Desire-based peripherals will lead the market

Need-based purchases of peripherals are slowly giving way to desire-based purchases, says SHIPRA ARORA

WHILE 2003 was the year of recovery for the Indian peripherals market, 2004 is being dubbed as the year for vendors to build up on that recovery. After a cautious last year when they focused on getting customers to sustain revenues, the focus in the coming year will shift towards trying to move customers up the value chain or technology ladder. As a result, while need-based peripheral devices will continue to grow, the space to look out for will be desire-based peripherals.

steady way up

Peripherals, which are a direct corollary of the desktop PC market, will ride on the positive growth sentiments within the desktop market this year. According to IDC, this year the desktop PC market is expected to grow at 24 percent over 2003 as compared to around 17 percent last year. IDC says the total peripherals market in India—taking into account segments like standalone monitors, hard disc drives (HDDs), optical disc drives (ODDs), printers, large format printers, scanners, multi-function devices (MFDs), uninterruptible power supply (UPS) systems, digital cameras, consumables and standalone keyboards—accounted for around Rs 4,575 crore in 2003. It forecasts the market will reach Rs 5,309 crore in 2004, a growth of around 16-17 percent. The 2004 estimates are a little on the conservative side, says Sanjit Sinha, manager, Hardware Research, IDC India. Actual growth might therefore be even higher than the stipulated 16-17 percent, so the overall market sentiment exudes positive energy.

Coming trends

New-age PC users and enthusiasts are now increasingly relying on a PC as a photo album, jukebox and video recorder/depository. This trend will largely be dependent on the capabilities of the peripheral devices that go with the PC. Customers will not buy PCs and peripherals in a hurry if these devices don’t connect even more easily and allow even the least techno-inclined to burn CDs and manipulate digital photos and video with thoughtless ease. As a result, one of the shifts that 2004 should usher in is the proliferation of peripheral devices that are not only sophisticated but also allow for easier connectivity with the PC and other devices.

This leads to another emerging trend: a spurt in the demand for desire-based peripherals. According to Sinha, technology in peripherals is shaping up in such a way that it is creating the need for itself. He however does not discount the market for need-based peripherals, which will continue to grow. The growth of the traditional areas will always be there. It is those products targeted at the household segment (which are essentially desire-based peripherals) where industry pundits see lot of activities happening in the years to come. Given this, one thing that is going to drive business on the home front in the overall peripherals business is the digital wave. The three logical and integrated steps completing the digital wave include capturing with input devices like digital cameras and scanners, processing and storage using devices like HDDs and ODDs, and finally output through monitors, printers, MFDs, etc. According to Sinha, this is boiling down to the resultant effect that if one sees a good amount of sales in one area then the others are going to get a boost with a latent demand created for them. Another important trend, IDC states, is that there is going to be a lot of channel activity with vendors trying to increase their reach.

Monitors

During Q3 2003 the overall PC monitor market surpassed earlier expectations by almost 12 percent; the market stood at around 7,37,237 units, valued at around Rs 486 crore. This was a growth of over 18 percent over Q2 and 21 percent over the same period in 2002. The upbeat mood in Q3 2003 will be there in 2004 as well. According to IDC, the total PC monitor market in India is estimated to grow at CAGR of around 23 percent in unit terms.

Out of the total monitor market, CRT monitors comprised 6,99,949 units during Q3 2003 with LCD accounting for the remaining 37,288 units. Within CRT, 15” colour monitors accounted for the bulk at 71 percent, followed by 17” colour at around 24 percent. While 14” colour is on the way out with a 2 percent share, 19” and above colour monitors remained a niche category with a market share of a little over 1 percent. Hence, the major traction from vendors during 2004 will be towards transitioning the mainstream market from 15” to 17”. The buying trend will be focussed on 17” and 17” flat CRT monitors, with the difference between 15” and 17” coming down to around Rs 2,000. According to Sonal Anand, national product head, Volume Business, Samsung, large-size monitors will gain in popularity with 17” becoming

