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Monitor Wars : Will The Big Get Better?

author-image
DQI Bureau
New Update

The monitor industry has become 'big' with the million unit

mark. If the proposed hardware policy comes into play, this could

get better with vendors realigning their strategies to make the most

of the new opportunity.



Big is better, generally, for monitors. But not really when the
number of vendors get bigger in the market. And this has been

happening in the Indian monitors business over the years. Starting

with the PC vendors, to the assemblers, to the MNCs, to the consumer

giants, everyone has jumped into the fray to grab their share of the

market. And in the bargain, eaten into each other’s business. Almost

regular and predictable price drops, gifts and enticing schemes

screaming out to the customers, channel ‘pampering’ programs, heavy

media spending to sustain brand image and brand superiority–have all

been tried out in the past. Having gone through years of intense

competition, the new millennium is expected to be more exciting and

more competitive, with each vendor having defined his strategies.

Though held in abeyance, the acceptance and implementation of the IT

Task Force’s proposed HW (hardware) policy will have a direct impact

on the monitors boom.



Nevertheless, even as the fate of the policy remains uncertain,

the mood in the industry is upbeat. The dust having settled down,

the vendors have their strategies in place to grow the market and

also themselves in the process.



First of all, the significant volumes and the crossing of the one
million mark during the last fiscal have been gratifying factors.

That the industry is growing by a good 35% plus, and entering the

phase of maturity, is another reason to feel cheerful about, for

many vendors. Now will the big get better?




All the vendors are waiting and ‘watching’. And getting their
acts together in the meantime. At least, three MNCs have shown a

strong inclination towards setting up manufacturing plants for

monitors. The domestic vendors, are similarly gearing up, and some

are even bold enough to get into component manufacturing–a much

needed area of expertise the country has been lacking in, in the

past several years. It is exactly the encouragement of hardware

manufacturing that the proposed HW Policy is all set to achieve,

though the big question is by when?




GoI
initiatives


After signing up the WTO agreement

for a zero duty regime by year 2005, the Government of India has
been showing interest in the hitherto neglected hardware industry.

The formation of a separate panel for the HW Task Force to identity

problem areas affecting the growth of the industry and to suggest

solutions to encourage this sector have themselves been two of the

big steps taken. Further, the policy recommendation ‘to prepare an

Action Plan for IT hardware industry along with policy instruments

to make India a major IT power with an export target of $10 billion

for development, manufacture and export by 2008,’ are welcome

signals for the industry.

The vision to make the investment

climate comparable to Taiwan, Philippines, Korea or Malaysia in
India in order to derive maximum competitive advantage for the twin

indigenous factors of low cost, high quality knowledge workforce and

fast growing international market, are other positive signals. The

report has identified three major areas for developing hardware

manufacturing and exports in the country. First, the Soft-Bonded IT

Units (S-BIT) scheme to make it more lucrative for hardware

manufacturers in country. Second, the report looks at setting up

Habitat Centers in parts of the country that have access to both sea

ports and airports. These will serve as centers of excellence and

will have the infrastructure required that support exports to rest

of the world. The third focus on setting up mega-fab within country

has also been mooted by DoE Secretary, Ravindra Gupta.





The glorified
S-BIT


The policy measures, appear, almost tailor made

for the exponential growth of the monitor business, and that is the
reason, the monitor vendors in the country are waiting for the

policy to be announced before making their announcements. Look at

S-BIT for instance. A carry forward from EHTP/EOU and EP2, S-BIT

aims to get manufacturing the time window it needs to stabilize by

the zero duty regime of WTO standards taking effect. The scheme is

seen as the real last chance for manufacturers to get a foot-hold in

the country as the first of the zero duty components begin shipping

as early as next year. Where it attracts the monitor industry, is

the relatively lower investments to start with when compared to many

other computer peripheral or chip manufacturing processes.




The reason why the monitor industry is in for a lot of advantages
from this scheme is because, there would be no export obligation

under this scheme. If the situation demands, these companies can

sell their total production in Domestic Tariff Area (DTA). If this

is the case, customs duty will be payable on imported inputs at

prevailing rates. However, if prevailing rates on inputs are more

than the customs duty on the manufactured item being cleared then

the duty chargeable for DTA access will be the prevailing rate on

finished products. For electronic components manufactured in the

S-BIT and sold in DTA, there would be no customs and excise duty.

