Taiwan: PC Market Outlook, 2003

Transcription

1 Taiwan: PC Market Outlook, 2003 Research Brief Abstract: Through 2003, vendors and resellers must work closely to target the markets they are best-suited to, and end users must work to reduce total cost of ownership. By Amy Teng and Martin Gilliland Recommendations Through 2003, vendors should concentrate on government and education spending, year 2000 (Y2K) replacement cycles, mobile PCs, wireless technologies, laptops as a replacement to desktops, digital content management and broadband requirements. Vendors and resellers must get their names on the list of approved Central Trust of China (CTOC) suppliers. Then the vendors must work with the resellers to make sure they have good "mind share" with the resellers and are therefore proposed for as many government and education PC deals as possible. Vendors must work closely with their resellers in creating mobility solutions for the different pockets of market demand. Government and education customers should look beyond making decisions based on purchase price alone. At a minimum, aim to have more services and support included in the price. Ultimately, customers must strive to reduce total cost of ownership (TCO) over time, regardless of today's purchase price. End users need to understand what is available in the mobile/wireless space and what is coming before investing. In some cases, it may be worth waiting for, and in others, a better solution may exist for a business issue than first thought. Vendors and resellers/assemblers should work on digital content management bundles. Publication Date:9 April 2003

2 2 Taiwan: PC Market Outlook, 2003 Introduction The Taiwanese PC market saw solid growth in 2002 with 12 percent yearover-year growth, and it is forecast to grow at a similar rate in Vendors should not be put off by the fact that Taiwan's PC market is not as big as China's or South Korea's. The Taiwanese PC market ranked fifth in terms of PC shipments in Asia/Pacific in 2003 and is set for solid growth in 2003 and beyond, especially in the home PC market (for more details, see "Asia/Pacific: PC and Workstation Marketplace Report, 4Q02" [HWCP-WW-MS-0263]). With extensive contact and feedback from vendors, end users and other market watchers, Gartner Dataquest has compiled the following list of the top three demand drivers for the professional and private markets in Taiwan for The professional market includes the government, education, large enterprise and small and midsize business (SMB) markets. The private market includes the home and small office/home office (SOHO) markets, where purchasing PC costs have not been written off against a company's accounts. These lists are by no means comprehensive. They cover, however, what Gartner Dataquest considers to be the most influential factors in the PC market for Various niche markets may have differing views of the coming 12 months, but these issues will significantly affect the majority of the PC market through Demand Drivers Professional Market The following are demand drivers in Taiwan's professional market: Government spending The Taiwanese government is expected to maintain its strong IT budgets during these tight economic times, making it one of the only areas in which spending is being maintained. On top of this, the government has outsourced its PC procurement activities to the CTOC, which has led to a more efficient and costeffective process for all government departments, including education facilities. Replacement cycle The PC market grew 63 percent year over year in 1999, mainly because of Y2K upgrades. These PCs are now almost 4 years old, and most will need to be replaced this year. There was not a sufficient increase in demand in 2002 to suggest that these PCs were replaced last year, so many of these PCs are expected to be replaced in Wireless uptake The strong growth of mobile PCs, increasing acceptance of wireless technologies, such as b, and the decreasing setup cost of wireless LAN have led to an increased interest and uptake in wireless and mobile PCs from large and midsize enterprises Gartner, Inc. and/or its Affiliates. All Rights Reserved. 9 April 2003

