Thailand: PC Market Outlook, 2003

Transcription

1 Thailand: PC Market Outlook, 2003 Research Brief Abstract: Multinational PC vendors must make Thailand a priority in 2003, while local vendors need to compete head-to-head with the MNCs. End users need to be careful not to spend without first considering all their options. By Martin Gilliland Recommendations Vendors must concentrate on local demand drivers through 2003, these include wireless, mobility, Y2K replacements, telecom infrastructure growth, white-box laptops and growth in the home market. Vendors should work closely with channels that have strong relationships with telecommunications companies and the government. Large enterprises should consider using local PC vendors for some requirements Local vendors must push their desktop and laptop products and offerings into the large-enterprise space via the usual bid-tender processes. Multinational vendors (MNVs) of PCs should look for pockets of the market that are receptive to their total cost of ownership (TCO) message MNVs should create local models to meet local prices within 10 percent of the local vendors' comparable products to allow for any brand equity. End users should aim for the reduction in TCO, improved return on investment (ROI), extras to be included in the purchase price from vendors or resellers. PC vendors should work with complementary vendors to create wireless bundles that can be offered either direct or indirect with the channel s support. All vendors should work closely with large retailers and smaller PC stores in large PC malls to create bundles and attractive offers to penetrate the fast-growing private market. Publication Date:3 April 2003

2 2 Thailand: PC Market Outlook, 2003 Introduction Thailand is one of world's fastest-growing, fastest-maturing IT markets. The compound annual growth rate (CAGR) for the PC market from 1998 through 2002 was 38 percent, and laptops alone grew at a 61 percent CAGR. Growth continued in 2002 despite the global economic slowdown, as government policies helped spur domestic demand to a point at which the gross domestic product (GDP) continued to grow about 5 percent in PC market growth is expected to slow a little in 2003 as the global economic slowdown finally catches up with the Thai economy. The forecast is for Thai PC market shipments to grow 12 percent year over year, with mobile PCs expected to grow 25 percent year over year (moderate growth by Thai standards). See "Asia/Pacific: PC and Workstation Marketplace Report, 4Q02" (HWCP-WW-MS-0263) for details. After 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 Thailand for The professional market includes government, education, large enterprises, and small and midsize business (SMB) markets. The private market includes the small office/home office (SOHO) markets in which the costs have not been written off against a company's accounts. These lists are by no means comprehensive, but Gartner Dataquest does consider them the most influential factors in the PC market for Various niche markets may have differing views of the coming 12 months, but through 2003, these issues will significantly affect the majority of the PC market. Demand Drivers Professional Market The following factors are driving demand in the Thai professional market: Wireless/mobile Continued price reductions and relatively strong offerings from local vendors are making laptops a much more viable option for local and foreign companies in Thailand. Demand for wireless technology is growing in line with this mobile growth, although it is not likely to drive much Centrino demand in Replacement cycle Machines purchased in 1999 to deal with the Y2K issue are approaching 4 years of age and must be replaced. However, many companies in Thailand refrained from purchasing machines for the Y2K issue and simply set the clocks in their PCs back to 1976 (Thailand operates on the Buddhist calendar, not the Christian calendar). The year 1976 was the last one in which the days of the week matched the days of the week through This replacement cycle will, therefore, mainly affect MNCs in Thailand Gartner, Inc. and/or its Affiliates. All Rights Reserved. 3 April 2003

3 3 Gartner Dataquest Perspective Telecom growth Thailand had the largest growth rate of mobile phone users in the world in 2002 (approximately 120 percent year over year). The infrastructure and back-office support from telecommunications companies grew accordingly in 2002, with strong growth also expected in Private Market The following factors are driving demand in the Thai private market: First-time home PC buyers/price Local vendors reduced the price of an entry-level PC from 25,000 baht (US$570) in early 2002 to 15,000 baht (US$340) in the first quarter of This price includes monitor and Linux OS/applications. Such a huge price drop in an economy that saw GDP growth of 5 percent in 2002 means that many more people can afford their first home PC. White-box laptops Local vendors, such as V-tech, Laser and Belta, have strong low-end and midrange laptop offerings. The Desknote from ECS and ASUS laptops are all selling well in Thailand because of their strong price/performance value. Growth will continue in Economic growth Thailand's economy bucked the recent negative trend. With 5 percent growth in 2002 and similar growth expected in 2003, Thailand has one of the fastest-growing middle classes in the world and with this comes disposable income. Many more homes will have two PCs, while first-time home PC buyers will continue the strong growth seen in Thailand was one of the Asian "tigers" back in the '80s and '90s, but the currency and economic crises of 1997 and 1998 hit Thailand extremely hard. The Thai currency the baht halved its value against the U.S. dollar almost overnight and has not recovered a great deal in the ensuing five years. Many of Thailand's problems have revolved around unstable governments, with 21 different prime ministers leading the country in the past 20 years. Some were considered puppets for the army, because there have been numerous military coups in recent times, the latest occurring in The current leadership falls to the democratically elected Thai Rak Thai party under Prime Minister Thaksin Shinawatra. Strong Economic Principals Although the Shinawatra administration has come under fire with numerous allegations of corruption, Thailand has experienced strong growth since Shinawatra took power in 2001 and looks set to continue on this path through Gartner, Inc. and/or its Affiliates. All Rights Reserved. 3 April 2003

