|
Small machines, megabyte action
New Delhi, August 28, 2004
Surajeet Das Gupta
Business standeard
Its a relative pygmy in the Indian laptop business. But last week
Mumbai-based Zenith Computers took the IT industry by storm when it
went on the offensive with seven new models including a super low-priced
entry-level machine for Rs 32,000. If that wasn't enough it slashed
the price of its high-end model from Rs 72,000 to Rs 54,000. That was
a Rs 18,000 price cut and it was a clear signal that a laptop war is
underway.
Zeniths not the only company thats changing the rules of
the game and aiming to make it big in the laptop market. At one level,
aggressive and savvy giants like Samsung and LG are muscling their way
into the world of laptop computing.
And, at an entirely different level, there are relatively unknown newcomers
like Allied Computers International(Asia) commonly known as ACi which
is threatening to drop prices to as low as Rs 15,000. ACi, owned by
UK-based NRI Hirji Patel, is opening a factory in India and hopes to
export laptops to different corners of the world from here.
Are these the opening shots in a no-holds-barred hi-tech battle? The
answer is both yes and no. A slew of new players is hoping to double-click
swiftly into the world of mobile computing and theyll be fighting
fiercely for market share.
But theres plenty of room for everyone at least for the
time being because the laptop market has suddenly exploded into
action. After years of relatively slow growth, mainly because of high
prices, customers are putting down their money for the sleek, lightweight
computing machines.
Industry experts reckon that laptop sales will double from 89,000 in
2003 to over 160,000 by end-2004. Some companies reckon that sales might
even touch 200,000 and Samsung, the most optimistic of all, believes
they could even zoom to 250,000. Whats more, sales are likely
to at least hit the half a million mark to a million mark by 2007.
Thats why everyone is lining up big plans for the future. Zenith,
for instance, last week launched seven new products and its hoping
to sell 1,000 laptops a month. It aims to get 15 per cent of its turnover
from the portable machines thats up from 5 per cent currently.
Says an upbeat Raj Saraf, chairman and managing director, Zenith: We
have been offering laptops for the last two years but we had only two
models. Of course we expect the MNCs to drop prices by 20 per cent to
25 per cent.
Also moving swiftly off the blocks are the Koreans who are
hoping to blast their way into laptops as they did in consumer electronics.
At one level, theres Korean giant Samsung which entered the market
only four months ago and which is focusing on the premium end of the market.
But even if it is selling expensive machines Samsung has ambitious targets
it hopes to sell 10,000 laptops by year end. Says Vivek Prakash,
vice president, Samsung India: We want to leverage our technology
strength and not fight Taiwanese on price where we cannot add any value.
So we are looking at the over Rs 1 lakh laptop market where we want to
be the leaders.
At another level, theres LG which is bulldozing into
a new market and hoping to leverage its far-flung distribution network
stretching into the smaller towns and cities. LG hopes that its success
in consumer electronics will have a hi-tech rub-off and enable it to sell
laptops.
By November LG will launch laptops in the Rs 60,000 and above range. Later
it may also move into entry-level computers. Inevitably, LG has an ambitious
target from the word go: from virtually nothing it wants a 10 per cent
share of the market.
But there are plenty of small-time players like ACi and Singapore-based
Kobian, which are also trying to corner a share of the market with lower-priced
Rs 29,000 laptops. How do they stay so low-priced? By using chips made
made by Via Technologies, a chipmaker headquartered in Taiwan, which makes
processors that are cheaper than Intels.
Says Ravi Pradhan country manager, Via Technologies India: There
is a mass market waiting to be tapped which is looking at low prices and
do not need so many features in their laptops. We are aiming at that market.
Kobian, a $100 million IT products company which sells Mercury brand laptops
is also hoping to sell around 10,000 this year. The company says that
about 30 per cent of its turnover comes from India.
Its also trying to carve out a new mid-market segment that will
be priced between Rs 50,000 and Rs 60,000 and these new models will probably
be launched before yearend.
Says Rajesh Bothra, the Singapore-based CEO of Kobian: There is
enough space for everyone in the market because the laptop market is growing
so fast, unlike few years ago when everyone was eating into someone elses
market.
The established players arent about to be out-computed without a
fight. This week HP India fired the first counter-salvo it slashed
prices of its entry-level business laptop by a substantial Rs 10,000.
That was a drop of over 12.5 per cent on its model which sold at around
Rs 69,990 (HP insists the move had nothing to do with Zenith). Another
industry giant IBM isnt planning to cut prices but plans to offer
more features on its laptops so that upgrade costs are lower for
users.
Are these optimistic forecasts for the future justified? Well, keep in
mind that more laptops have been sold in the first two quarters of 2004
than during the whole of financial year 2003. In sharp contrast, total
personal computer sales are expected to grow by only 25 per cent this
year.
The reasons for booming sales arent tough to understand. For a start,
laptop prices are falling (thats because laptop sales have soared
worldwide and also because duties in India have tumbled). Average prices
fell from Rs 80,000 to less than Rs 50,000 in less than a year. That has
reduced the yawning price gap between desktops and laptops.
Theres also another factor at work. Around the world the computing
game is moving in favour of laptops. But the ratio of laptops to desktops
has always been lower in India than in other parts of the world.
