The fortunes of the Indian peripheral market declined last year as massive flooding in the global manufacturing hub of Thailand disrupted supplies to PC makers and other hardware companies. By Pupul Dutta
2011 was a rough ride for the Indian PC peripheral market as a combination of sluggish growth in the domestic and global economy and natural disasters gave the industry jitters. The market that was valued at `15 billion in 2009 and predicted to grow to about Rs 44.8 billion by 2015, faltered last year.
The floods in Thailand affected a significant portion of supplies for the Indian IT manufacturers leading to an acute shortage in hard drives and a price rise in the market. Although the flood waters have abated, the supply chain still continues to bear the after effects.
“Our expectation is that the PC industry in India will shrink by 10% in the current quarter. Incidentally, this is the most important quarter since it typically sees a spike in government procurements,” said Ganesh Ramamoorthy, Principal Analyst at Gartner.
Ramamoorthy cautioned that the slowdown could result in leading to delays in many projects. “There has also been a double hit to the IT industry due to rupee depreciation, which has caused a 21% cost escalation for all IT hardware vendors,” he added.
Monitors and projectors
Desktop monitors have undergone a sea change from being the usual big box shaped screens to the current sleek LCD formats and growing. Consumers now demand bigger, sharper and clearer images and that has been the focus of the manufacturers as well.
Ramamoorthy commented, “If earlier, it was the transition from CRT to LCD that created a surge in the market, what we are seeing now is that the LCD prices are coming down given the dip in the cost of panels. Companies are finding it hard to hold on to the prices and there is constant price erosion.”
18.5-inch screens continued to be the most popular while 22”, 23” and 24” also managed to get a good foothold in the Indian market.
“Though there was some decline in 15.6” screen size demand yet the standalone monitor market saw a growth of 19% in FY11 with total revenues of around Rs 26.24 billion. In the last quarter of FY11, AOC fared better than most of the LCD monitor brands in India by grabbing a 20.5% market share and registering y-o-y growth of over 26%,” said Saurabh Grover, Sales Head India, AOC Monitor, TPV India Office.
Moving on, it is expected that for monitors the next big demand will be of 3D monitors and LEDs for the projector segment. With 3D monitors, interactive projectors will be the next boom.
The size of the Indian projector market is estimated at 500,000 units in 2012. While the global projector market is growing at 20%, India is growing at a CAGR of 60%. “According to FutureSource, the Indian projector market size in 2010 was around 180,000 units which have seen a YoY growth of 89.5% in FY 2010- 2011. Moving forward, the outlook for 2012 looks promising for projector business and the growth is expected to continue to come from emerging markets like Latin America, China, India, Russia and Indonesia,” said Abhilesh Guleria, Country Head – Multimedia Product Group and IT Platform Business, NEC India.
The IT adoption levels with education, government and corporate have grown immensely over the years with education clearly emerging as the major buyer for projectors contributing to more than 40-45% of the total projector market in India.
This year as far as solutions are concerned, 3D projectors in particular are expected to see the highest levels of adoption. Today 3D projection has become an extraordinary experience that enriches our personal entertainment. For businesses, it has become essential to deploy audio visual equipment and projector in order to create the right impact.
“Portable projectors will be used by business people for carrying business presentations, training material etc. In addition, a number of meeting rooms also tend to buy portable projectors given its weight, convenience of carrying around with wireless technology that totally eliminates the need to connect to a video cable,” added Guleria.
As far as monitors are concerned, the market is expected to recover soon and it is expected that the growth would double up in terms of both volume and revenue. “Tablets will be the major product which will drive sales, however monitor sales will also increase in the coming fiscal,” said Ajay Sharma, Country Manager, India, ViewSonic.
To sum up, Ramamoorthy explains that, in the future, integrated monitor units like the one that Lenovo had launched would become more popular. “There will be key focus on developing the lightest, thinnest and eco-friendly concept models. Companies are also planning to launch products with LED backlit panels next year,” he said.
Motherboards
The size of the Indian motherboard market is estimated to be around 3.2-3.5 million units based on projections by IDC and Gartner for the white-box PC market 2011. It is expected that the numbers would remain constant in terms of growth in the year 2012 as well with the total market estimated around Rs 1,000 crore.
“We saw that while in Class A cities people preferred laptops and notebooks, in smaller cities, the demand for white box PCs is growing—a trend we anticipate will spill over to this year as well,’ said Eric Kuo, Managing Director, MSI India.