3 3 Gartner Dataquest Perspective Private Market The following are demand drivers in Taiwan's private market: Mobile PCs replace desktops The private market in Taiwan made up about 43 percent of all PCs sold in 2002, and 47 percent of that market was mobile PCs. Mobile PCs are expected to break through the halfway mark in 2003 by making up 52 percent of all PCs sold into the private market. This growth is attributed to the lowering cost of mobile PCs, the strength of local vendors' offerings and the narrowing of the technology gap between mobile PCs and desktop PCs. Digital content creation/storage Phenomenal growth in sales of digital cameras, digital video cameras, Motion Picture Experts Group Audio Layer 3 (MP3s) and other digital commodities has occurred in Taiwan. The PC is the central piece of this home entertainment and digital storage concept. This, as well as the large increase in the number of homes having a second PC, helps to drive demand for more powerful and more-capable PCs into the home market. Business-to-consumer (B2C)/broadband Government policies and regulations have increased the security of online commercial transactions. As such, more and more Taiwanese use the Internet to perform B2C functions. This, in turn, will help push the number of broadband subscribers to 2.5 million in 2002 to about 6 million by Taiwan is one of the maturer PC markets in Asia/Pacific and, as such, may not have expected good growth in these tough times. However, Taiwan appears to be weathering the storm quite well, with double-digit growth experienced in 2002 and the same expected in Even though the Taiwanese economy relies heavily on exports, Taiwan has not come up against the same troubles as other countries with a similar reliance, such as Singapore and Hong Kong. The decreases in exports from the manufacturing sector in 2001 appear to have reversed in 2002, and the Taiwanese government is hopeful that this trend will continue. Unemployment has risen in Taiwan because of these earlier decreases in manufacturing demand, but jobs are being created in the services sector. This sector makes up approximately 67 percent of Taiwan's total gross domestic product (GDP), so any changes in the fortunes of the services sector will have drastic effects on the rest of the economy. However, the problem in Taiwan is structural unemployment, in which former manufacturing workers compete for jobs in the services sector that they are not trained for or experienced in. The government is working on solving this problem, but it is unlikely that this will be solved in Gartner, Inc. and/or its Affiliates. All Rights 9 April Reserved. 2003

4 4 Taiwan: PC Market Outlook, 2003 Government vs. Corporate 2002 saw significant growth in the government and education sectors in termsofpcshipments,with28percentand26percentyear-over-year growth, respectively. At the same time, the business market actually contracted 3 percent. This trend is expected to continue in 2003, with growth in the government and education markets significantly outpacing growth in the business market. The Taiwanese government, as opposed to many corporations, has not reduced its IT budgets for Also, governmental departments are essentially given poor financial management scores if they do not spend their entire budget in the allotted time frame. Therefore, they tend to spend whatever money is remaining just to clear the "bank account" and maintain a good departmental record. To succeed in the government and education markets in Taiwan, it is vital that vendors' products are included in the preferred-pcs list and vendors or its channel partners are included in the preferred-suppliers list maintained by the CTOC. The CTOC lists various hardware configurations for PCs and sets a price that vendors must meet to be considered by the users of this process for purchase decisions. The selection criteria for this list are not stringent, and 25 PC vendors and resellers have qualified for this list. At a minimum, vendors must ensure they are included in this list. Once on the list, vendors must increase their brand awareness and increase their visibility in the market for them to be considered when purchase decisions are being made. The prices offered in this CTOC procurement process are low and usually offer low margins for the vendors, so any extra support or service that vendors can offer to increase their brand equity, enabling them to charge some price premium, will help to make this a worthwhile market. Without any price premium, many vendors, especially the multinational vendors, will find that these prices are simply too low to be considered fruitful. On top of this, vendors must work closely with CTOC-qualified resellers to make sure the resellers are willing and able to sell their products. This may include increased rebates or marketing funds, but any channel conflict must be avoided. The CTOC process covers only simple hardware transactions; it does not cover complex service contracts that may involve multiple technologies and multiple winning vendors. The CTOC is capable of assisting in these more-complex deals, but the margins are usually much better for the vendors on these deals than on the simple hardware transactions, in which the CTOC is heavily involved. Vendors, therefore, should look for resellers with established relationships or technical skills in these other markets as well as an understanding of how best to serve these markets Gartner, Inc. and/or its Affiliates. All Rights Reserved. 9 April 2003

