Components selling

The market for components continues to be highly competitive. But with margins in decline, how are resellers and system builders making profits in this cutthroat business?

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Components selling Anish Rahman, sales and marketing, MEIA, Foxconn
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By  Clayton Vallabhan Published  June 5, 2012

The market for components continues to be highly competitive. But with margins in decline, how are resellers and system builders making profits in this cutthroat business?

The market for components continues to be highly competitive, especially given the high level of commoditisation and trading that characterises this market. With partners in the components channel being urged to transition into solutions selling, where do the best opportunities lie for resellers and system builders that still want to make a profit in the components segment? Intel and AMD are pushing their Ultrabook and Ultrathin platform offerings respectively. But for resellers in the system builder and reseller channel finding the right mix of solutions to take to the market can be the difference between failure and success. How are resellers staying competitive with the rapid changes happening in the components and processor segment in the Middle East market?

Generally, building PCs is limited to a few companies in the channel, with home grown enthusiasts making up a sizeable proportion of this segment in the Middle East. While in general the system builder channel is quite broad, the majority of system building happens in markets like North Africa and Iran. As a result, these are some of the largest importers of components in the Middle East. Components growth in these two regions has soared, albeit at lesser levels than the ‘boom’ days. However, PC penetration is still low, which leaves an open market that can be tapped into, with little risk of saturation any time soon.

Ossama Eldeeb, Components sales manager, META at AMD, said the components and system builder channels are different from one country to the other in the region, and depending on how much total PC shipments are in that country. He said the financial dynamics such as disposable income indicates the trends for component channel players.

“Generally, I believe that in mature markets of the Middle East the components channel growth rate is flat. However the fact remains that the absolute number of component and desktop PCs represent the big bulk of the market today,” Eldeeb said.

Anish Rahman, director, Sales and Marketing, Middle East, India and Africa at Foxconn, said there is a huge potential for expansion in the components and system builder market for partners across the region. He attributes this to the expansion and modernisation of infrastructural developments that constantly require desktop PCs with the best components available.

He said: “The Middle East is a market of aggressively-priced multinational branded consumer notebooks. Whereas components are synonymous with desktop PCs, the ‘do-it-yourself’ (DIY) market remains big in Saudi Arabia, Iran, Egypt and other parts of North Africa.”

Rahman said the biggest potential for regional desktop integration lies with the vast expansion and modernisation of infrastructure in the education, telecommunications and government sectors.

Rahman said that political instability, currency fluctuations and natural disasters affected the components market in the Middle East, with the flooding in Taiwan that impacted the hard drive sector having the most impact overall in the past quarters.

According to Rahman, the Middle East is a growing region with huge potential for the components and system builder channel. “The market demand is increasing and in some regions PC penetration is even less than 20%. The global desktop market is expecting 2% year-on-year growth in 2012. And the number of players is shrinking, which enables the current focused players to grab a bigger piece of the cake,” he said.

Pearl Shieh, sales manager-MEA,ECS Elitegroup, said: “The current state of the motherboard market in the Middle East region, stands at 3.9 million units, which includes local brands and the DIY clone market, according to Gartner, 2011 figures.”
Shieh said ECS is confident that it can grab nearly 0.63 million of the Middle East motherboard market in 2012, which translates to a 16% market share of motherboard penetration in the Middle East.

Margins have been declining in part due to the commoditisation of components and the stiff competition among the global components manufacturers. Pundits say that although the number of global players in the components market has dwindled over the years, competition has stiffened leaving only the strongest to survive.

Eldeeb said: “Differentiation is a key word here. Margins are declining due to increased competition and the fact that everyone is selling the same product so the channel needs to look for something that can differentiate them and allow them to make healthier margins.”

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