to look upon developing technology usage as a means of sustainedeconomic recovery. For instance, this has been a focus area of the current BJP-ledcoalition government in India too. The government has been encouraging computerand Net usage in the country through various policy measures that originatedwith the 1998 Task Force recommendations. In fact, the government has beenconsistently lowering duties on various computer components, in an attempt tomake the final product more affordable to consumers. That’s a direct cost tothe exchequer, but most experts agree that the benefits from a strong domesticIT industry will far outweigh any revenue impact.

In the region, as a whole, higher growth rates were witnessedas fears that Y2K would dampen PC demand in the first quarter were unfounded–businesses,as data shows, quickly resumed spending. Low PC penetration rates also meant alot of growth opportunity–and continued demand.

The future looks good, too. According to IDC, the year 2000will continue to present high growth rates in the PC market, led mainly by highconsumer demand in the Far East and Asia-Pacific countries. The consumer segmentis expected to propel growth and record sales of close to 50% above the 1999levels. While the first two quarters of the current year appear to be on track,a large part of the full year’s growth will depend on sustaining the growthwitnessed in the Asia-Pacific region. With the overall economic recovery in theregion well under way, the artificially high growth rates will give way to lowerbut steady and very real growth in the current year. Vendors needn’t worry–happydays are here to stay–for a while at least.

–A DQ Report