PCs Stay Sluggish

Retail sales of the home PC and small and medium-size

enterprise (SME) segment have taken a beating with the Indian economy

experiencing a slowdown. The slump in demand from this segment could not have

come at a worse time for hardware vendors. Research firm IDC India predicts that

the growth rate in the calendar year 2001 would be 8%, a far cry from the 52%

growth in calendar year 2002.

There are several reasons for this, which include the global

slowdown, negative consumer sentiment and a weakened base of industrial

production. Growth rates have been revised from around 35% at the beginning of

this year to the current estimate of 8%. The fall in the growth rates is evident

from the figures for successive quarters of 2001. While the JFM

(January-February-March) quarter showed a growth rate of 47%, this figure fell

to 11% in the AMJ (April-May-June) quarter. But things took a turn for the worse

in the JAS (July-August-September) quarter when it stood at a negative —5%.

IDC India predicts that the OND (October-November-December) quarter would see a

negative growth of —7%. This negative growth is expected to continue into JFM

2002.

Vasu A.Srinivas, Manager, Computer Products, IDC (India)

says, "The healthy growth in JFM 2001 ensured a positive growth of 8% in

2001, but the absence of such a strong JFM in 2002 might mean a lower growth

rate of around 5.5%."

This would mean three consecutive quarters of negative growth

in India and would mirror the scene in the US. The significant difference

between the two markets is that while the US has a high degree of PC penetration

at more than 40%, India’s PC penetration is a meagre 0.006 percent.

The slump in growth is a far cry from the upbeat mood a year

ago. Vendors were bullish on the 50% growth in the PC market. It was expected

that the trend would continue for quite some time, but this was not to be.

Demand drops across different verticals have set alarm bells ringing for

vendors.

Even the home segment, which had been touted as fast growing,

has seen demand flatten.

The mood among vendors is sombre with no fresh purchases from

individual buyers and a decline in demand from corporates. According to Acer

General Manager S Rajendran, "PC makers built up infrastructure for

sustained growth rates of around 35% in the coming years but were caught on the

wrong foot by the slowdown".

Hardware vendors are now increasingly focussing on the

Government, PSUs and financial institutions as these segments seem to be among

the few sweet spots left.

US drives negative trend



Indian shipments thus roughly echoed the worldwide trend.

Worldwide PC shipments fell 11.6 percent in the third quarter of 2001, according

to preliminary data from Gartner’s Dataquest Inc as the slowing US economy

spread to other regions.

Preliminary numbers indicate that every region experienced a

significant slowdown in PC shipments. An anticipated double-digit decline in the

Europe, Middle East and Africa regions is a major influencer in the worldwide

result. "In the third quarter, the PC market continued to suffer from the

impact of PC saturation in developed markets and the effects of the US economic

downturn came heavily to bear on all PC regions," said Charles Smulders,

vice president of Gartner Dataquest’s Computing Platforms Worldwide group.

"The market is experiencing a significant PC component surplus, which is

creating two dynamics: First, it favors the major companies with the most

efficient supply chain. Second, it is creating a resurgence in the non-branded

(white box) PCs. The oversupply is expected to last throughout 2002."

Clearly, vendors both large and small are watching the market

with baited breath. Any signs of a rise in consumer confidence and greater

consumer spending would give them a respite from the bad times that they are

currently facing.

Amit Sarkar in New Delhi