Vinay Shetty, Country Manager Components Business, Asus, said that there was about 11% growth from January to September last year, however, post Thailand floods that affected the manufacturers in a big way, there was almost 50% slide in sales from October to December.
“Overall, it was a good year though we could not meet the 3.5 million PC target,” Shetty said.
In the motherboard category, power-savings or ‘green’ computing were the highlights last year as low power consumption products were thronging the market.
“This year we expect the focus to shift to gaming and better, faster performance. Companies including Asus plan to launch chipsets that come integrated with solutions—GPU and CPU knit together into one and called the Accelerated Processing Unit or APU,” Shetty added.
The industry is expecting a boost to sales in 2012 with assembly elections scheduled in many states.
“Schools and other educational institutions would be the major drivers of this growth and so will be the government as both these sectors are still in the habit of using desktops while notebooks or tablets are reserved for the higher ups,” stated Ramamoorthy.
This year will also witness the launch of the Z77 chipset from Intel. “MSI is planning to roll out its motherboards using the same chipset technology. One will also see a surge in motherboards and high end graphic cards specialized for gaming,” Kuo said.
Summing up, Kuo said, “India is a huge market for us in terms of numbers and we see a lot of growth here especially in terms of peripheral sales.”
As mentioned, the anticipated chipset launches from Intel and AMD will see a lot of new range of mainboards globally as well as in India. The market too is expected to revive after March, from the first quarter of next financial year.
Personal storage
The consumer storage market was set for unprecedented growth in 2011, in part due to a drop in prices of HDDs as well as computing devices. However, sales in the crucial October-December quarter of 2011 were impacted due to a global shortage of HDDs in the aftermath of the severe flooding in Thailand. One of the worst hit sectors was HDD manufacturing leading to a shortage of hard drives and hence a spurt in prices which are yet to normalize.
“As per our estimates the market grew at a rate of 10-15% in 2011. This year we expect the general trend to shift from flash drives to lower capacity portable HDDs. While 500 GB portable HDDs emerged as the volume drivers in 2011, we expect sales of 1 TB units to rise significantly this year once prices stabilize. Interestingly, research has revealed that total capacity usage has grown much faster than HDD sales in 2011,” said Saif Khwaja, Sales Director for India, Middle East and Africa, WD.
On the other hand, memory card market remained unaffected by any of the natural or economic disasters and this category was riding high in 2011 with the constant surge in telecom or mobile phone users. “With the consistent growth in smartphones and other converged devices the market fared well last year. According to McKinsey Global Institute, the Indian consumer’s spend is set to increase to over Rs 200 a day on an average by the year 2025, steered by a ten-fold increase in the country’s middle class population and a three-fold jump in household income during this period,” said Manisha Sood, Country Manager and Director, SanDisk Corporation, India and SAARC.
“For us there was a growth surge, which is indicated by the fact that, according to CMR, SanDisk has been consistently the largest brand in terms of market share,” she added.
Flash memory storage solutions have witnessed rapid adoption in consumer electronics gadgets such as mobile phones, digital cameras, personal computers, tablets, e-book readers, among others. It is this set of new applications that is helping to drive the global growth of flash memory. With the explosion in digital content necessitating the need for more memory/storage, companies like SanDisk are well positioned to capitalize on the storage needs of the large, fast-paced Indian market.
The host devices—smartphones, cameras, tablets, are increasingly getting memory hungry. Moreover, its not just capacity but also speed that all these devices demand and need to be catered to. “Flash drives have multiple applications beyond computing. It can be used in car audio, televisions, DVD players and much more. SanDisk has been launching products to meet these changing trends,” asserted Sood.
It is also the new-found ‘always online’ phenomenon among consumers which is shaping the way they access and share information. In line with this trend, vendors are continuously researching technologies for faster interfaces, higher storage capacities and seamless connectivity between devices. In a nutshell, digital lifestyles or personal content creation for home entertainment or sharing on social media are influencing the evolution of technology in a big way.
All these factors make a business case for the personal Cloud, wherein users can store all their content centrally in a safe location at their homes or offices and then edit, stream or share it from anywhere in the world. “A few such existing services have found a large customer base that is mostly made up of professional users. However, owing to security concerns they haven’t tapped the mainstream market yet,” said Ramamoorthy of Gartner.
On the other hand, new products such as the WD My Book Live Personal Cloud Storage that store content in a HDD rather than some mysterious remote location have found quick adoption. Again, adoption of such personal Cloud devices is being driven largely by smartphone or tablet users.
