Thai floods, depreciating rupee to make PCs dearer

The depreciating rupee, coupled with the floods in Thailand, are expected to hit personal computer (PC) sales not only for the fourth quarter (October-December), but also during the next few quarters, according to industry analysts.

The PC industry, which saw one of the best quarters in terms of sales this July-September period, would see a rise of five-10 per cent in prices, said an industry analyst. The combined desktop and mobile PC market in India accounted for nearly 3.15 million units in the third quarter, a growth of 13 per cent on a year-on-year basis.

“We are seeing vendors increasing prices in the range of five-10 per cent. PC vendors are able to absorb the price to a certain extent. Beyond that, they are forced to pass this on to buyers,” said Vishal Tripathi, principal research analyst, Gartner India. According to Tripathi, this trend would force buyers to defer buying decisions till the rupee became stronger and PC prices returned to earlier levels.

In November, the rupee has declined by at least 6.3 per cent. Since the majority of components and accessories are imported, the costs of these have risen. While the rupee has been depreciating for a few months now, manufacturers chose to absorb this fall, rather than pass on the rising expenses to customers. The shortage in the supply of hard disk drives in the wake of the severe floods and rains in Thailand has made matters worse. Thailand supplies about 60 per cent of global hard disk requirements. Hard disk prices in certain areas of the country rose 30-200 per cent.

“The big challenge is the rapid devaluation of the Indian rupee. The dilemma is while bottom lines cannot be allowed to turn red, customer demand would shrink if rapid price increases are undertaken,” said Alok Bharadwaj, president, Manufacturers' Association for Information Technology, the apex body representing the information technology hardware ecosystem in India.

The price rise would not only affect the consumer PC market, it is also expected to force enterprises to defer their buying plans in the fourth quarter. “There would be delays in purchasing decisions of consumers, and some enterprises would also wait for a quarter for prices to return to their earlier levels,” said Gartner's Tripathi.

PC manufacturers say though the crisis in Thailand started around Diwali, most of them were waiting for the festive season to end before effecting any price rise. Hard disk drives account for seven-eight per cent of a desktop's or a notebook's component costs. Owing to their short supply, hard disks were being sold at two-three times their original prices. This is slowly declining to 1.5 per cent of original costs.

Industry insiders say the real challenge is the steep fall in the value of the rupee, which has declined almost 18 per cent, compared to the beginning of the year. “If the prices of hard disks rise 30 per cent, considering they account for about seven per cent of overall component costs, the impact of that would be around two per cent, which is much more manageable than the 18 per cent increase in the dollar rate,” said Harish Kohli, chief sales officer, Acer India.

“The non-availability of hard disk drives has hit the systems business. Since printers are connected to systems, it indirectly affects the printer business,” said Nitin Hiranandani, director, LaserJet Enterprise Solutions, HP Imaging. HP has increased the prices of most of its imaging products by six-seven per cent. Currently, the company is considering another price rise.