With an explosion in the storage requirements and these requirements moving beyond the traditional domain of PCs, the market has seen the emergence of a whole new plethora of devices. Termed 'Storage Peripherals' these are the new age devices that sometimes even run storage capacities higher than what an average desktop or laptop can boast of. Apart from external portable storage like Pen drives (or Flash drives/Thumb drives/Flash disks) and external hard disk drives there is a whole range of devices like digital MP3 players, still digital cameras and PDAs that may not fall under the purview of traditional storage medium. But, by virtue of the storage capacity they carry, these gadgets are today defining the market for storage capacities. The iPod with a capacity of up to 60 GB is a case in point.

The market for storage peripherals got a boost last year with an explosion in the amount of digital content getting generated on the consumer as well as the corporate front. This included e-mail, audio, video, digital imaging, office documents, presentations, etc. As more and more people connected to the Internet, surfed, downloaded, shared, a lot of digital content was created, both for personal and business use. This spurt in digital content pushed the demand for creating storage capacities beyond the PCs, thereby driving the market for storage peripheral devices. Some of the other factors that drove the demand were portability, ease of access and the ability to transfer data between non-networked machines (for pen drives, etc.).

The Digicam Boom
Digital imaging is one of the front-runners in driving up the demand for storage capacities-reflecting on the market for still digital cameras. According to IDC India, the market size for branded digital cameras in 2004 was around 106,260 units, around Rs 100 crore in value terms. It is expected to cross over 227,250 units in 2005 and by 2007, it is anticipated to be close to around 900,000 units-in value terms, Rs 600 crore. The growing demand for digital cameras is also driving the demand for external storage like USB-based flash drives, as the digital image content is being backed-up, shared and transferred.

Growth Drivers: The two key factors driving the growth in this segment last year were the growing awareness among consumers and the drop in prices. It is estimated that the prices have almost dropped by 25% in the last two years. Price erosion on 3-megapixel digital cameras was widespread in the latter half of 2004 due to the abundance of these cameras. As a result, the year 2004 saw the 3-megapixel category of the digital cameras become the market staple.

Technology Shift: While two years ago 1-megapixel was the entry-level offering, 3-megapixel emerged as the entry-level in 2004 as it became more affordable. According to IDC, around 48.2% of cameras sold during 2004 were in the 3 megapixels range. And, continuous price pressure is likely to lead the 4-megapixel digital cameras to overtake the 3-megapixel digital cameras as entry-level by 2005.

Last year also witnessed a faster uptake of advanced technology features. It is estimated that almost 36.5% of the digital cameras sold during the latter half of 2004 were equipped with a 3X optical zoom. Entry-level models with higher optical zoom, ranging from 5X to 10X, also became available at competitive prices during last year, thereby driving the demand for digital cameras with optical zoom functionality. Consumers are also becoming increasingly tech savvy. This has also led to the introduction of new features like shooting movies, special scene settings, image control. On the capacities front, the storage capacities of memory cards has also been improving. The SD/MMC card emerged as the most popular storage medium.

However, in spite of the various technology advancements, the number of megapixels was still the top purchase consideration over aspects like lens quality and image processing as both the vendors and the consumers continued to fuel the megapixel war. Moving forward, the trend is expected to continue and drive the dynamics of the digital camera market. Vendors like Canon are also trying to drive the demand as lifestyle products, amongst the youth population. This segment is emerging as the target audience this year and will become a major driver for the digital camera growth in the coming years.

PDAs: First Steps
With the Indian market waking up to mobility and the enterprises starting to embrace mobile applications, PDAs gained a stronger foothold in the Indian market last year. The Indian market for PDAs is estimated to be around Rs 75 crore in FY 2004-05. This forms an almost negligible share of the $4.3 bn PDA market worldwide in 2004.

