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Skoch study paints grim picture for PC growth

Neha Kapoor

MUMBAI, March 8

CONTINUING its downhill journey, the growth rate of the Indian personal computer (PC) industry is expected to crash by half in 2001, according to an annual report released by the Delhi-based Skoch Consultancy Services Pvt Ltd.

The PC market had moved up to an estimated 1.7 million PCs valued at Rs 7,331 crore in 2000 from 1.02 million valued at Rs 4,540 crore in 1999, recording a 67-per cent growth in terms of volume and 61.5 per cent in value terms.

The report, titled `Fourth Skoch PC Industry Analysis', says that this trend is unlikely to continue as the industry has been showing signs of slowdown since the third quarter of 2000.

``Though the year started on a good note, consumer and SME purchases which were considered the main drivers of growth in the industry declined, resulting in the slowdown,'' said Mr Sameer Kochar, Managing Director, Skoch Consultancy Services.

The consumer PC market consisting of first-time users, small business and home segments, which fuelled the growth during 1999, witnessed a drop in growth rates from 108 per cent in 1999 to 75 per cent in 2000.

``There has been no significant growth in A and B category towns, which clearly shows that the penetration in the consumer and SME segments is quite high. Hence, not many new customers are being added,'' he said.

The installed base, having crossed the 5.7-million mark as compared to four million last year, has taken penetration up to 5.7 PCs per 1000 Indians.

``Expansion can only come from the C category towns, but these have problems of poor infrastructure and logistics. So, growth rates will continue to fall,'' Mr Kochar added.

According to the report, while MNC brands have retained a 24-per cent marketshare in spite of a nine per cent reduction in the average price of PC, the assemblers' share has increased from 56 to 58.6 per cent without any significant price drops.

This happened at the cost of Indian brands whose share fell from 20 per cent to 17.6 per cent in spite of the average prices falling by two per cent.

``The US economic slowdown will result in a price war, resulting in lower prices of MNC brands. Inventory pile-ups in China and Taiwan will lead to lower prices in the grey market too. So, the only ones to suffer will be the Indian brands which cannot re duce prices,'' Mr Kochar said.

``The only way sales will increase in the A and B categories is if the entry barrier is dropped to a price point of Rs 15,000, half the existing price. This can only happen in the case of second-hand PCs, but for this, the Government has to allow 100 per cent depreciation,'' he added.

OUTLOOK FOR 2001

The industry is expected to record a growth rate of 35 per cent as consumer and SME buying slows down further.

MNC prices expected to fall further due to an impending price war in US.

Assembler prices also may fall due to inventory pile-ups in China and Taiwan.

Indian brands are unlikely to keep pace with falling prices; overall share is expected to fall further.

Government and enterprise corporate buying would remain buoyant. However, this will not be in line with Budgetary pronouncements of increased Government buying, as most of the projects announced for computerisation by the Finance Minister have been alrea dy under way for several years now.

Duty-free segment will continue to grow, posting marginal increase in growth rates.

Retail outlets selling PCs will go up substantially, though most are unlikely to break even on PC sales alone.

Almost all hardware export opportunities will be lost to China and other countries.