The ratio is a mere 1:40 compared to an average of 1:6 in Asia Pacific
and 1: 3 which is the global average. But in terms of value it is 1:10.
That is because average realisation on laptops is higher than on desktops.
Also, some players like ACis Patel are employing innovative tricks
to bring prices down even further. Patel will emboss corporate ads on
the outside of his low-priced laptops. That way he hopes to bring prices
down next year to around Rs 15,000. Also, hes bringing out a variety
of entry-level models and a wi-fi enabled laptop for Rs 44,900 with an
Intel Pentium chip.
Why do customers prefer laptops to desktops? There are many factors involved
but new technological innovations mean that laptops are truly mobile devices
for customers on the move. Says P Raghuraman, country manager, business
notebooks, HP India: Notebooks needed killer applications. And that
has been provided by technology which has made it into a truly mobile
device and is perceived as a productivity tool.
Raghuraman believes that a key driver of growth has been
the launch of Intels Centrino processor, designed specifically for
notebooks. About 60 per cent of HPs laptops sold in India are fitted
with Centrinos. The Centrinos have two huge advantages: they reduce power
consumption so average battery life has virtually doubled to five hours.
Two, Centrino has made notebooks wi-fi enabled: so customers no longer
need cumbersome wires to connect to the net.
As a result, new market segments are opening up and this is driving volumes.
To give one example, many companies are distributing laptops to their
salesmen. At another level, Indian management institutes are helping their
students to buy laptops.
The result is that management institutes account for 15 per cent of total
sales. The institutes have added the laptop cost into the fees but students
take it home when they finish studies.
So how are companies differentiating themselves in the market? And how
are they wooing customers? Samsung for instance wants to sell its notebooks
as lifestyle products for customers willing to pay a stiff price for technology.
The company plans innovative marketing methods to reach an expense account
audience: it will be sending direct mailers to owners of luxury automobiles
like the Sonata and the Toyota Corolla. It also hopes to set up kiosks
in lifestyle stores.
Says Prakash: We want to sell it as a lifestyle product-with MP3s
and camcorders and have created a common separate sales force to do so.
Samsungs products will, of course, have some fancy add-ons. Its
notebook PCs, for instance, are targeted at customers who want entertainment
on the move.
So it comes with surround-sound speakers, a 120 Gb large hard disk which
can store movies, a larger screen (17 inches) with better picture quality.
To make mobility easier, it has also launched the lightest laptop in the
world weighing only 900 gm.
LG, by contrast, which has 500 regional distributors is looking at aggressively
getting into untapped markets. The company hopes to push sales strongly
in B and C class cities and towns rather than only concentrating on large
cities.
Says Mani Tandon, product group head (IT products): We expects over
50 per cent of our laptop sales to come from B and C class cities. That
is because we have a strong distribution system which we can leverage.
ACi also hopes to follow a similar strategy. The company currently has
around 100 dealers and hopes to take that to 1,100 in the coming months.
Again it will aim at B and C class cities where prices will be an all-important
factor.
ACi hopes to sell 20 per cent of its laptops in these markets. Its
even throwing in attractive extras like a three-year warranty and an insurance
scheme that comes into play if the machine is stolen, at only Rs 3,000
extra.
Of course Via could become the price warrior to watch in alliance with
its partners in India. Its already scouting for new partners and
in October will organise a series of roadshows in over 20 cities to showcase
laptops working on its processors.
But the market, according to many players, wont only be for the
price warriors. In fact, its shifting quite sharply. This year entry-level
laptops will form 50 per cent of total sales. Thats expected to
drop to 30 per cent by next year. Both the mid- and premium segments are
expected to boot up quickly.
Thats why established companies like IBM and HP are not too worried
about falling prices at the lower end of the market.
IBM prefers not to play the pricing game by offering stripped down products.
Says Sanjeev Menon, brand manager, mobile computing, IBM India: Though
entry level prices have dropped the market is not moving over towards
that price. Our volumes are coming from price levels between Rs 60,000
to Rs 80,000 because customers are looking for features and value and
want to use it as a mobility tool.
IBM has also played a smart game with its laptops. The companys
entry-level laptop at Rs 49,900 is powered by a Celeron mobile processor
(not the cheaper desk processor), a DVD combo drive (others have a VCD
drive) and pre-loaded Microsoft Home software (most of its rivals are
equipped with Linux).
Menon says IBMs strategy is to ensure that customers spend less
in the long run even if they pay a premium upfront. Thats because
IBM notebooks can be upgraded cheaply as they already have key features
built into the basic model.
Similarly, HP India is wooing customers on the mobility platform. For
instance, its bluetooth enabled notebooks offer customers wireless connectivity
with their mobile phone, printer and camera.
HP is also developing usages for the tablet PC where users can scribble
on the screen with a pen. The company has sold 400 tablet PCs and is looking
at innovative new usages: it is talking to hospitals where doctors can
scribble a few lines and then store it in their patient records.
The company is also addressing the growing need for data security on laptops
by offering smart card authentication and security chips that encrypt
data.
The rest of the world has already gone mobile in computing terms. Now
India is playing catch-up. And as the game heats up in the computing world,
this will, no doubt, turn into the hi-tech war of the future.
|
|