“The introduction of Thunderbolt interface saw peripheral manufacturers deliver products that take advantage of its fast data transfer speeds. For the time being, such devices are being marketed keeping media and creative professionals in mind. However, very soon we shall see Thunderbolt-based devices enter the mainstream consumer market as preference for high quality content such as HD movies drives adoption,” said Khwaja.
On the enterprise front, storage companies are constantly researching new ways to expand storage capacities in small form factors. The challenge for storage technology lies in keeping pace with inflating capacity requirements without compromising on the efficiency and cost-effectiveness of storage peripherals.
The HDD prices are expected to stabilize to a certain extent this year, after companies resume production in their respective plants in Thailand. “Our Navanakorn plant in Thailand resumes production in March and we expect to return to pre-flood output levels by September this year. However, there are several other market forces along the distribution chain that are impacting prices. A significant drop in HDD prices can be expected only by 2013,” explained Khwaja.
Going forward, a marginal dip in the growth of India’s HDD market is expected for the next few quarters, until HDD prices stabilize or reduce. The focus will shift towards personal cloud and wireless streaming products that provide enhanced utility for buyers. According to experts, market penetration of such devices in urban India is expected to touch 30%.
On the other hand, the growth in consumer and enterprise markets is driving demand for flash storage solutions. The mobile market continues to experience robust growth in feature phones, smartphones and tablets. Within the PC ecosystem, innovation is unfolding in ultra-thin notebooks, driving demand for NAND flash. NAND flash can be designed into notebooks as high-capacity solid state drives (SSD). According to Gartner, NAND flash consumption is expected to be 110 exabytes by 2014.
SMB NAS
The SMB NAS market too felt the heat of the global events that stunted the growth of this segment for a while. With ever growing needs, the requirement for increased capacity too has doubled.
“Capacity will outgrow once again,” asserted Praveen Sahai, Director of Sales, India & SAARC and Strategic Marketing Director – APJ, Iomega.
Eventually with such high requirements the trend will be to move into the Cloud for an elastic storage capacity. Given the low price points, it is expected to be an instant hit with consumers or business houses.
Explained Sahai, “We are building products for high capacity needs that will be available at the right price point. Products are expected to be priced anywhere between Rs 17,000-20,000.”
For this segment to grow, broadband penetration has to increase in a big way that would help customers store data on the Cloud. Also, for companies it is important to boost ARPUs given the stagnation in price points.
Keyboards, Speakers and Mouse
While most peripherals suffered losses due to unforeseen circumstances, the keyboard, mouse and speaker segment grew at a normal rate. The segment saw a conversion of technologies wherein products with smart features were launched, for example, speakers with video playback as an option.
“We grew 22% last year in the speakers segment. There were launches of many new products that included sound bar system, notebook speakers, portable multimedia speakers, speaker with video output and fresh range of 5.1 and 2.1 multimedia speakers adding value to the existing portfolio,” said Vikram Kalia, GM – Product Management, Intex Technologies (India) Ltd.
The mouse and keyboard segment too witnessed good growth last year with innovations centering around wireless mouse and retractable mouse giving importance to the esthetics and technology.
This year the market is expected to be driven by notebooks, tablets and their accessories. 3D technology for LED monitors will also drive the market.
Government spending too are expected to increase which would further give a fillip to sales.
Moving On
Despite the difficult conditions, the PC peripherals market in India did manage to grow at a moderate rate and is expected to have a better year in 2012. A dip in panel prices this year will also result in a rise in demand for LED monitors.
“India was one of the few markets where desktop computer sales had seen strong growth of more than 15% between 2009 and 2010 while it registered a decline of 4.4% in 2011. Consumers are twice as likely to buy a laptop, netbook or a tablet rather than a traditional desktop computer in 2012,” said S Sudhir, Managing Director, Inspan Infotech Pvt. Ltd., a leading distribution company dealing in computer peripherals.
2012, is expected to be the market for tablets with all major brands focusing more on incorporating voice and 3G supports. Their focus will also be on introducing more and more accessories for tablets with attractive designs to appeal to the fashion quotient among youth.
Factors that would drive sales are declining prices, increased disposable income, developed e-commerce market, quick replacement of worn-out hardware product, government will and participation through e-governance, education, manufacturing and retail. To conclude, in 2012 the computer peripherals market will be back on its high growth trajectory.
