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VGA vendors are working overtime to differentiate their offering from rivals. Channel strategy can make or break a vendor in the Middle East market

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By  Alex Malouf Published  October 27, 2004

Video demand|~|Sunny-side.gif|~|Sunny Narain, senior sales manager at Pine Technology |~|VGA is big business and a host of names have appeared on the horizon bidding to grab the attention of end-users and resellers alike. Talk is of high margins and easy sales but graphics is surrounded by a fog of confusion as consumers and the channel struggle to distinguish between products when all they see are numbers and try to understand how much value-add manufacturers can really give to a product. From the vendors (V) Luciano Alibrandi, EMEA director of product PR at nVidia explored the issues. At a manufacturer (M) level Patrick Lin, regional manager at GeCube; Willie Huang, senior sales manager at Tul; and Sunny Narain, senior sales manager at Pine Technology spoke on the record. On the reseller (R) side, Vishal Mohanani, sales and support executive at Tiger gave the street perspective.

CME: What is the demand like for VGA products and graphics cards in the Middle East region? Which products prove most popular for end-users?

VISHAL MOHANANI (R): We get around 20 to 30 customers coming in every day asking for high-end VGA cards. But when they come to know the price, they realise that this sort of card would cost them the same price as a whole computer. They end up with a 128Mb product.

SUNNY NARAIN (M): Numbers are pretty vague for the Middle East. We know that growth has been phenomenal here, but there is no standalone market where you can say there is demand for ‘x’ amount of cards, especially when you have Dubai acting as a re-export hub. On the card side we do nVidia and in the past there would have been more low-end FX4000 and FX5200 in comparison to other markets in Europe and the USA. Today we have as much demand for the 6800 Ultra, the top end card, as we have in the other countries worldwide.

PATRICK LIN (M): Demand for VGA products comes in at around 150,000 to 170,000 per year, with Iran accounting for 60,000 and Egypt for 20,000 to 25,000 as currently this market is slow. Saudi I’d estimate to be about 20,000 and Turkey is another 25,000. The rest is shared among the GCC, Levant and North Africa. I believe that remarked graphic cards are occupying a certain portion, probably 20,000 to 30,000. As for products on ATi’s side it is the Radeon 7000 that is the big seller. The Radeon 9200SE used to be popular in the past, especially in Iran and Egypt. This card is now in decline. We are shifting production from ATi’s 9200SE to 9250 and we are encouraging our channel partners to do the same.

Cme: With so many brand names in the market, how do manufacturers distinguish their wares?

WILLIE HUANG (M): Graphics technology is very common nowadays and there are a lot of players in the market with their own solutions. Everybody can manufacture graphics cards but it is not so simple a task to distinguish yourself from others in the market. We emphasise 100% ATi solutions and we offer more ATi solutions than other manufacturers. For example Asus has only 10 models featured in its ATi range but we have more than 50 products. We can offer the most complete graphics card solution to customers. The most important distinction is that we are more professional. We have more focus on ATi.

SUNNY NARAIN (M): How to distinguish ourselves from others in the market is an issue that we are constantly reappraising. Customers do ask what is the difference between one brand and another. What we attempt to do is localise our product and part of this involves choosing a distributor that knows the market. What we have also done is to insert an Iranian and an Arabic manual in the box regardless of which country the product is sold in. Our games bundling is also very selective to add the maximum value. In this industry you can buy games for whatever price, but a game that has some meaning and adds value doesn’t come cheap. There is a lot of research that has to be done and we have to sign big contract deals with the game developers. We are not bundling for the sake of bundling like other manufacturers out there.
||**||Pitching to the public|~|vishalm-side.gif|~|Vishal Mohanani, sales and support executive at Tiger Trading|~|Cme: How important is price when buying a graphics card?

LUCIANO ALIBRANDI (V): Obviously the buying decision is relative to the customer wanting to upgrade their PC. High end purchases represents around 2% to 3% of our market and price does not represent an issue. These products are targeted at a very limited number of people who want the best of the best all the time. For the majority of buyers interested in having a card in their PC, 60% of the decision is based on price. Some buyers in the midrange are sensitive to price but are willing to go that extra mile to get a better product and experience.

WILLIE HUANG (M): In the Middle East price is king — it is the only issue in the market. Price is very sensitive and for entry level cards everybody sells at the same rate with no exceptions. If vendors are not competitive at entry level, then they are out of the market. For high end products pricing is not the only issue. End-users want to see good reviews, awards, marketing and bundles when they are shopping around for a high-end product.

Cme: How are you driving demand for high-end VGA products?

SUNNY NARAIN (M): We have been pushing from our side, educating the market, and we have been doing a lot of promotions with the media. We are only emphasising high-end because the low-end market is there by necessity. But end-users need plenty of education about the benefits of buying a high spec product. nVidia is helping us by also driving demand. Games themselves are doing a powerful job as when you go out there to buy a game today a list of requirements and also recommended specs is written on the box. High-end VGA is generally recommended. That is automatically doing a bit of work for us.

Cme: What is happening to margins for VGA product?

