Indian IT Hardware Industry : A Mixed Bag
While the overall Indian IT industry remained flat in 2019, an impressive PC sales boosted the morale, however the COVID-19 pandemic may put a big dent on the industry in the current fiscal
It was a mixed bag for the Indian IT hardware industry in 2019. While a few industries registered impressive growth, some other continue to decline owing to multiple factors including changing technology dynamics, Covid-19 pandemic and a blurry future.
While the Indian PC market displayed a record growth – highest in last six years – the printer market showed a decline. Similarly, the storage market that consistently grew for the first three quarters, plunged to an abyss in Q4, taking the average Y-o-Y growth to a new low. The Indian server market showed a consistent decline throughout the year. Covid-19 pandemic turning out to be a big blow to the overall industry as it forced the market to shut down, forcing the supply chain and thus shipments to a halt, and at the same time it injected a sort of pessimism to the market that appeared to cautious now. This trend is expected to continue in 2020 as well, experts believe.
The India traditional PC market inclusive of desktops, notebooks, and workstations finished 2019 with an impressive 18.1% year-over-year (YoY) growth, shipping 11 million units during the year, according to IDC. 2019 also turned out to be the biggest year for PC shipments in the last six years. The growth was largely propelled by the government-driven education projects and upgrade purchases for Windows 10.
The last quarter of the year also saw a healthy 16.5% YoY growth with 2.3 million shipments, primarily contributed by the strong 26.5% annual growth in the commercial segment. Also, after a YoY decline for five straight quarters, the consumer segment saw growth of 4.6% YoY in 4Q19 shipping close to 950 thousand units.
As notebook PCs become thinner and lighter with enhanced mobility features, they are increasingly getting preference from the consumers, education sub verticals, and enterprises. Notebook PCs saw highest-ever annual shipments with a 67.7% category share in 2019. The desktop category also witnessed a 5.7% YoY growth largely driven by the refresh buying from banking and financial institutions and touched a 30.7% category share for the year.
On the processor front, shortage in availability of Intel’s CPU was a concern point for vendors throughout the year. This provided room for AMD to enter certain segments and helped vendors to fill the gaps to some extent. However, Intel remains a leading processor brand with a 70.8% share in the traditional PC category.
The large government education projects, Windows 10 refresh orders along with vendor initiatives to target SMEs even in the lower-tier cities and helping them with easy finance options were the key drivers of strong growth in the commercial segment, aiding in its growth of 44.8% annually in 2019, says IDC.
The commercial segment saw healthy growth in all four quarters of 2019. However, vendors struggled to achieve meaningful growth in the consumer segment despite adding more ultra-slim devices with higher processing power and optimized performance in the portfolio. One notable growth area was the Gaming based PCs, which grew 51% YoY in 2019. While most of the vendors increased their shipments in the gaming segment, Asus stood out as a leading vendor with one in every four notebooks shipped being a gaming one from the vendor in 2019.
Lenovo slipped to 2nd position in 4Q19 but remains the leader for the overall year. Lenovo’s commercial segment grew 32.1% YoY and the consumer segment witnessed 13.5% annual growth in the last quarter of the year, resulting in the annual growth in all four quarters of the year for the vendor.
In Q4, HP regained the top position as its shipments grew 8.6% from the same time a year ago. However, the company remained in the 2nd position for the overall year. The growth in 4Q19 was driven by the fulfilment of few education deals and strong growth in the enterprise segment.
Dell Technologies maintained its 3rd position in 4Q19 and the overall year. The vendor had registered strong growth in the commercial segment driven by refresh orders from its global accounts and steady growth in the mid-market segment. However, vendor struggle continues in the consumer segment as its shipments remain flattish, when compared to the same quarter last year, according to the research firm IDC.
India’s SMB market provides a large opportunity for PC vendors in the next few years, as SMBs strive to adopt new technologies for their digital transformation journey. However, the vendors need to be more innovative to deal with the aspirations of this segment and would require a cohesive ecosystem focus to improve the infrastructure and support for small and medium businesses
The overall Indian server market declined 10.13% in FY19-20 on account of a big fall in x86 server revenue.
If we go by quarterly basis, IDC reports, in Q4 2020 the overall server market in India witnessed a year-over-year (YoY) decline of 22.1% in terms of revenue to reach $232.1 million in 1Q2020 (Jan-Mar) versus $298.0 million in 1Q2019. The x86 server market accounted for 85.2% of the overall server market in terms of revenue.
Major contribution to the x86 server market continues to come from the professional services and telecommunications segments, followed by banking and manufacturing verticals. Large deals were witnessed from telecommunication vendors, nationalized banks, digital wallets companies, global high-tech semiconductor manufacturing companies, and various federal government departments during 1Q2020.