4 4 Thailand: PC Market Outlook, 2003 Shinawatra has implemented some heavy government spending programs, as well as hard-line anti-corruption and anti-drug policies that have met with mixed results and very mixed levels of support. Overall, the Thai Rak Thai party's popularity has grown, because its policies are generally aimed at improving life for the majority of Thais, not just the rich elite. GDP growth of 2002 is expected to continue almost unabated in 2003, with growth forecasts varying between 3 percent and 5 percent. General economic growth and competitive offers from the five major mobile telephone companies in Thailand have helped the telecommunications industry in Thailand grow at a phenomenal rate. The back-end processes of these telephone companies relies heavily on IT, and with growth expected to continue through 2003, the IT infrastructure requirements of these telephone companies will continue to be a major demand driver across most of the IT industry. Standard office requirements for desktops, laptops and IA-32 servers will continue to grow for the telecommunications companies as well as their retail outlets. Vendors may not necessarily need any telecommunications packages to compete in this area, because the requirements will be quite standard. It is critical that vendors work on their relationships with the telecommunications companies or use channels with strong telecom relationships to better understand the needs of each telecommunications company for each tender. Vendors must realize that channels can often have inside information about what is needed to win a tender (bid), so it is vital that they heed the advice from the channels in these cases. Of course, vendors must first be confident that the channels actually know the clients well and, therefore, have the inside knowledge. Telecommunications companies must be aware that local vendors may well be able to provide them with the product and service they need for this industry standard hardware. It is important that the minimum requirements are met, which will vary with each tender, but if local vendors can meet these requirements, there is no reason not to consider them as real contenders for the business. Local vendors are even beginning to have strong laptop offerings that would be perfectly suitable for the large-enterprise environment. The requirements from local vendors (as with MNVs) must include tools for reducing TCO. Some local vendors will struggle to offer this, but what telecommunications companies should be looking for includes the following: Asset management software Software distribution tools Asset management and deployment services Asset disposal services 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 3 April 2003

5 Consistency of components and Basic Input-Output System (BIOS) requirements The Mobile Phenomenon While local vendors have been growing in strength and building their large enterprise customer base, they have also been improving their product range, so they can now compete quite well with the likes of IBM, Dell and HP on most deals. This has been the case for some time with desktop PCs, but it is now true for their laptop PCs as well. The year 2003 will see a significant increase in the number of laptop bids where local vendors Vtec, Belta and Laser will have a strong offering. MNVs will encounter stiff price competition, so it is important that sales teams and channels push the correct message. Local vendors may not have the same level of service and support, and they will tend to have lessconsistent parts, making image maintenance difficult for end users. MNV products may also have tools that will help end users reduce their TCO over time. Although Thailand is quite price-sensitive, pockets of demand still exist in the large enterprise market and will respond well to a strong TCO message. Atthesametime,MNVsmusttrytocreatealow-cost,low-end,local offering to compete with local brands. The price does not have to match local brands, because there is still significant brand equity in names such as Toshiba, Fujitsu, IBM and HP, and the service and support offerings will be stronger, but these may provide for about a 10 percent price premium. If the price gap is any greater, Gartner Dataquest suggests that clients consider the less-expensive option more closely. End users must make sure they know what they want, what they need and what they can afford. If budgets are too restrictive to allow effective TCO reduction in buying, then they should look for extras in the price and see if the vendors or resellers will offer on-site vs. customer-carry-in repairs, one-year vs. three-year warranty (it is not uncommon for parts to have a different warranty period than labor), on-site installation, free shipping, and image loading. Another significant demand driver in the laptop market is the growth of wireless. Although Thailand is not seeing a boom in public wireless "hot spots" comparable to that of other countries in the region, many companies are showing significant interest in the technology. Home PC buyers are also showing strong interest in wireless technology. With both professional and private laptop markets expected to grow 25 percent year over year in 2003, vendors and resellers should be prepared with strong wireless offerings Gartner, Inc. and/or its Affiliates. All Rights Reserved. 3 April 2003