Purchase transactions would be free of sales and entry taxes, excise

duty, purchase tax, turnover tax and Octroi. All inputs of capital

goods, raw material, piece parts, consumables, components and

sub-assembly are free from customs duty.




The objective of scheme being to promote genuine manufacturing,
it allows for manufacturing based on imported and SKD kits, the duty

chargeable for DTA access to the prevailing rate of duty on finished

product. Excise duty will be payable at rates on finished product

when sold in DTA. While lucrative even for domestic units to set up

shop under the new scheme, it really comes into its own when exports

are involved. Units that export out of the region will get a special

concession rate of duty for accessing the DTA. This is exactly where

the S-BIT scheme catches the eye of the domestic player as well.

More than half a dozen vendors have their manufacturing bases in the

country and with volumes going up within the country and a high

demand for monitors in the world market, they are all set to benefit

from the scheme.




color=#ff0000>Get-set-go
“We have heard that

the policy is likely to be announced in a quarter’s time and after
hearing it we will work out plans for the kind of investments and

manufacturing that we will take up in India. We are prepared for the

same, but it all depends on the policy. The present level of duty

structure and infrastructural bottlenecks, if it continues, do not

warrant a manufacturing set up here,” explains Vivek Prakash,

Business-Incharge, Samsung Monitors. Samtel, the largest Indian

manufacturer of monitors, has got its plans charted out for adding

on capacity, and component manufacturing. “We have earmarked a total

investment of Rs400 crore upwards for setting up a color CDT in the

country, in addition to manufacture of some other components that

are being contemplated,” says an optimistic MS Kohli, Divisional

Manager-Marketing, Samtel India. “The plant, in addition, to

enabling self-sufficiency and higher volumes, will also give us

advantages of lead times and better planning, for large OEM orders

both within and outside the country.”





There are obvious reasons for being bullish about component
manufacture. For, under the S-BIT scheme, sale of products from DTA

to S-BITs shall qualify for all benefits available for physical

export. The domestic manufacturers shall get duty drawback against

deemed exports to S-BITs within 15 days of filing their application.

By virtue of this, the domestic products can get the advantage of

internationally competitive pricing. If the proposed S-BIT scheme

and other recommendations are accepted, it will give the much needed

fillip to the hardware industry. Particularly at a time when the

Indian market is being viewed very seriously by the international

and domestic players alike, for huge volumes and making

manufacturing competitive on a global scale.

Worldwide

trends




“India is falling in line with the new trends with the rest of
the world, although, at a slightly lower pace than expected,” says

CD Khatau, Head-BG PC Peripherals, Philips India. “We are following

trends that are happening globally. The trend towards flat display

screens, better multimedia features and higher monitor size as in

the world market is happening here too,” says Viju Thomas,

SDGM-International Operations, BPL Ltd. In the last six months the

Indian market saw the launch and aggressive push of flat monitors

and even LCDs by market leaders Samsung and LG Electronics. “Further

the technology move towards digital video interface and USB port and

bigger CRT size is prevalent now,” adds Pawan Gupta, Product

Manager, Acer. According to him, the international standard is 15"

and 17" in developed markets like the US, though of late, the shift

from the hitherto 14" dominated market to 15" is occuring.




Vendors are taking steps to upgrade the Indian customers to shift
the market to larger CRT sizes. For instance, Samsung has taken a

worldwide initiative to phase out 14" monitors. Being one of the

three leading suppliers of color monitor tubes; the company cut down

its manufacture of 14" color tubes from 400,000 to just 80,000 in

the last year. “With our initiatives to move the market to the 15",

we have found that in the Indian market, the shift is towards 15"

and 17",” says Prakash. In the last year, for Samsung, the sales of

14" dipped from 86 to 66%, while it moved up from 8 to 22% in the

15" and a whopping 8 times in the 17" category.




Left with no other alternative and the fact that Indian customers
are taking to technology levels prevalent globally, every vendor in

the market has unanimously agreed on giving the customer the latest

at the best price. Even Microtek, a large Indian manufacturer that

occupied a dominant market share in the 14" mono and color segment,

has taken a policy decision to move the market towards 15" and focus

on the high end segment. HCL Peripherals, a division of HCL

Infosystems, has also concluded on the same move–to manufacture

bigger, color CRT sizes. “We are looking out for tie-ups with

manufacturers in Korea or Taiwan on a contract manufacturing basis

for manufacture of higher CRT size monitors in Indai,” says S

Pattabiraman, VP-Operations, HCL Peripherals. However, the company

plans to simultaneously continue the production line of mono

monitors for diversified areas such as POS terminals and bank

terminals.

