Monitor Wars : Will The Big Get Better?

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.


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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