One leading Indian company suffered a serious Denial of Service (DoS) attack in recent weeks. Even as the tech support team engaged itself in retrieving the situation back to normal, a petulant CIO attributed the discovery of audio and video files as well as digital photographs in the as the root cause of the problem. Not only was his reasoning technically and logically baseless and flawed, the CIO was obviously not attuned to todays realities.

A global study by IDC on The Expanding Digital Universe sponsored by EMC a few years back, discovered that 173 exabytes of information was generated globally in 2006, and this would increase ten times by 2010 to 1,773 exabytes. Seventy percent of this digital world (more than 1,200 exabytes at a conservative count) will be incidentally created by individuals, thanks to a generation of more and more email, audio, video, digital photographs and electronic documents.

With India responsible for a significant 20% plus of this information bonanza, one obvious impact has been the boom in the storage peripherals market. It comprises a diverse range of products: from the ubiquitous flash drives (popularly called pen drives) and flash memory cards (and even external memory sticks that go into mobile phones) to external hard disks, the market also includes digital cameras and audio players (defined by the widespread adoption of Apple iPods).

Who Took My Pen Drive?
Like my pen, even if you have taken it, I dont really care, as pen drives have really become an ubiquitous mass consumer product. In FY 08, flash drives continued to dominate the market as low capacity storage devices compared to external hard drives and memory cards. While the ease of handling was one big factor, the duty drop on USB flash and 30-40% price reduction on 1 and 2 Gb drives also helped in generating market momentum.

For all major vendors like Transcend, Kingston, and Sandisk, both professionals and students seemed to be potential target segments. With two different kinds of consumer base evolving, in FY 08, vendors looked to bifurcate the market to meet the demands of both sections. The standard entry-level capacity changed from 512 Mb to 1 Gb last year; with prices falling to less than Rs 600, more vendors started looking at 2 Gb flash drives over 1 Gb. Soon 2 Gb/4 Gb capacities are expected to come in the mainstream.

Unfortunately for most of these vendors, the gray market contributed to the major share of the trade, almost 30% higher than the official shipment. Vendors like Transcend and Sandisk appointed channel partners to organize the market to counter the gray trade

Globally, it might be in the fifth position, but in India, the flash drive market in FY 07 was dominated by Transcend. India in fact contributed 4% of this Taiwanese vendors global revenue for the year. With demand for larger capacity increasing too, Transcend also launched 16 Gb and 32 Gb Jet Flash V10 drives in India during the year. Other vendors like Kingston and Sandisk were active in launching new products as well, like the Cruzer line from SanDisk. Another interesting story was the entry of Moser Baer, as part of the companys strategy to actively foray into storage peripherals.

Notwithstanding what these vendors achieved, the gray market still contributed to the major share of the trade. The estimated gray market was about 30% higher than the official shipment. Flash drives of all major brands like Transcend, Kingston, and Moser Baer were easily available in the gray market at a much lower price, the differential often amounting to less than half of MRP. No wonder vendors like SanDisk (it appointed Ingram Micro and Rashi Peripherals) looked for channel partners and organized market to counter the gray menace.

Substantial sale of memory cards happened online through e-commerce sites like Indiatimes and eBay; while the established brands sold more through traditional channels, lesser known brands sold online

Adoption Trends
The increasing consumption of mobile phones and digital cameras led to substantial growth of the flash (or memory) cards segment. The overall mobile phone handset market in India last year was around 100 mn units, out of which at least 60% handsets had memory card slots. This created a huge market for memory cards. The drop in prices of digital cameras leading to the digicam market witnessing a rapid growth also supported the memory card boom greatly.

Like pen drives, there was a capacity shift happening in flash card too as people wanted to store more song, music and photographs. The demand for 4 Gb and 8 Gb memory cards for mobile phones were particularly high. Time lag was a major problem for photographers using low capacity memory cards. Digital cameras with 8 megapixels were largely in demand which in turn fueled the growth of 8 Gb memory cards for cameras.

The movement toward smaller cards continued through the year with MicroSD and MiniSD formats taking over a larger share of the market. This was applicable for all leading vendors like SanDisk, Kingston, Transcend, Moser Baer and Umax. However, there was a significant expansion in the memory card market in Q4 07, with a 24% increase over the previous quarter. This expansion happened as more consumers gravitated toward phones that can play music, take high-resolution photos, access the Internet and play/record video.

Apple introduced Touch iPods during the year. Thanks to its perennial superhit Shuffle and Nano, Apple had done more business in India through iPods than it ever managed with its Macs. No wonder, large distributors like HCL Infosystems were active in reselling Apple iPods during the year

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