The market for PDAs in India was primarily driven by corporates, followed by the consumer segment. During last year more and more enterprises evaluated Sales Force Automation and mobile-enabling their enterprise applications. But, there is still an on-going debate in the corporate circles with many companies struggling to justify business case and RoI on mobility applications, thereby deferring investments into PDAs. However, with the emergence of more and more applications beyond just Sales Force Automation, the market for PDAs is likely to get a far greater thrust in the next two to three years with the consumer market also fuelling the growth. Consumers are now taking up to the idea of PDAs to manage their personal information.

PDAs are now even starting to compete with laptops with the addition of a wireless keyboard, expandable memory and peripheral support.

Growth Drivers: PDAs reached the Rs 15,000 price point, (for eg, an Intel 300 MHz PDA with Windows Mobile 2003) making them more affordable for the Indian market. The prices of plain vanilla PDAs are likely to dip further in the coming year. The de-licensing of the 2.4 GHz for outdoor Wi-Fi and the emergence of Wi-Fi in the home segment also drove the demand for PDAs.

Verticals like BFSI, insurance, pharmaceuticals, agro and FMCG have been leading the demand and will remain the lead drivers for the next one year. Increasing focus on e-governance projects has also given some thrust to the adoption of PDAs in the country. In terms of applications, sales/service force automation have been instrumental to a large extent in driving the PDA demand. Enterprise applications like loan recovery, claims management, insurance policies, quality inspection, surveyors, etc are also giving a fillip to the PDA market. FY 2005-06 is likely to see the emergence of mobile applications beyond SFA/CRM on PDAs. However, sales/service force automation will continue to be the primary application for the enterprises. On the consumer front, the thrust for PDA adoption will come from the growing demand for mobile email, mobile banking and mobile content.

Trends: Moving forward, more and more PDAs are going to turn into an all-in-one device comprising of mobile phones, digital cameras, data connectivity (Wi-Fi, GPRS, EDGE, UMTS support), etc. There is also a growing trend towards increasing storage capacities and more storage alternatives for the PDAs, as more and more users start using it as a mini storage device. The PDA market is also seeing the beginning of adoption of the Linux platform, though Windows CE and Palm OS continue to be the most dominant and popular platforms. Worldwide, Windows CE became the No 1 PDA OS accounting for around 43% of OS shipments followed by the Palm OS with a 36.3% market share in 2004, according to Gartner estimates.

An important trend in the coming years will be an increasing bundling of PDAs with the necessary productivity and enterprise applications to justify benefits of mobility and encourage spend in this segment. This will particularly accelerate PDA adoption in the enterprise segment. The consumers too will start eyeing PDAs not just as a lifestyle statement but as more of a storage and computing device. However, it will still take some more years for the device to become mainstream in the Indian market.

Pen/Flash Drives: Great Going
Drawing on the growing demand from executive users and the young tech-savvy personal user market, the year FY 2004-05 significantly built up on the momentum generated for external portable storage-like Pen Drives (or USB- based Flash Drives/Thumb Drives/Flash Disks). The market is expected to be around 100,000  units in FY 2004-05 in volume terms. At an average selling price of around Rs 1,000 per unit, the market size for Pen Drives is estimated at around Rs 10 crore.

Even though last year showed early signs of maturity in this segment, the gray market was a major issue. Fake alternatives for brands like LG, Sony, Samsung, etc were readily available at prices much lower than the originals. The gray market is estimated to be around 50% of the total market for Pen Drives in India in FY 2004-05 as compared to the 70-80% share in FY 2003-04. Combating the gray market will be one of the major thrust areas for the vendors this year; the share of the gray market is expected to come down to around 30-40% in FY 2005-06.

Overall, the segment is expected to grow at over 100% to reach market volumes of around 250,000 units. The market size in terms of value is expected to be around Rs 25 crore. The average price per unit is unlikely to fall drastically because higher capacities will be available at almost same price points as is the case with hard drives.

Driving factors: While the players started entering the market around FY 1999, that market started picking up only around FY 2003-04, reaching some significant volumes by FY 2004-05. Before FY 2003-04, the market itself had not matured for the product and it was still considered to be a technology that not many people could afford. While the market had already started shifting away from FDDs and CDRWs to Pen Drives, this shift became even more marked last year with the drop in prices and the need for higher storage capacities, with the explosion in digital content.