entry-level by the end of 2004. Companies like HCL and BenQ are also gauging a similar trend. LG foresees a very healthy growth rate in the CRT 17” and Flatron segments, which are now its fastest-growing segments. Ashish Bakshi, country head, India Operations, BenQ, feels that LCD monitors are increasingly being adopted by medical professionals, banks, financial institutions, the aviation industry, stock brokers, hotels and corporates. “The SOHO segment holds tremendous potential as the prices of the LCD monitor have come into the sub-Rs 20,000 category, making them more affordable,” Bakshi says. In the LCD range, the 15” monitor is the most popular model, commanding over 80 percent share of total LCD shipments in India during Q3 2003 because of the value it offers at the price it is sold. According to R Manikandan, deputy general manager, Sales & Marketing, IT Products, LG Electronics India, the key factor driving faster movement towards the next technology level is the rise in multimedia usage, coupled with the growing use of high bandwidth and graphic intensive applications, making monitors a hub of the convergence experience.

Forecasts by IDC estimate that 15” CRT will remain the dominant segment, but growth rates will keep decreasing as the market upgrades to 17” CRT with the decline in the latter’s prices. And with vendors slowly dropping the prices of 19” and 21” CRTs, customers will be ready for the next upgrades. According to S Pattabiraman, executive vice president, HCL Peripherals, SOHO, BPO outfits, educational institutions, the government and the telecom and BFSI sectors will be the high growth verticals driving the monitor market.

Hard DisC Drives

According to IDC, the Indian disc storage systems market has grown sequentially by 15.1 percent to $34.1 million during the second quarter ending September 2003. In terms of installations, the market has grown sequentially by 24.3 percent to 974 terabyte (TB) installations in the second quarter.

With the increase in the use of Internet applications and home entertainment devices, there will be an increase in the demand for higher capacity drives for storing high-volume digital content. This is giving rise to the new trend of vendors increasingly targeting the consumer electronics space rather than the pure PC space. 2004 will be significant in that it will be the threshold year for the trend to gain some foothold in the country. In future, we will see an increased use of HDDs in the consumer electronic space.

The Indian consumer is gradually evolving into a digital entertainment consumer, and unlike a typical desktop PC user, he is today keen on creating and maintaining personal media libraries of music, movies, digital photographs and family videos. As a result, from video cameras to portable music players, consumer electronic manufacturers are increasingly incorporating high-capacity hard disk drives into their products. “We will see an increase in the demand for higher capacity drives in products like video cameras and portable music players, with more customers wanting to store high-volume digital content at a faster rate. This is a sign for the HDD industry to further expand its expertise in providing instant access to digital content for consumers in India and around the globe,” states Yogesh Kamat, sales manager, India Subcontinent, Maxtor Corporation. Maxtor is aggressively eyeing this space in India in the coming months. However Sharad Srivastava, country manager for Seagate in India, feels otherwise; he is of the opinion that the new application of HDDs in consumer electronics is not very significant in India so far, and due to this HDD usage has been entirely in the PC market.

Overall it is believed that in India, apart from PCs, new applications like personal video recorders (PVRs), multimedia PCs, game cubes, digital home entertainment devices and other consumer electronics are going to create the need for more storage-based systems with high-capacity drives in the coming years. This is because consumer computing appliances in the home, such as PCs, multimedia hubs, game cubes and set-top boxes with PVRs have all started demanding large-capacity hard drives (200 GB+). According to Sonal Anand of Samsung, within the PC market the key growth driver is the home segment. “Along with the upgrade market which is coming alive, we would have a high focus on this segment. Industries like BPO have high data needs and needs for speed where high-capacity /high-speed products would be pitched,” he adds.

Some key technology innovations in the recent past in the HDD space have been the introduction of UDMA 133 Mbps data transfer rate for PATA hard drives, the introduction of SATA HDDs in the market with data transfer rates of 133 Mbps, and the Fluid Dynamic Bearing Spindle motor technology. Over the next few years, one may expect to see new PCs and other platforms slowly withdraw support for PATA (parallel ATA) devices as chipsets reduce and eliminate ports for PATA devices and the market takes advantage of the benefits of Serial ATA features. SATA will most likely become the standard interface replacing parallel ATA. The transition will probably occur over 2004 and 2005. Also in the future, the SATA platform of data transfer currently at 150 Mbps is likely to go up to 300 Mbps in 2005 and 600 Mbps by 2007.

