Abstract

Dramatic Notebook PC Sales Growth despite Low PC Penetration Rate in India

By 2005, the total installed base of PCs in India had reached approximately 18 million units. In a country with a population of around 1 billion, this figure gives a PC penetration rate of only 1.8%, which is much lower than the penetration rates in advanced nations. However, this low PC penetration rate means that the Indian PC market offers considerable growth potential. This is especially true in the notebook PC segment, where falling prices as well as aggressive marketing and brand development by leading international PC vendors are contributing to rapid notebook PC sales growth that is expected to exceed 100% once again in 2006.

In the desktop PC segment, with the government continuing to promote IT adoption, and with demand from SMEs increasing, the number of desktop PCs sold in India is expected to increase by at least 20% in 2006.

Impact of Government Policy on PC Market Development

The policies adopted by the Indian government have had a significant impact on the development of the PC market in India. One example is the raising of the import duty payable on full-system PC imports, with the aim of encouraging international PC vendors to establish assembly plants in India. The establishment of SEZs is expected to stimulate the development of Indian industry as a whole, thereby boosting demand for PCs.

As part of its efforts to stimulate domestic demand, the Indian government has implemented various projects to improve infrastructure and encourage more widespread IT adoption. These projects create new business opportunities for PC vendors in the bid market.

PC Market Highly Segmented in India

Disparities in wealth and income, and between urban and rural areas, are still very pronounced in India. This situation has had a significant impact on the strategies that PC vendors adopt when seeking to develop the Indian market, encouraging segmentation between the high-end and entry-level PC markets. Attracted by high growth rates in the notebook PC market and by the potential for further growth as the purchasing power of Indian consumers rises, some vendors have made a strategic decision to withdraw from the Indian desktop PC market altogether and concentrate on the notebook PC market, offering a comprehensive range of high-end, mid-range and value-line notebook models.

Other international vendors have focused on the desktop PC segment of the market. To reduce the costs resulting from high import duty, some of these vendors have decided to expand their production capacity in India. Dell is planning to establish a desktop PC factory in India in 2007, and Lenovo is implementing a major expansion of IBM's India PC plant that Lenovo acquired when it purchased IBM's PC division. Lenono's expansion project is due to be completed in 2008.

Disparities between rich and poor, and between urban and rural inhabitants, thus provide PC vendors operating in India with several distinct market segments to develop.

Appendix

List of Companies