During the last two years, prices for the 128 MB capacity drives have come down by almost 50%. However, the price drop in the higher capacity of 1 GB has been lower at around 10-20%. This trend is likely to continue due to the expected growth in the market of Flash Memory-the RAM foundry market of Korea and Taiwan are shifting their manufacturing output to Flash from the overcrowded RAM production. Thereby, leading to some price fluctuations.

The two primary segments that are creating the market for Pen Drives are executive users backing up confidential and critical data, and personal users in the 15-25 years age group. These two segments are the more technology savvy user categories and are going to lead the charge for future growth as well. The market is also gaining significant traction in the SOHO segment.

Capacities moving up: The market is continually moving towards higher capacities. While about two years back 64 MB was the standard storage capacity, it has become obsolete today. Last year, 128 MB emerged as the standard storage capacity available in Pen Drives. However, the market is already moving towards 1 GB, and the 1 GB capacity products are likely to become the standard over the next one year. More usage of MP3 and other personal use software will require more storage capacities, driving the demand for higher capacity drives.

With the youth market growing at a phenomenal rate, the growth trend will continue in the next two to three years with the Pen Drives/Flash Drives likely to become a standard accessory for every PC user as the awareness percolates down to the other market segments as well.

MP3 Players: Boon for Music Lovers
As Internet penetration grew among the masses, the digital MP3 player market in India got a definite boost last year. With the expected escalation in Internet usage and the growing availability of free music resources on the Internet, it is expected that the Indian MP3 player market will continue to expand. The worldwide market for MP3 players is expected to grow to $44 bn by 2007 from $11.8 bn in 2002, according to an IDC report.

Driving Factors: While the internet and the song-swapping services have made MP3s popular, other factors leading the market growth are large storage capacities, affordability, and portability. Portability is becoming key to the consumers' lifestyles today and this is extending to the storage devices as well. The Indian consumer is gradually evolving into a digital entertainment consumer, keen on creating and maintaining libraries of music in one device, instead of carrying multiple storage devices such as CDs, DVDs or USB drives. MP3 players offer a wide range of capacities and are portable, thus making them ideal mobile music devices. The MP3 players' market in India will ride on this wave of changing lifestyles of the Indian consumer to drive growth.

The MP3s also offer better sound quality and smaller file sizes as compared to the other forms of music storage. The growing popularity of MP3 players as a storage peripheral can be drawn from the fact that consumers are increasingly looking to a hard disc player to do much more than just store music. It is also increasingly being used to transport other digital content like pictures, data, office documents, etc.

External HDDs: Tackling Storage Pains
With not only the consumers storing digital photos and music but also professionals storing and archiving huge volumes of digital content, the market for external hard disk drives (HDDs) got a fillip during FY 2004-05.  

Market Segments: There has been an increase in the number of users who are running out of storage space on their PC. This is the primary driver for the growing traction towards external hard drives.

There is a huge adoption of digital cameras in the Indian market, leading to a requirement for more space to back-up the photographs. Further, consumers are downloading heavier digital content like audio and video, driving the need for additional capacities. Also, consumers are increasingly downloading music and are starting to back it up on external hard drives instead of CDs. Apart from the consumer market, there has also been a growing trend towards adoption of external hard drives by the corporate executives for backing up the critical data on their office systems. This is owing to the growing awareness with respect to the safety and security of data.

Growing Capacities: A key trend in the external hard drives market is the rapid growth in capacities. Today, these drives are available at over 300 GB capacity with the 500 GB capacity likely to be introduced before the year-end, into the Indian market. While Pen drives/Flash drives are going to be popular for low capacity storage requirements, the external hard drives will dominate in high capacity storage needs. Though prices have been stable in the last 12-18 months and will remain so in the near future. What is happening is that at the same price point more capacity is getting introduced and this trend will continue.

Shipra Arora