5 5 Governmental departments and education facilities should try to include more than just the basic technical requirements and price reduction in their configuration requirements when consulting with the CTOC. They should aim to include extra services in the price, such as image management services, asset management services, PC disposal services andextendedwarranties. The CTOC procurement process has forced vendors to offer products with a one-year warranty to meet the price requirements. End users should look beyond this simple cost-cutting exercise and ask vendors for a three-year parts and labor warranty for the same price. PCs are expected to last for at least three years, and many organizations are easily extending this life cycle to four years and beyond. If only a one-year warranty exists, then some sort of service and support contract needs to be arranged for the following two to three years. A one-year warranty is a short-term budget fix that will cost a lot of money in the longer term. If budgets allow it, the government bodies should also aim to gain as much as possible from the PC vendors in terms of TCO reductions. PCs that have a significantly lower TCO than others tend to have a higher initial purchase price, so buyers must be prepared to pay more upfront to save money over time. In other words, you have to spend money to save money. Upwardly Mobile The Taiwanese mobile PC market is dominated by local vendors, with the top two market share spots taken by local vendors; 60 percent of all mobile PCs sold in Taiwan come from local vendors. IBM and Hewlett-Packard holdtheno.3andno.4spots,respectively,andtheyarelikelytogrow their market share this year, but local vendors still hold the lion's share of all laptops sold in Taiwan. If you consider how many mobile PCs are manufactured for Hewlett-Packard, IBM and Dell Computer by Taiwanese contract manufacturers, then this figure gets significantly more impressive. As was previously mentioned, more than 40 percent of PCs sold in Taiwan were sold to the home market, and more than half of those will be mobile PCs in On top of this, broadband is rapidly gaining in popularity, with 6 million subscribers expected by This number is staggering when one considers that 6.8 million households exist in Taiwan today. The decreasing cost of entry into the mobile PC market for "white box" manufacturers is the main driving force for this huge boost in demand, and this will continue in Vendors must work with their resellers to create mobile bundles that will meet the needs of the various market segments that are interested in this technology. This does not end with the PC it includes broadband access and wireless LANs and may even extend into some more innovative offers that include finance and asset management services Gartner, Inc. and/or its Affiliates. All Rights 9 April Reserved. 2003

6 6 Taiwan: PC Market Outlook, 2003 The home mobile PC buyer is likely to want an affordable laptop with broadband access for the home and possibly a printer and wireless hub and PC card, if required. The home office mobile PC buyer is likely to want the same as the home mobile PC buyer, with the potential of buying a slightly more expensive and more reliable laptop and the possibility of taking up a wireless LAN option. The professional mobile PC buyer is likely to be looking for a "road warrior" laptop with wireless installed as well as the wireless LAN. Installation and extended warranty would also help sway these customers. Meanwhile, a suitable PC leasing program, combined with the benefit of income statement exposure and government's tax exemption, would be attractive to large mobile PC buyers. (Taiwan's large corporations are now realizing the importance of financial leverage. They used to buy PCs as capital; now they will try to lease PCs because this makes profit and loss sheets look better. Also, corporations are free of PC disposal, and they get a new warranty every time a technology upgrade occurs as per the terms of the lease.) It almost goes without saying that these buyers are all looking for the best price, so for vendors and resellers to get the best price possible, they must understand and articulate the sales message well. End users may pay more for something they need or even want, but they will not pay for extras that they will not use. For example, a home office PC buyer is not likely to be persuaded to spend more on one brand because it has more security features, whereas a corporate or government buyer might want those features. End users should work with the resellers to work out what is best for them. There is no point paying for something that will not be used or that will not provide a reasonable return to the organization (or home). The Digital Home When it comes to the home PC, it is rarely a case of what the home needs, but more what the buyer wants. This is most certainly the case in Taiwan. The recent growth in digital technology for the consumer has taken Taiwan by storm, with digital photography and music leading the way. The relative low cost of these products has made them extremely accessibletothegeneralpopulationinacountrywithsuchahighstandard of living, and the center of this digital revolution is the PC. Although the digital gadgets are typically used for the content creation (for example, taking a photo with a digital camera), they all perform best when linked to a PC. The PC adds so much more capability to these products Gartner, Inc. and/or its Affiliates. All Rights Reserved. 9 April 2003

7 Vendors need to be aware of this in Taiwan, as it is expected to be a major driver of home PC sales in PCs that include software packages, which help edit, manage, print, publish to the Web, store, distribute, download and copy this digital content, will help fit this high-margin niche. End users should shop around for vendor specials. Vendors tend not to have their specials at the same time, so the specials should come up frequently during the year, not just in the lead up to holidays, such as Christmas and Chinese New Year. Overall, 2003 appears to be a promising year for vendors, resellers and end users in terms of PCs, with the possible exception of local white-box PC vendors. Almost everyone has something to gain this year, especially with prices continuing to fall. 7 Key Issue What are the key technologies in each computing hardware platform market, and how will they affect the market? 2003 Gartner, Inc. and/or its Affiliates. All Rights 9 April Reserved. 2003

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