External storage is another significant emerging trend in 2004. Digital photographers /creative professionals are always looking for an external storage solution that would offer a better way to organise their files, photos and projects. Similarly, the PC home user/SME audience is looking for an easy way to back-up home/business PCs to prevent loss of personal financials, digital photos of the children, or small projects. In 2004, companies like Maxtor will be targeting the external storage market in India.

Optical Disk Drives

The optical media solutions market in India is estimated to have grown at a rate of 16 percent in 2003. The category saw good growth led by the growing CD-RW and Combo drive business. The overall addressable market was estimated at 2.02 million units. The expectation for 2004 is around 2.4 million units.

According to Anand, the primary factors driving growth will be the reduction in import duties by the Indian government, the reduction in prices of CD-RWs, and the increasing trend of DVD media usage along with reduction in DVD media title prices. However, Manikandan points out that DVDs are predominantly used for entertainment in India, and other applications like storage have not yet picked up due to the high cost of DVD-Rs. “The day DVDs are used for storage the market will surely pick up. CD-RW, on the other hand, is seeing the fastest growth rate, while the market for CD-ROMs, especially in the A & B class market has more or less saturated,” says Manikandan.

Bakshi feels that India has the potential to emerge as the world’s largest market for DVD drives. “It is ultimately the depth of Indian market in content—both music and movies—that will have its inevitable effect,” he says. While DVD and Combo drives are also gaining popularity, they are still going to be limited to a niche segment for the next two years. CD-RW is going to be the thing to watch out for since it is one of the fastest-growing segments.

Clearly, the market in 2004 will be driven by CD-RW and Combo volumes will surge. The overall market will be driven strongly by reduction in optical drive prices and the increasing awareness created by OEM PC manufacturers regarding

the advantages of CD-RWs. According to Manikandan, one of the key trends is that the market is steadily moving towards increased acceptance of CD-RWs, though CD-ROMs still have good market acceptance.

The major areas in which technological development has happened are writing speed and the launch of DVD-RWs on a commercial scale. In terms of speed, most products (CD-RWs, CD-ROMs, Combo drives) reached the maximum platform of 52X read/write speeds, while the DVD-ROM has reached 16X speed.

The latest technologies under development, which are yet to go into commercial launch but have promising potential in the next two to three years are blue ray technology and multi-layer high-density DVD media. Blue ray will allow the optical drive to store huge amounts of data, and one can even think of capacities much beyond the current 4.7 GB DVD capacity.

According to Anand, over the next few years there will be substantial development on the DVD-R media front, with dual-layer high-density media getting popular, and capacities moving to the 9.4 GB platform. DVD-RWs will start showing doing better from H2 2004. With the Indian market in tune with global markets on most optical products, DVD technology is also expected to ramp up in 2004. Along with this, optical media solutions will see a host of added features like SAT to make the drive deliver under the toughest media conditions.

UninterruptIble Power Supply

According to industry body MAIT, UPS sales grew by 9 percent in H1 2003-2004 over H1 2002-03, driven by improved household consumption and better sales in smaller towns. While household consumption accounted for 53 percent of the market (and is growing at 69 percent), businesses accounted for 47 percent (where sales dropped by 22 percent). While the top four cities accounted for 42 percent of consumption, their sales dipped by 19 percent. This indicates that vendors will be focusing on smaller towns in 2004 and 2005.

Shrikant Bapat, country champion, Uptime Solutions, Emerson Network Power India, agrees that B & C-class cities such as Pune, Ahmedabad, Bangalore, Hyderabad and Cochin will be a major focus area. “The quality of power in these cities is an opportunity for the UPS industry, driving the need for a reliable power protection solution,” he says. Adds Subodh Tagare, marketing manager, APC India, “Traditionally, the top five cities act as feeder zones for surrounding markets. However, a shift is being seen over the last 12 months. The share of B & C-class markets is growing as the distribution and logistics of multiple IT vendors has spread across the country and is reaching into the heart of India.” In terms of segments, the key growth drivers in 2004 will be BPO, healthcare, finance and entertainment.

