Desktops & Notebooks: The Volume Game

The Indian PC industry in some ways is different from other geographies in the West. While the mobility products have started cannibalizing on the desktop market but one can say that the onset of cannibalization effect though felt but one can say it's rather slow and steady. But as we dissect the PC market that was in FY13, going by a conservative estimate, the overall PC market in value terms grew my just about 6% to Rs 30,273 crore. In unit terms as per our estimate-all vendors put together-pushed around 12 mn units (both desktops and notebooks) during FY13.

DESKTOP DYNAMICS

As we look the market dynamics, in the overall PC shipments, Desktops makes for 45% in terms of units. While desktops are getting trounced by notebooks but large enterprises like IT and ITeS and verticals like manufacturing still has a lot of desktop buying. The companies which dealt with lots of mission critical data deliberately favored desktops against laptops as they will have a better discovery and insight into what is happening in each of the desktops within their enterprise. That apart, there is also a cost factor involved and hence mostly the enterprise offered desktop as the device of choice for the entry level employees. Moreover, in some of the enterprises, despite employees having a notebook, they had desktop as a secondary option and used that in a complimentary way-as some of the task demanded a desktop kind of a form factor. These are some of the uppers for the desktop market and beyond that it's a platform that has hit the plateau and hence as we move forward, desktops numbers and volumes will considerable shrink.

In the last two years one is seeing a lot of form factor innovations coming into fray in the desktop space and one is seeing the escalation of the AIO desktops that is becoming a choice device in the consumer space. All vendors are locking horns in the AIO turf and companies like Lenovo and HP and others significantly upped their ante in the space.

NOTEBOOK DYNAMICS

In the last two years notebooks have taken a dominant position and during FY13, the composition of notebooks only got better and as their share in units' terms in the PC market is estimated at 55%. And it's growing by the day eating on to the desktop slice. The notebook numbers went up as it rode on large big ticket government wins by vendors like HP and Lenovo which saw big wins from UP and Tamil Nadu government respectively.

But in terms of failures in the notebook space is Ultrabooks and Netbooks. While in some ways the vendors killed the Ultrabook form factor conceived by Intel. Only post the Ultrabook concept, many vendors used that as an inspiration and launched their own slim line range of notebooks and positioned the Intel defined Ultrabooks at a premium cost that is beyond the reach of many. In all, 2013 can be called tapering out of the Ultrabooks as a form factor as none of the vendors (with exception of ones like Acer and Lenovo) demonstrated any big traction in that space and thus making Apple's MacBook Air as the one and only true Ultrabook.

VENDOR DYNAMICS

As we look at the vendors' performance and take into consideration HP, it closed the fiscal with a bang, with a market Share of 17%, while Acer and Lenovo locked horns and they managed to post in excess of 14% market Share and Dell managed about 13% market Share. The Q4 of FY13 was particularly good for HP as it saw its market Share going up in excess of 22% in that particular quarter. So clearly HP had a very good start if we go by 2013 from a calendar year perspective. With populist measures by governments and its free laptop distribution schemes is one major opportunity to expand the notebook volume and unit market Share. But such volumes come at the expense of value and hence the PC segment continues to be mired by tight margins. If we look at other vendors like Acer, it continues to leverage its traditional expertise in verticals like government and education that panned out well. But Lenovo and Acer are increasingly battling head on, and interestinly last year Lenovo which also has a strong market Share in the education segment saw its share going up to 27% in Q4 FY13 and took the pole position. The company also upped its position in the Very Large Enterprise (VLE) space and transpired into #1 player.

OUTLOOK

With the rapid escalation of tablets, phablets, and smartphones over FY13, the personality of the computing devices market has changed in many ways. While tablets are eating into both conventional notebooks and desktops space at the same time, India per se both desktop and notebook market will hold on and sustain it for the next few years. But there will be intense battle for market Share and big quarter on quarter swings. Like one big ticket multi-crore government win will totally change the vendors' performance that quarter. But government is a big vertical, but there is an element of risk associated with it as vendors might get into extended payments default if their projects were caught in bureaucratic and political wrangling. In all, FY14 yet again looks like a mixed bag, and it will be an achievement for vendors to sustain and retain their market shares, if not growing it.