Buoyed by the massive uptake of hand-held computing devices, the ICT hardware sector in India has registered a healthy growth of 23.9 percent, with the industry registering overall revenues of $15.87 billion during 2014-15. Together the handhelds – smartphone, phablet and tablet PC – registered 94 percent growth, up from 6.3 crore units in 2013-14 to 12.3 crore units sold in the fiscal.

According to a report released by the Manufacturers’ Association of Information Technologies (MAIT) on July 17, while phablets (screen size of 5-inch and more) recorded a phenomenal 527 percent growth largely due to drop in prices, PC sales (desktop computers and notebooks) showed a negative 10.43 percent growth. The negative growth in the PC segment comes after a six-year positive growth run, from 67.9 lakh units in 2008-09 to 1.18 crore units in 2013-14 and 1.06 crore units in FY 2014-15.

According to the report, the negative growth in notebooks was driven by 26 percent drop in demand from the household segment with the market share of notebooks showing signs of steep decline in lower SECs, that is, lower segments of consumers. “The high fall in notebook share is also because of the large UP government deal which happened in the previous FY (2013-14),” pointed out Amar Babu, president of MAIT.

Commenting on the road ahead for the industry, Babu said that there is a need to explore ways of increasing computer penetration in Indian households. “One way is by enabling infrastructure, providing low-cost loans and discount vouchers for purchasing PCs. We also see a ray of hope for PC growth in future on account of some of Digital India initiatives which aims at having a digital infrastructure as a utility to every citizen, governance and services on demand, and digital empowerment of citizens,” he said.

The report also pointed out that notebook sales among establishments during 2014-15 have ended with a rise of 6 percent. The growth is mainly accounted by startups and small and medium businesses (SMBs). The notebook sales dropped by 15 percent as compared to a 55 percent growth last year. The desktop market also registered negative growth of 4 percent, with demand from establishment registering negative growth of 14 percent over the previous year.

Hand-held upswing

In the hand-held segment, smartphone sales increased by 33 percent over the last year and stood at 6.96 crore, while tablets saw a sign of losing shine with a marginal 4 percent growth when compared to the huge growth in the last three years. The sales for 2014-15 stood at 34.8 lakh units as against 33.5 lakh in 2013-14 indicating a decline of the category even before it established itself.

The numbers as reported in the Annual Industry Performance Review for the financial year 2014-15, also indicate that the demand for tablets has been negatively impacted by the spurt in demand for phablets in India. The report also estimates the tablet market in the country to de-grow by about 16 percent in FY 2015-16 owing to the consumers moving to adoption of higher screen size smartphone and phablets with voice calling facility.

“The euphoria of phablets will, however, settle down to 65 percent while we can look forward to a 27 percent growth in the smartphone market,” said Anwar Shirpurwala, executive director of MAIT, the apex body representing India’s IT hardware, training and R&D services sector. The report also highlighted that the multi-utility of phablets coupled with the ease of usage and handling makes it a preferred device over other devices.
 
“The bigger screen of a phablet makes it an extremely desirable product as it bridges the gap of a multi-utility device and an entertainment device. However, it is only up to the 5.5 inch screen phablets that have found acceptance,” said Shirpurwala. He also pointed out that the role of tablets as a ubiquitous device for consumers was fast diminishing.

Servers up, peripherals stable

The other star performer of the year was the servers that registered a growth of 30 percent over the last financial year, up from 1,41,025 units in 2013-14 to 1,82,727 units in the current year. This was driven primarily by the large number of data centre projects in the fiscal. However, the server market is expected to de-grow by 10 percent in FY 2015-16, primarily driven by the large-scale adoption of cloud by the SMBs.

The peripherals market on the other hand grew marginally by 1.7 percent with overall sales of 31.5 lakh units. While the sale of ink jet printer remained stable, with a marginal increase of 3,875 printers over last year, laser jet printer posted a positive 5 percent growth – up from 16.6 lakh units to 17.41 lakh units. The dot-matrix printer on the other hand registered a 12 percent decline in sales, down from 2.70 lakh units in 2013-14 to 2.38 lakh units this year. Interestingly, the UPS sale also slumped by over 50 percent – down from 30.06 lakh units to 15.14 lakh. This was primarily driven by less uptake of desktop PCs in the country.
 
Government to drive growth

The industry body estimates the overall sector to grow by 15 percent in revenue terms during the current fiscal. According to the report, while the desktop PC sales are expected to de-grow by around 10 percent in FY 2015-16, the notebook sale is estimated to jump 17 percent during the period. However, this growth in notebook sale is majorly dependent on the expected order of 11 lakh notebook from the Tamil Nadu government as part of its phase 4 and 5 of laptops for students programme.

While Lenovo has already been shortlisted as L1 based on the financial bid, the state government is yet to finalise the order for the same. However, since the order is to be executed in four months, MAIT expects the numbers to get added in the current fiscal tally. It also expects desktop sales to de-grow by around 10 percent in the fiscal. The major sales of desktop are going to happen in rural India and lower SECs, the report said.

Talking about the impact of the government sector, Shirpurwala said that the government programmes have been instrumental in driving the growth of notebook and also its decline. “In a country where affordability is an issue, it is important for the government to provide the additional impetus to the adoption of PCs, thereby, driving overall development of the society. We expect the push led by Digital India programme to drive domestic IT hardware sale in a big way,” he said.

The study is based on over 42,000 face-to-face interviews with end-users spread over 35 cities and 41 socio economic regions (SCRs) to estimate the country’s rural market.

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(The article appears in the August 1-15, 2015 issue)