Is a price war looming in the laptop horizon? Acer recently unveiled the
TravelMate 212 TX notebook with a price tag below Rs 60,000 for the first time
in India. A few days later, domestic IT giant Wipro announced plans to launch
its branded notebook LittleGenius in the sub Rs 70,000 price segment. Is the
stage set for the rerun of the desktop segment and the continuous price barrier
breaches like the sub-Rs 30, 000 and now the sub Rs 20,000?
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Vendors are confident that notebook prices are not going the desktop way, at
least not now. Let’s first look at the key reasons for the breach of the sub-Rs.
60,000 barrier. According to S Rajendran, general manager-Marketing, Acer India,
"Falling prices of LCD (liquid crystal display) panels, Intel processors,
memory modules and improvements in technology leading to better manufacturing
yields are the key reasons for the availability of the sub 60,000 price
product."
Will it continue further? LCD panel prices have softened in recent times but
still continue to remain high and are not expected to come down sharply. Given
the increasing global demand for LCD and the continued manufacturing capacity
shortage of the same, prices are expected to firm up once the upturn happens.
Comments Ajay Mittal, brand manager, India-Personal Computing Division, IBM
India, "As long as LCD prices remains high, I don’t see notebook prices
coming down." Since an LCD panel constitutes about 30-40% of the total
notebook prices, any drop in LCD panel prices will have a direct impact on
notebook prices.
Also, will increased demand bring in economies of scale and reduce price
levels? Not likely! Given the small base of notebooks in the overall pie, price
cuts due to economies of scale will not happen in the near future. Agrees
Rajendran, "Volumes and economies of scale do play a role here, but will
take some time to reach that level."
Secondly, are customers actually buying notebooks below the Rs 70,000 price
range? Comments Mittal, "We have had a product in the Rs. 65,000 range for
some time now but the number of customers buying the same have been very
low." Points out Ravi Swaminathan, director, Access Business Group, Compaq
India, "For Compaq, the sweet point is between the Rs 80,000 and Rs 1 lakh
price band."
Unlike desktop buyers, notebook buyers are on the higher end of the literacy
spectrum and, therefore, not too concerned about the price of the product.
Conversely, issues like price performance, features and brand play an important
role here. Most of the vendors agree that the cheaper Celeron based offerings do
not find many takers in the corporate setup and a major chunk of sales happen in
the Pentium based systems. The rationale behind this is, "If I am getting
the latest model for a few thousand rupees more, why not?" It will be very
difficult to crack this logic, so playing the price card alone will not work.
There is no denying that there is a market for low-priced laptops. Realizing
the gains in productivity and increased mobile tool usage, large corporates are
equipping their front-end sales teams with Notebooks. The affordable price has
widened the market to include the small and medium enterprises (SME) and small
office home office (SOHO) space. Unlike the West, where students are among the
major users of low priced laptops, in India these are still the tools of the
corporate management cadre. Things could change here too. But it will take a
while before the prices come down.
According to vendors, the responsibility of bringing down the cost of laptops
rests with the government. If the high liquied crystal display panel duty
structure is done away with, this could lead to a drop in laptop prices. Or
else, a laptop will continue to remain a tool for the management segment only.
And in these times of mobile connectivity and access, that would be a sorry
portent indeed for the future.
Yograj Varma in New Delhi