BackConsumer durable firms focus on IT products to boost growth
Consumer durable firms focus on IT products to boost growth
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Faced with a market that is growing at a slower rate than the overall economy, consumer electronics companies are looking to boost their revenues by selling more computers. “There is huge potential for consumer electronics in India, but in the past few years, the industry’s growth has stagnated at less than 10%, whereas the IT and GSM (phones) growth is each at approximately 30%," said Moon B. Shin, managing director, LG Electronics India Pvt. Ltd. GSM is the predominant technology platform for mobile phones in India with 136 million subscribers at the end of June.
According to government data on industrial production, the consumer durables industry grew by 3.7% in 2006-07 (to Rs25,000 crore according to industry estimates) over 2005-06. In 2005-06, it grew 12.5% over 2004-05. People in the consumer durables industry say the growth has slowed because of two factors: IT products that are becoming increasingly versatile and government policies. “There is a convergence that has taken place in the electronics sector where many products in the IT sector are serving multiple purposes," said Suresh Khanna, secretary general, Consumer Electronics and Appliances Manufacturers Association, an industry body. Khanna’s reference is to computers that can serve as TV sets, DVD players, even home theatre systems. Khanna added that the taxes levied on consumer durables are much higher than those on IT products. “The excise tax on television is 16%, while on computers it is 12%. And the state VAT (value-added tax levied by the states) on TVs is 12.5%, while (it is) only 4% on computers," he said. Khanna added that some companies were actually selling LCD television sets as LCD monitors simply to reduce the tax that increases the retail price of the product.
The market for IT products itself is growing, with more people buying computers and printers for use at home. “The potential of the Indian market, the strong growth in categories such as LCD monitors, printers and the overall acceptance of convergence products, is pushing companies to get more aggressive in the IT division," said Ravinder Zutshi, deputy managing director, Samsung India Electronics Pvt. Ltd.
Both Samsung and LG have sought to leverage this phenomenon to their advantage with a slew of product launches. On Tuesday, LG announced the launch of two notebook computers and a 3D monitor. In 2006, IT products contributed 13% to the company’s revenue of Rs8,250 crore in 2006.
For Samsung, IT products contributed 27% of the company’s Rs5,000 crore revenue in 2006. In March, Samsung launched a range of LCD monitors. It has also appointed local distributors for its printers.
Other companies have had similar success with their IT products. Sony India Pvt. Ltd said its IT division has grown 300% in terms of revenue since 2004. “We have new product launches and make changes to our laptop portfolio every three months," said Sachin Thapar, sales and marketing head for the Sony Vaio model of notebook computers.
The growth slump in consumer durables is encouraging more companies to look at IT products. “We are currently evaluating the possibilities of getting into IT products through the launch of laptop computers. If everything works out, Mirc will launch its laptop computers in one year," said J. Ramesh, general manager, IT, Mirc Electronics Ltd, the company that owns the Onida brand.
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