PC market heats up in India
By Siddharth Srivastava
NEW DELHI - The market for computers in India is witnessing considerable churn.
Recently, Hewlett-Packard Co, the world's second-largest personal-computer (PC)
maker, announced its expansion plans for India and a broader Asian extension.
Early this month HP announced the rollout of its new global integrated
marketing campaign, based on the theme "The Computer is Personal Again", in
India.
"India [and] China as well as the young tigers in Asia Sri Lanka, Bangladesh
[and] Pakistan are the markets of the future," said
Adrian Koch, senior vice president of the personal systems group (Asia) for
Palo Alto, California-based HP. "We're evaluating to what degree and how fast
we expand," Koch said in an interview.
HP's plans follow those of Dell, the world's leading PC seller, which recently
said it expects its first manufacturing facility in India to begin production
by the end of this year, aimed at cutting shipment and production costs. India
will be the seventh location where Dell has a plant; it already has two
manufacturing sites in China and one in Malaysia in the region. Dell (whose
current share of the Indian market is 5%) also plans to hire 5,000 more
employees in India. A spanking-new office is being readied in Gurgaon.
"We want to be No 1 in the overall Indian market and replicate our global
success in this region as well. I am sure it is a difficult task but we [intend
to] achieve this within a few years," Paul-Henri Ferrand, Dell's vice president
and general manager for South Asia, has said.
HP and Dell are stepping up their Asian presence to catch up with China's
Lenovo Group Ltd, the industry leader in the Asian region, and take on other
local competition. Dell's and HP's inroads in China has already seen Lenovo's
market share drop sharply. Lenovo, which became the world's third-largest PC
seller with its US$1.25 billion acquisition of IBM's PC assets last year, saw
its share of the Chinese market dip to 31.3% in the first quarter from 36% in
the fourth, according to International Data Corp (IDC).
In India, as per the latest IDC estimates, computer sales rose 30% in the year
ended March 2006, because of brisk demand especially from the government and
mid-sized business segments. More than 4.6 million units were sold during the
period, IDC India said. Sales of notebook PCs, increasingly being brought as a
second computer because of dipping prices, rose 168%, though on a much lower
base.
HP retains the top slot with a market share of 18% (desktop plus notebook),
followed by local giant Hindustan Computers Ltd (HCL) at 14%, and Lenovo at 9%
in terms of unit shipments. In terms of total desktop PC shipments, HCL led the
market in the financial year 2005-06, followed by HP and Lenovo. In terms of
total notebook PC shipments, HP was the top vendor.
On a visit to India, Lenovo chairman Yang Yuanqing said: "India is a very
important market for Lenovo. It's a high-growth market. The market is also
similar to China's, so we can replicate here what we are doing in China.
According to IDC figures, our shipments grew 56.5% and revenue grew 39% in
2005-06, compared to the previous year. These are much higher than industry
growth rates."
But with Dell and HP pushing new plans, analysts believe that other players
will be under a lot more pressure. Lenovo is planning to expand capacity from
600,000 units per year to 1 million at its existing facility in Pondicherry,
while HCL Infosystems, which has already hiked production capacity from 600,000
units per year to 1 million, is planning to churn out 1.4 million computers
(including both desktops and laptops) a year.
Much like the case with the cola companies, Bollywood superstars such as
Shahrukh Khan, Saif Ali Khan and Soha Ali Khan have been signed up at huge cost
by HP and Lenovo to endorse their products. Early this month Microsoft India
tied up with Intel and HCL and public-sector telecom giant Bharat Sanchar Nigam
Ltd to expand its "Broadband PC" scheme in commercially viable areas of the
country. Microsoft plans to invest close to $2 billion in the region to set up
a network of 50,000 Internet cafes during the next four years.
These moves are aimed at taking advantage of rising incomes and the high-tech
transformation in India, which saw its mobile-phone user base cross 100 million
in May, making it the fifth-largest country in terms of subscribers. The
expectation is that a similar penetration can be achieved with PCs, once the
price issue is addressed. In contrast to mobiles, there are fewer than 20
million PC users in the country (17 computers for every 1,000 persons).
Computers are still considered quite expensive and the market has not responded
despite desktop prices having tumbled to less than $350 (a mobile phone can be
purchased for $35). But demand for computer hardware is expected to soar
nonetheless because of relatively lower penetration rates compared with Western
markets. Computer and English-language proficiency are increasingly being
recognized as prerequisites for the best jobs in the country and abroad.
Recently, US-based Intel Corp, the world's largest chipmaker, announced that it
will help local partners Wipro, Zenith and HCL launch low-cost computers that
will lower prices by 20%.
In keeping with such predictions, US chipmaker Advanced Micro Devices (AMD)
also plans to set up the country's first chip fabrication factory (or "fab"),
at a cost of $3 billion. Following up on AMD's decision, competitor Intel has
announced a multi-year investment plan for India, totaling more than $1
billion, including $800 million over the next five years for business
expansion.
The demand for chips in India is expected grow to $3 billion in the near
future, from about $800 million today. This is still modest given the global
chip industry's size of $220 billion. Although India has developed a large
software and outsourcing industry, semiconductors (the technology used in
chips) remain a fairly small business. Few chips are designed in India compared
with the US, China or Taiwan. So far, no major fab facilities exist in the
country, though investors have toyed with the idea.
India, of course, continues to be in the news as a global hub for the
information-technology industry and an emerging manufacturing center. IBM
recently announced that it will triple its investment in India by pumping in $6
billion, the biggest new investment by a multinational company in recent years,
and Motorola announced that it would invest $100 million to build a cell-phone
and telecommunication-equipment plant in southern India, after a $3 billion
commitment by South Korea's Samsung.
In the recent past, the chiefs of Dell, AMD, Intel, Lenovo and Microsoft have
all made high-profile visits to India: the reasons are amply clear.
Siddharth Srivastava is a New Delhi-based journalist.