6 6 Thailand: PC Market Outlook, 2003 PC vendors are unlikely to be able to offer a complete wireless solution, especially because Gartner Dataquest does not envision Centrino being a big demand driver in Therefore, vendors will have to partner with resellers to help create solutions for the various market segments interested in wireless. The main wireless and PC markets in Thailand are pockets of demand within the large-enterprise segment (for example, warehousing, sales departments, creative teams and so forth), some technical small businesses and SMBs, and the home market. For PC vendors with a direct push into any of these markets, it is important they team up with other vendors needed to complete the wireless offering, for example, Cisco and Netgear. Repeat Customers vs. New Buyers Thailand is showing strong growth because the replacement and new-user markets are growing at the same time. Much of the growth expected in the replacement market is the result of the Y2K buildup. Thailand did not have the same growth spike in 1999, relative to other years, as many other markets did, but it did grow 27 percent year over year. Many of these PCs are still in circulation and will probably need to be replaced this year. Year-over-year growth has been more than 40 percent every year since 1999, so this replacement cycle is set to continue for some time to come. Vendors must understand that many of these Y2K PCs were bought by MNCs and not local companies, because most local companies simply set their PC clocks back to 1976 to avoid the Y2K problem. Therefore, the replacement cycle for 2003 will need to be targeted at MNCs and large local firms that deal with foreign corporations. These companies are typically quite large with standard operating environments (SOEs) and some level of understanding and execution of reducing their TCO. They include all banks, telecommunications companies, large finance companies, insurance companies and export manufacturers. Many of these companies are seeking a direct relationship with their PC vendor, so vendors that can offer this relationship well in Thailand may have an advantage. Price is typically not the key consideration, but it is still important. Helping end users manage and reduce their TCO is also a reasonably high priority, but the main demand driver with most of these firms will most likely be improving ROI. Vendors that can show an increase in productivity or a reduction in immediate costs and expenses with their PC products will also hold an advantage Gartner, Inc. and/or its Affiliates. All Rights Reserved. 3 April 2003

7 7 End users must look beyond purchase price and, if possible, beyond simple ROI. Improving ROI is only a part of what can be done by bestmanaging TCO. The gains will not be immediate, so budgets need to be considered and managed over the life of the PC to understand the full benefits available to the organization. It is not uncommon for a poorly managed network of PCs to reduce its TCO by 10 percent to 30 percent over the life of a PC. For most large organizations, that translates into millions of dollars. The other end of the market is the new PC buyer. The Thai middle class is growing in numbers and wealth at an extremely fast rate, and so is its appetite for consumer goods. At the upper end of the consumer goods scale is the home PC, but because the private PC market has been growing well in Thailand for some time, with a 54 percent CAGR from 1998 through 2002, many new homes now have more than one PC. Thailand has a reputation for its voracious appetite for material goods when times are good. In fact, Thailand was the fourth-largest market in the world for Mercedes-Benz vehicles in the mid- to late '90s. Now that things are looking up again, the Thai spending machine is back in action. The majority of this growth in the private market comes from new PC buyers, so vendors and resellers need to be aware of the needs of these consumers. Many will be novices when it comes to computers, so basic Internet, word processing, printing, and gaming capabilities should suffice. Because the bundles required by these consumers will often require printers, paper, extra software, installation services and possibly extended warranties, it is probably best that vendors work with a few large retail chains to get the most out of this market. These end users are typically low-profit, high-volume and, therefore, do not justify much sales effort from the vendors. That effort should be left to the retailers and large PC outlets that can be found in IT malls across the country, the largest being Panthip Plaza in Bangkok. Overall, 2002 saw Thailand's economy stabilize, and 2003 will see more of the same. The stability of the economy relative to many others in the region means Thailand should be an important market for vendors in Resellers and end users should, therefore, enjoy the attention especially from the foreign vendors, because localized marketing and bundling should increase through Key Issue What market forces are affecting computing hardware platform shipments and revenue, now and in the future? 2003 Gartner, Inc. and/or its Affiliates. All Rights Reserved. 3 April 2003

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