When Taiwan’s Acer acquired Gateway for $710 million this week, a milestone was crossed in the world of personal computers, with the writing clearly on the wall: the once high-tech product is now a commodity-like volume-based game.
IBM’s once popular PC is now effectively a Chinese brand after the US giant hived off its PC division. Compaq was swallowed into Hewlett-Packard (HP). Somewhere along the way, entry-level PCs became cheaper, and now can be bought for as low as Rs 10,000 – which makes it cheaper than colour TV sets. No wonder, that is triggering a consumer brand war.
Industry consolidation, low margins and aggressive advertising are driving the game. This is justified by the fact that PC makers are positioning PCs as lifestyle consumables rather than nerdy looking machines.
The Manufacturers Association of Information Technology (MAIT) recently announced that PC sales at 6.3 million, grew more than 23 per cent in the 2006-07, compared with 5 million in 2005-06. Players are eager to latch on to this mood. MAIT officials say that PC penetration in India has gone up from 18 per thousand to 22 per thousand, driven predominantly by laptop sales.
“PC uptake is growing in India and while margins are wafer thin. We are banking on volumes,” says Raj Saraf, chairman and managing director, Zenith Computers.
Lenovo, HP and Acer have hired movie stars like Saif Ali Khan, Shah Rukh Khan and Hrithik Roshan, symbolising the new trend.
Indian players such as Wipro, with their recent launch of ‘Protos’ PC priced at around Rs 14,000, besides, Sahara, Zenith and HCL offer increasingly cheaper home computers and laptops.
Industry analysts attribute this trend to a scenario in which brands and high volumes help bigger players stay ahead in a game where assembled and grey market players bring up a “long tail” of cheaper PCs.
PC makers say to drive volumes, they need mass appeal, which a celebrity can provide.