In terms of market dynamics, there is expected to be some shakeout in 2004. Last year itself saw some known names losing out on market share. This will get further intensified; Sinha believes that many local players will lose share and gradually become extinct.

According to Deepak Sharma, managing director, Powerware, the 3Phase UPS has seen new technologies being introduced with the transformerless design becoming a standard in the US and European markets up to 100 KVA; this feature is expected to become a standard in India in the coming years. Remote monitoring is another standard feature in American and European markets, and is expected to become so in India in one or two years. According to Sunil Bhalla, director, Radiant Power Systems, (distributors for Luminous), the new trends in the UPS market will see products having very fast recharging abilities with special chargers as well as with batteries having the capability to accept charging at a fast rate without it affecting the life of the battery. In addition, there is the constant requirement from customers to have improved reliability in a UPS system as a product since it is the backbone of their IT/critical application equipment.

Keyboards & mice

The performance of the input devices market has always been proportional to computer penetration, which received a boost due to the recent reduction in Excise duty announced in the

mini-budget. According to MAIT, the keyboard market grew by around 29 percent during H1 2003-2004 over 2002-2003. The increasing demand in the work environment, and opportunities in the entertainment and gaming industry have made consumers realise the multiple uses of high-end peripheral devices. As a result, the Indian market is now gearing up to adopt advancements in technology. According to Rajiv Bapna, managing director, Amkette, extensive use of PCs in India has resulted in significant changes in the technology and layout of keyboards and mice. 2004 will see a market emerging for high-end input

devices like wireless, multimedia and Internet keyboards. Also, with increasing health concerns due to the prolonged use of input devices, ergonomically-designed computing devices will start becoming a reality. These will find more acceptance in 2004 with greater awareness being created by vendors. Amkette has recently taken the initiative by launching its new range of ergonomically-designed keyboards—the Series A range—for the high-end peripheral market in India.

What is going to be seen in 2004 is convergence resulting in a boost to the growth of the wireless/optical peripherals (like the optical mouse) market in India. According to Mohit Anand, manager, Home & Entertainment Division, Microsoft, the latest technologies from a mouse and keyboard perspective that are currently exciting are wireless with smart receivers, which mitigate the problem of interference and cross-talk which are inherent weaknesses of 27 MHz RF technology.

Conclusion

When the whole IT industry in India is looking up and is supposed to grow at nearly 25 percent, a good share of it will come from the peripheral segment. It will be more desire-driven than need-driven. There are lots of interesting technology and innovative trends that will be seen in 2004. But a couple of problems facing this industry make it vulnerable: the high customs duties and levies, and the cheap Chinese goods flooding the market. Can India manage them?

If the answer is yes, this industry is unstoppable.

shipra@expresscomputeronline.com

Future of monitor market

Increasing shift towards 17” and above monitor sizes. Flat screens. Touch screens and wireless technologies, along with wider acceptance of upcoming display projection technologies like TFT LCD (Thin Film Transistor-Liquid Crystal Display) and Plasma displays.

Emerging UPS trends

Increasing trend of online UPS systems. Shift from distributed UPS (micro range) towards centralised UPS and hence high KVA UPS. Customised solutions rather than standard UPS. System integrators getting into the fray. IT and power sellers getting more integrated.

Major keyboards and mice trends

Extended battery life. Optical technology. Bluetooth. Changes in products in the texture, patterns and colour front. Ergonomics. Spill-resistant keyboards.

HDD trends

Introduction of 120 GB per platter HDDs by July 2004. 80 GB becoming the entry-level by July 2004. SATA becoming more popular, especially because of their high performance with Hyper Threading CPUs. Use of HDDs for non-PC products (Xbox, iPod, digital camcorder, set top box, etc.) External storage gaining ground.