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If the global automakers and phone makers would term India as the silver lining in the dark clouds of the global slowdown, the PC makers have every reason to vigorously disagree. In FY 09, combined PC (laptops and desktops) shipment in India declined by 8%. During the same time period, global PC shipment shot up by 6%.

Indias PC penetration is far lower than many emerging countrys, let alone the developed market. So what explains this sharp slump at the first encounter with a mild (in India, it is) economic slowdown?

There are many explanations that have been and can be given. The most common one that you are likely to hear is that most CIOs held back investments in IT capex in the face of uncertainty, which affected all IT sales, especially hardware sales. Many analysts would even go to dissect which industriesIT/BPO is the most accuseddid that more vigorously than others and so on.

By the way, all that is true. So no disagreement there.

CyberMedia Research  DQ Estimates

The Indian PC market witnessed its first slowdown even as laptops continued to increase their pie in the overall PC shipments. The slump was despite the unit prices in rupee terms not falling too much

The problem is: all these explanations have one inherent assumptionthat it is the business spending that is completely responsible for growth or slump of the market at any given time.

Is it true? Yes, almost.

Should it be true?
That one is the big questionwhy has the consumer PC market not taken-off in India the way it should have? India has a population of 1.1 bn. The installed base of PCs is less than 40 mn. Only a small fraction of that would be consumer PCs.

Unlike software, services, servers, storage, networking and even printers to a great extent, the PCs are not an entirely B2B product. Had there been an active consumer PC market in India, probably it would have lowered the impact of the slowdown. The Indian consumer market has seen no slowdown when it comes to non-discretionary spending. Spending on a PC, for those small number of consumers who do that, is today highly discretionary.

Take a look at the mobile phone market in India, for a comparison. Launched some fifteen years after PCs were launched in India, mobile phones have caught the fancy of Indians. Between 1995 ad 2009, their installed base has gone up from zero to 400 mn. In the last year itself, some 130 mn mobile subscribers were added. By conservative estimates, that is an addition of at least 150 mn handsets.

Comparing all mobile phones to PCs may not be a fair comparison. Let us take only smartphones. After all, today, a mid-range smartphone like Nokia E71 costs more than an average desktop. According to Dataquest, the market for smartphones (see page 168) in FY 09 grew by a whopping 78%. There was very little impact of the slowdown there.

CyberMedia Research  DQ Estimates

India is slowly becoming a reflection of global reality, but for a strong domestic player in HCL

PC market, on the other hand, crumbled.

As Indias economy matures, there will be business upturns and downturns and that will impact all B2B spendingsincluding ITfrom time to time. We are sure, even this time, with all signs of a recovery visible, the enterprises will start investing on IT again. The IT market will bounce back and so will that of PCs.

The question is: Should the industry leave it at that? PC, as a very essential IT product in an enterpriseand just that?

We leave this for the time being with some questions, as we move to the performance analysis of the market for last yearis it the low broadband penetration that is affecting home PC sales? Or has the PC failed to prove its usefulness as a product to consumers when seen in context of what it costs? Will netbooks be able to change that? Or has India just leapfrogged to mobile devices and the growth may come from mobile devices becoming more and more like PCs and not the other way?

The Market as it Was
In FY 09, the overall PC market registered a slumpprobably its firstof 10% over FY 08 to record a total sales of Rs 18,030 crore, down from last years Rs 19,954 crore. The laptop market grew 3.5% to constitute 43% of the market at Rs 7,778 crore. What pulled the market down is the huge 18% drop in the desktop market, which registered a sales of Rs 10,252 crore.

One clarification here. This time, we have changed the market sizing estimates from end user pricing based to what the vendors realized as their revenue. So, you will find that our last years figures were a little higher. For a fair comparison, we have taken the corresponding figures (vendor revenue) for last year as well. The reason behind this change is that our survey is based on the data given to us by suppliers and hence we have a more accurate view of that.

In terms of unit shipmentswhich the above change in our accounting method does not affectthe overall market dropped 8 %, largely driven by 13% drop in desktop shipments while laptops grew at 7.9%, according IDC data. Between April 2008March 2009, India saw a total shipment of 75,87,000 PCs, out of which desktops accounted for 71% and laptops 29%.

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