The personal computer market in India will see a massive boom by 2010, according to a new report by Forrester Research. India, says the report, will add 80 million (8 crore) new PC users by 2010.
Despite gaining prominence as a center for outsourcing, India today has one of the lowest adoption rates in the world. However, PC adoption will grow at a 37 per cent annual rate through the end of the decade.
By the end of the decade, the number of personal computers worldwide will more than double from 575 million today to 1.3 billion.
According to Forrester, mature markets in the United States, Europe, and Asia-Pacific will add 150 million new PCs to the world market by 2010.
But the biggest growth will come from emerging markets, for which Forrester forecasts that 566 million new PCs will be in use by 2010, up from 75 million in 2003, a 31 per cent CAGR (compounded annual growth rate).
The report says that China will see 178 million new PC users; Indonesia will have 40 million new PC users; and 46 per cent of Mexicans will own a PC by 2010.
Competition for market share will pit industry leaders like Dell and HP against local emerging market manufacturers and fundamentally change the rules of the game, says Forrester.
Price will be the key driver of the pace of adoption, it adds.
"Today's products from Western PC vendors won't dominate in those markets in the long term," says Forrester senior analyst Simon Yates.
"Instead, local PC makers like Lenovo Group in China (which has just bought IBM's PC business) and Aquarius in Russia that can better tailor the PC form factor, price point, and applications to their local markets will ultimately win the market share battle."
The report predicts that Western PC manufacturers will win the first round, but local manufacturers will dominate in the long term. Forrester gives three reasons to support this finding.
Wave 1: Wealthy urbanites, educated, brand-conscious, sophisticated PC users, started with entry-level PCs but now demand more power from their PCs and are motivated to purchase technology from Western firms like Dell, HP, and IBM.
Wave 2: Middle-class literates -- this group represents the sweet spot for PC unit volume sales. They are educated consumers, first-time PC buyers, and are targets for local PC makers that tailor the PC form, price points, and application to local market conditions. They are also price-conscious and brand-irrelevant.
Wave 3: Rural mass market -- It'll be a long-term challenge for the PC industry to attract this segment to the PC platform; they are likely to choose PC alternatives, such as smartphones. This group is rural, low-income, and very price-sensitive. They lack community infrastructure, funding, communications, and reliable power sources to support PC platforms.
What it means
Forrester believes that the PC industry must innovate to thrive. To grow emerging markets beyond the early adopters, firms must develop a new generation of PC products that are affordable, simple, localized, useful, durable, and serviceable.
Drawing a comparison between western and local PC builders, Forrester says the advantage rests with the locals, as evidenced in the announced sale of IBM's PC unit to China's Lenovo Group, demonstrating IBM's understanding that a majority of the growth in the PC sector will come from emerging markets and be led by local manufacturers.
The other important factor is the Windows versus Linux battle. The advantage goes to Linux, says Forrester. Establishing the Windows platform in these new markets will be an uphill battle. No Windows legacy in these markets means that local manufacturers can drive down prices by installing Linux instead.
The third factor is the battle between the wired and the wireless providers. Forrester says the advantage goes to wireless.
Investments in landline networks outside major city centers won't pay off, so rural populations must wait for new wireless technologies like WiMAX and 3G GSM networks The 16 emerging markets analysed in this report include India, China, Indonesia, Brazil, Pakistan, Russia, Nigeria, Bangladesh, Mexico, Philippines, Vietnam, Egypt, Ethiopia, Turkey, Iran, and Thailand.