Though rapidly moving towards higher CRTs, and taking

to the flat display screen, the Indian market is still not ready for
sopisticated LCDs and plasma technology. Explains Rajeev Saxena,

Manager-IT Business Development, Sony India, “Even now the price of

an LCD is approximately 5 times the price of a 15" CRT monitor. Till

the price gap between them is drastically reduced, it will be almost

impossible for LCD to replace CRTs.” He further adds that “Even if

the price of an LCD monitor comes down, various applications like

graphics, animation and CAD/CAM require very high resolutions at

higher refresh rates which cannot be supported by LCD monitors. So

even if they are popular they will be in for applications like

software development and MS office applications.” But why are

vendors offering LCDs priced at almost that of an entry level motor

car? “We do not want to leave out any segment of the market, even if

it means sales of just one LCD to the PMO’s office or for Jackie

Shroff. Strategically, it makes sense to cater to all segments of

the market,” he adds. Echoing the same view is Shailendra Kumar,

DGM, LG Electronics, “We have products to augment every segment of

the market, from the casual internet surfer to the serious CAD

user.”





Market
segmentation


That the market is huge and segmented

offering room for more than ten active players in India is a
undisputed fact. However, segments such as the home, SOHO and

corporates are ruling the roost. So much so everyone has the home

segment at the top of the list. Even PC vendors are getting

aggressive about the home market. HP for instance, has launched its

Pavilion Monitors for its home PCs. “Though not a strategy for

monitors, the aim of launching the monitor series is to grow the

home and consumer PC business,” says Kaushik Bellani, Business

Development Manager-Home PCs, HP India. There are also niche players

who are focusing on the home segment only. Amkette group of

companies is one such. “Amkette’s key area has always been the SOHO

segment and we will continue to focus on the same, with features and

designs to cater to this segment. The internet-optimized monitors

with multimedia features are the first in the series,” explains

Rajive Bapna, Director-Amkette group.

Clearly, the market which

is besieged with different players of all kinds can be classified
into three main categories–the MNCs, the Indian assemblers, the

television manufactuers. Nevertheless, the growth of about 35% in

the last year, has been a heartening factor for the

‘too-many-players’ on the monitors territory. The year also acted as

an acid test for those fly-by-night players, who quit due to their

inability to sustain the heat of the competition any further. “What

we saw was the clear wipe-out of most of the regional assemblers in

most parts of the country. Now the race is on primarily between the

MNCs and the domestic players,” says Kohli. So are the domestic

manufacturers threatened by MNCs? “Yes, they are at the low end of

the market,” says Saxena. Having worked on a reverse strategy of

entering the domestic market after proving itself in foreign turf,

Viju Thomas says, “We are confident that we can give shorter lead

times, faster delivery, protection from forex fluctuations, coupled

with a nationwide service network.” But quick to disagree is Anil

Gupta of Microtek, “The local manufacturers as a whole are not

threatened. Those with world class quality will always thrive, let

alone survive,” he asserts.





But increasingly, the trend is that the consumer durable giants
such as BPL and Videocon who have entered the monitors bandwagon are

tougher competition on the regional and domestic manufacturers.

“However, in a market like India, where the domestic players like

Solidaire have given a tough fight to the Onidas,

there is no

reason why the trend will not be repeated for the monitors
industry,” opines Pattabiraman. “Finally, MNC or domestic player,

what will see players succeed in the IT business is the ability to

address price, support and service, logistics, brand and quality

products,” explains Sandeep Shah, Product Manager, Neoteric

Infotech, an IT distribution company.





That is the reason vendors are doing a bit of self-retrospection,
identifying their weak areas and trying to have a strategy in place

to overcome the same. Samtel and HCL Peripherals, for instance, have

decided to evolve a strategy for building their brand in

the

country after deciding on reaching out to the local market. While
some are getting

their logistics and IT infrastructure in place,

to get to the future way of doing business. Finally, the vendors are
utilizing their time to planning and strategizing things while the

policy itself is expected to be announced anytime now, to give a big

boost to the monitors business in the country.


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