The x86 server market in terms of revenue declined YoY by 25.3% to reach $197.9 million in the fourth quarter of the financial year 2020 as against $264.9 million in the same period a year ago. The decline was due to the lack of spending from global hyperscalers and spillover of deals into the next quarter, IDC said in its report. The restriction on the movement of goods amidst the pandemic resulted in delivery constraints with customers waiting to materialize their previous orders before placing newer ones. The market is expected to decline further in 2Q2020 due to Covid-19 affecting the financial and operational balance of the industries. Recovery is expected to be observed in 2H2020, owing to spend coming from federal government agencies, bank refresh, and network modernization projects from telecommunication vendors.
The non-x86 server market grew YoY by 3.6% to reach $34.2 million revenue, in the last quarter. IBM continues to dominate the market accounting for 74.1% of revenue share with a revenue of $25.4 million. Adoption of IBM’s server offerings is growing primarily across banks for their core banking and internet banking workloads. As a result, 79.4% of its revenue was seen coming from banks, followed by manufacturing. Oracle came at second position followed by Hewlett Packard Enterprise (HPE) with a revenue share of 14.6% and 11.3% respectively.
In Q3 20, the overall server market in India witnessed a year-over-year (YoY) decline of 2.8% in terms of revenue to reach $299.6 million versus $308.1 million for the same period a year back. The x86 server market accounts for 88.1% of the overall server market in terms of revenue. The contribution to the x86 server market primarily came from professional services, education, telecommunications, manufacturing, and banking verticals. Large deals were witnessed from telecommunication vendors, nationalized and payment banks, high-tech semiconductor manufacturing companies, and education in India, during the period.
The x86 server market in terms of revenue declined YoY by 1.2% to reach $264.0 million in Q3 as against $267.1 million in Q3, 2018. IDC reported that the professional services vertical which includes public cloud providers, traditional IT/ITES companies, witnessed a drop in revenues of 24.1% to account for 36.1% of the overall market.
However, there was the increase in spending from verticals such as banking, telecommunications, and manufacturing that grew 33.5%, 42.9%, and 18.4% respectively. The education vertical registered the highest YoY growth of 189.9% in the x86 market during the period, according to the research firm.
The non-x86 server market declined YoY by 13.2% to reach $35.6 million in revenue. IBM tops the market with a revenue share of 74.0%, followed by Hewlett Packard Enterprise with a share of 18.2%, and Oracle with 7.8%. Banking remains top vertical with 75.2% revenue share followed by manufacturing and insurance with 12.3%, and 3.6% respectively.
In Q2 the market grew by 0.8% in terms of revenue to reach $280.1 million in CY 3Q19 versus $277.8 million in CY 3Q18.This growth is majorly driven by non-x86 server market as it registered big deals from large public and private banks in India during 3Q19.
In Q1 the market declined by of 1.0% in terms of revenue to reach $350.2 million versus $353.9 million in the corresponding period a year ago. The x86 server market accounted for 89.9% of the overall server market in terms of revenue. The contribution to the x86 server market primarily came from professional services, telecommunication, and retail verticals. The market segment witnessed large deals from IT and ITeS customers, nationalized banks, telecom service providers, and e-retail in India during the period.
Going forward, experts believe, the industry would behave cautiously and would hold on to their spend on account of pessimism in the market because of Covid-19. The industry may closely watch the next couple of quarters before investing in big scale server space.
The Indian external storage market was growing consistently, around 10%, for the first three quarters till Covid-19 hit the industry in Q4. Traditional investors like Governments, banks and professional services organizations have been pumping money into the system but a sort of caution and wait-and-watch attitude was witnessed in the last quarter driving the overall industry to decline for the entire year.
In Q4 of FY2019-20, the external storage market declined by 20.6% Year-over-Year (YoY) by vendor revenue and stood at USD 87.8 million in 1Q20 (Jan-Mar). The majority of the YoY decline in storage spending was seen in professional services, manufacturing, and telecommunications organizations.
In its report, research firm IDC said that due to Covid-19, most of the organizations have reduced their IT spending for this FY2020. Businesses are revisiting their CAPEX spending and would invest only if there is a pressing need, else would opt for OPEX models. Organizations are moving to Public Cloud (Backup and DRaaS) so that they can avoid capital spending in these hard financial times.
All-Flash Arrays (AFA) contributed 37.6% to the overall external storage systems market in 1Q20. With the advent of NVMe, more organizations are expected to adopt new-age flash technologies to address the growing demand for high-density applications such as artificial intelligence, machine learning/ deep learning, real-time analytics, etc.
High-end storage systems grew by 3.7% YoY due to increased investments from Banking and Government organizations in 1Q20. The Entry and Midrange storage segments witnessed a steep double-digit YoY decline in Q120, IDC reports.
Organizations are expected to delay their IT spending on technology refresh but would spend on new projects which would drive automation, increase performance, and optimize costs due to cash flow issues. Businesses would prioritize projects such as digital transformation, IoT, artificial intelligence, etc. in the near future.
Dell Technologies continued to be the market leader with a 31.4% market share by vendor revenue, followed by Hewlett Packard Enterprise (HPE) with a 15.9% market share in 1Q20. Hitachi and IBM witnessed strong YoY growth in 1Q20 due to key wins from government and banking organizations respectively in 1Q20.
