India Consumer Electronics Report Q4 2012

Includes 3 FREE quarterly updates

BMI projects that Indian consumer electronics spending will grow by about 17% in US dollar terms in 2012 to US$32.9bn, driven by rising incomes and growing affordability. However PC market growth slowed in Q112, against a background of rising inflation and a weak rupee, which led many consumers to defer their purchase decisions. Only nine out of 1,000 people in India own a computer, one-fifth of the level in China. Meanwhile, Indian mobile penetration is about 57%. Another long-term driver is that 45% of India’s population is under 25. Spending on consumer electronics devices is projected to grow at an overall CAGR of 15% through to 2016, with the key segments including low-cost mobile handsets, colour TV sets, set-top boxes and notebook computers. Much of the growth during BMI’s five-year forecast period will be driven by growing demand from India’s relatively underpenetrated rural areas.

Headline Expenditure Projections

Computer Hardware Sales: US$8.8bn in 2011 to US$9.7bn in 2012, +10.0% in US dollar terms. This upward revision is due to analyst modification despite slower growth in Q112 as consumer demand was constrained by macroeconomic factors.

AV Sales: US$10.6bn in 2011 to US$13.4bn in 2012, +27% in US dollar terms. The result is unchanged from Q312, with TV sets expected to provide the most dynamic development.

Handset Sales: US$8.7bn in 2011 to US$9.7bn in 2012, +11% in US dollar terms. This figure is unchanged from Q312, with vendors likely to increase their focus on semi-urban rural customers.

Risk/Reward Rating

India’s score is 49.9 out of 100.0, putting it in ninth place in our latest Asia Central Europe Risk/Reward Rating (RRR) table. BMI expects India to rise up the table over time owing to economic growth and the potentially vast market in rural and semi-rural areas.

Key Trends & Developments

In 2012, strong growth opportunities are expected across the next 200-400 smaller cities in India, where vendors are expanding their retail and distribution presence. Around 45% of new PCs sold in the Indian market are now shipping outside the top 75 cities. The government's policy of providing tax breaks and subsidies for hardware manufacturers should help keep PC prices down and support growth. Meanwhile education procurements, such as those being implemented by Tamil Nadu state and others, will also drive volume sales.

Tier two and tier three Indian cities also offer significant growth opportunities for handset vendors as prices of entry-level feature phones and smartphones come down. Meanwhile, two thirds of India's population reside in rural parts of the country and the telecoms network still only connects about 4,500 towns and cities, and 65,000 villages in the country. In order to expand network coverage, India's mobile operators are extending their infrastructure to rural parts of the country. This is expected to raise penetration rates significantly over the next few years.

TV sets remain the core product in the Indian AV category, with demand for colour TV sets estimated at about 23mn units in 2012. There is still room for organic TV set market growth driven by first-time buyers, as household TV penetration is estimated at less than 60%. TV set demand is projected to reach 34mn units by 2016, with sporting events helping to drive spending. TV is so central to cultural life it has become a part of social policy, with free distribution of sets to low income families in some states.