PATRICK LIN (M): Margins are too low to mention at the low-end. VGA cards are different from other components. Product cost is made up of the chipsets, the printed circuit board (PCB) plus the memory. Chipset and PCB prices are almost fixed but we suffer price fluctuations on memory as the price changes daily. For low-end cards the cost of production is very unstable and there is no guarantee of any margins. Mid and high-end cards enjoy healthy margins but we need to build up our brand first before we can talk about margins.

Cme: What are the best forms of channel support that can be offered?

LUCIANO ALIBRANDI (V): I believe all types of channel support are useful if they help to drive sales. Assemblers love rebates, retailers love branding and game bundles, and distributors love market development funds and rebates. We have worked during the last two years on several campaigns worldwide to promote our brand with the consumers and our customers. By offering a choice of channel support plus targeted campaigns we have seen a great increase and awareness for our brand.

PATRICK LIN (M): Chipset vendors have to take the lead in offering channel support and most importantly building up an image of the brand in the minds of the end-user to drive sales. There needs to be that push effect through a combination of marketing and education. nVidia has linked its image to that of gaming and when end-users talk about gaming they want GeForce. ATi is doing well in the low-end segment as nVidia can’t fulfill the market demand. If ATi is going to do anything it needs to allocate resources to educate the user as to how good its product is and what kind of technological advantage ATi products can provide to the market. We need eye-catching marketing to boost exposure.
||**||Future prospects|~|GeCube-side.gif|~|The ATi Team: GeCube proudly displays its ATi-based VGA solutions|~|Cme: How does fake market product impact the Middle East channel?

VISHAL MOHANANI (R): There is a severe impact but this hits harder on bulk export sales rather than individual purchases. When exporting, price is the major concern, as even a small cost difference adds up to major savings. For the local market customers can take a really good look at the product and are willing to spend more to get the genuine goods.

WILLIE HUANG (M): This is a big problem for the industry here. I met a lot of customers in Gitex and all of them complained to us and ATi that there are a lot of fake Radeon 7000 products here. Before we thought that there wasn’t a serious problem — maybe 3% to 5% of product in the market — but we have found that it is much more serious. Fake products could take as much as 10% of the market share.

Cme: With more PCs coming with on-board graphics how does this affect you?

PATRICK LIN (M): The Middle East is one of the biggest markets for integrated graphics. Maybe 50% or 55% of computers use discrete on-board graphics, but we do find that many consumers opt for a VGA card after a few months as on-built graphics don’t cut it.

Cme: How do end-users distinguish products with identical specifications and manufacture benchmarks?

VISHAL MOHANANI (R): End-users are very confused when they see all the information. It is down to resellers like us to explain what everything does and what the information means. Customers trust us and they rely on us to inform them about the product that will suit them best.

Cme: What impact has PCI Express had on the market?

SUNNY NARAIN (M): The impact has been enormous. When PCI Express came out people were saying that this is a new technology and it will take forever to catch on. We are seeing an increasing demand for PCI Express products and the growth rate has been phenomenal with orders in the hundreds and thousands. Education has played its part. People did not know what the product was before but today when end-users go out to buy a PC, they will think twice. If they know technology they think, ‘should I buy an AGP or PCI Express.’

PATRICK LIN (M): PCI Express demand is very low and is centred on a handful of countries — Turkey and the GCC. We do no more than 500 pieces a month. PCI Express will hit next year, not now. The cost of switching from AGP to PCI Express is very expensive. End-users have to buy a new motherboard and memory on top of the card. Most people are not willing to pay for that. WILLIE HUANG (M): The effect PCI Express has had on the market this year in the Middle East has been zero. It is all tied up with vendors who produce motherboards compatible with the new technology. If you take a look at Intel they are still stocking a lot of non-PCI Express motherboards, the 845 and 865 models, and so I think the pricing of PCI Express motherboards won’t drop for the next two quarters. The knock-on effect this will have means that PCI Express will not enter the mainstream till the second or third quarter of next year when prices drop. Then you will see new products having a big effect.

Cme: Is the graphics industry affected by seasonal sales?

LUCIANO ALIBRANDI (V): Absolutely. There are several seasonal peaks for sales, and it differs from region to region. Ramadan is the major holiday for the Middle East, while Christmas affects Europe the most. Other events that help us in selling more products are games launches. When a new and highly-anticipated game comes into the market such as Doom3 our numbers are affected tremendously. Since Doom’s launch, sales for our products have skyrocketed.

VISHAL MOHANANI (R): Not in our experience. Demand for graphics varies throughout the year but it doesn’t change according to season. Customers are always coming in and asking for VGA solutions, and even during Ramadan there is no great shift.

Cme: Where do you see the biggest opportunities for growth?

SUNNY NARAIN (M): I would say the gaming market definitely. This is becoming more and more accepted in the Middle East and I have even been in discussions about holding large-scale events here. Gamers are growing up and they are demanding more from their computing experiences. The programmes that are now being released are complex affairs and have so much more to offer than in the past that it is one form of entertainment that is becoming mainstream. Gaming is coming of age, users are maturing and they need more developed and powerful platforms to play these games on.

PATRICK LIN (M): There will be more focus on high-end products. We at GeCube are doing good numbers but we need to shift from low-end to mid and high-end solutions. More sales in high quality product in each market is a must for the next quarter. We want to shift high-end VGA solutions but before we can move in that direction we have to establish our name at the low-end and then work upwards. Now we are doing the fundamental job and building our branding.
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