Survival instincts

The Gulf is not only a rapidly growing computer market, but a rapidly changing one too, and agility is becoming a key to future survival.

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By  Andrew Seymour Published  August 2, 2007

Headline figures published on the state of the local PC market this week reiterated what everybody knows already: that the Gulf is currently home to one of the fastest growing computer markets in the world. What the data doesn't immediately reveal is the extent of change facing players in the region's PC channel.

If you're looking for the ideal conditions to breed market growth then the Gulf couldn't find itself in a more favourable position. The economic climate is improving in most territories, corporate organisations are realising the importance of developing a reliable IT infrastructure and the digital revolution taking place in the consumer sector has the PC at the very core of it.

The market for desktops, notebooks and industry-standard servers in the six Gulf markets is, according to analyst firm IDC, worth a colossal US$2.4 billion a year, illustrating why PC brands are pitched in aggressive marketing and brand awareness battles to secure the affection of customers spoilt for choice.

However, this ongoing picture of healthy double-digit expansion masks the concerns and worries that are clearly going to be felt among some parties in the near future, if they haven't already. Projections for future PC growth are undeniably positive, but if you scratch beneath the surface then it is clear that GCC-based PC producers and resellers have some bold decisions to make.

Sure, shipments of PCs in the Gulf are forecast to climb by an average of 16% for the next five years at least, but the simple truth of the matter is that such growth falls short of the steep rate enjoyed during the last few years. Admittedly, you have to allow for the fact that previous growth rates are primarily generated from a much smaller base, but that is of little comfort to those parties - particularly indigenous system builders - impacted by this pattern.

Indeed, one of the more intriguing aspects to emerge from the data published by IDC is that the three largest suppliers of PCs in the Gulf now account for around 65% of shipments. That's a remarkable portion of the market concentrated into the hands of HP, Acer and Dell, and if you factor in other so-called ‘A-brands', such as Lenovo and Toshiba, then hardware from international vendors now represents seven out of every 10 PC purchases these days.

Given the PC penetration rate in the region is still on the ascent, this trend has struck at a much earlier stage than other theatres, where local assembly has only begun to feel the heat once a degree of saturation has occurred. With international brands possessing unrivalled economies of scale, superior marketing budgets and multiple channels-to-market, dealers who build or resell whitebox PCs have to wake up to the fact that life is becoming a whole lot harder, even if top-line figures portray an overall market moving steadily upwards. I'm sure these changing dynamics will be viewed with interest by the regional channel teams of Intel, AMD, Western Digital and co who supposedly rely on local assembly for a significant chunk of business.

Clearly, as the market growth rate slows - even taking into account the propensity for renewal and replacement cycles - many system builders will be forced to decide whether they should abandon their integration capabilities in favour of reselling branded machines or focusing specifically on certain niches.

Make no mistake about it, there are a lot of very successful and powerful local PC producers in the GCC who continue to evolve and diversify their proposition. And there is no doubt that five years down the line - even 10 years down the line - there will be room for local assemblers and international PC vendors to co-exist. The difference is that the margin between success and failure is becoming thinner with each year that passes.

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