India’s external storage market witnessed a growth of 6.0% Year-over-Year (YoY) by vendor revenue and stood at $91.0 million in Q3. Banking, professional services, government, manufacturing, and telecommunications industries contributed 81.2% to the overall external storage market during the period.
India’s external storage market witnessed a growth of 8.0% Year-over-Year (YoY) by vendor revenue and stood at USD 91.8 million in Q2. Professional services, banking, government, manufacturing, and telecommunications industries contributed 83.2% of overall external storage market in Q2.
In Q1, India’s external storage market witnessed a growth of 16.4% Year-over-Year (YoY) by vendor revenue and stood at $ 101.8 million in 2Q19.
Investments from Professional Services and Banking organizations drove the growth in 2Q19 majorly due to infrastructure modernization, technology refresh and investments on emerging technologies.
Across all the storage class categories, High-End storage grew by 69.6% YoY due to large wins in FSI, Government, Media, and Telecommunications organizations in 2Q19. Entry and Midrange external storage segments also witnessed a YoY growth in 2Q19, IDC reported in its quarterly tracker.
With the advent of Digital Transformation initiatives, there is a clear need for innovative Storage technologies to address the ever-growing storage requirements. Hyperconverged infrastructure, Object Storage and Software Defined Storage are getting more traction in the
As a growing requirement in the digital economy, organizations are opting for automation technologies, which are self-healing even at the infrastructure layer and consumption-based pricing to lower their CAPEX and to avoid unwanted over-provisioning of infrastructure. To address these needs some of the major vendors are embedding machine learning/deep learning to infrastructure and have started offering consumption-based pricing.
Going forward, the experts afraid, the market would grow at a single-digit compounded annual growth rate (CAGR) for the 2019 – 2024 time period and storage spending in CY 2020 to decline majorly due to Covid-19 impact.
The India Hard Copy Peripherals (HCP) market that includes printers and copiers, shipped 3.5 million units in CY2019 and registered a year-over-year (YoY) decline of 4.7% due to weak consumer segment demand. The annual decline was primarily from laser printers (excluding copiers) declining by 11.8%, as the market continued to be impacted by weak demand as well as migration to Ink Tank printers. The laser copier market grew by 6.9% with strong corporate demand and continuing decline of refurbished copier market. The inkjet market remained stable with a decline of 0.1%. The year ended with the inkjet market commanding more than half of the market.
In 4Q19 the market shipped 0.79 million units, a YoY decline of 7.3%. 4Q19 witnessed low demand, which was a result of overstocking of the channel in 3Q19 and prevailing consumer sentiment.
Ink Tank printers grew by 7.0% and now command 73.2% of the inkjet market. The Ink Tank segment overtook the overall laser printer segment for the first time in 2H19. The laser copier segment also noted a growth of 6.9%. In 2018, Government’s strict regulation on the refurbished Copier (RC) market through tight monitoring and increased seizing of illegal units at major ports gave a boost to the original copier segment, which continued in 2019 as well. However, by 2H19 the market resumed its normal pace of growth as the effect of RC market stabilized, reports IDC in its quarterly tracker study.
Top 3 Brand Highlights:
HP maintained its leadership in CY2019 HCP market with a market share of 39.1%, while posting a YoY decline of 7.4%. HP’s Ink Tank shipment grew by 14% YoY as a result of strong channel schemes and end-user promotions. It’s Laser A4 segment witnessed a decline of 9.7% YoY, its highest decline since CY2009. On the bright side, HP’s share in the copier segment grew by 29.4% YoY owing to strong channel push.
Epson maintained its 2nd position in the overall CY2019 HCP market with 26.8% market share. It also continued to hold its leadership in the inkjet segment with a market share of 45.7% and YoY growth of 1.4%. Epson’s stable numbers despite muted market sentiments can be primarily attributed to Epson’s strong brand recall, channel depth and multiple channel schemes in the first half of the year.
Canon recorded YoY decline of 6.3% in CY2019 and maintained its 3rd position in the HCP market. In the copier segment, it maintained its leadership position with a 29% unit market share as a result of its strong corporate connect and steady flow of government orders. In the Ink Tank segment, Canon witnessed a strong YoY growth of 15.7% because of its increased focus on the Ink Tank segment with launch of new models, attractive channel schemes and end-user promotional campaigns. In 2H19, Canon overtook HP to become the 2nd largest player in the Ink Tank segment.
Due to Covid-19 pandemic resulting in multiple tranches of nationwide lockdown, there is a lot of uncertainty resulting in frequent changes to the outlook for the coming quarters. However, under the assumption that things become normal from 3Q20 onwards, vendors are still likely to face a slowdown in consumer demand as they prioritize their spending towards essential goods.
However, despite weakness in consumer demand, IDC expects the India HCP market to start showing signs of recovery from 3Q20 onwards as economic growth starts rebounding. Vendors are likely to go aggressive with their marketing and promotional campaigns during 4Q20 to cash in on the festive season.
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