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India consumer A/V market to hit $6.6B by 2011

Posted: 04 Jul 2007 ?? ?Print Version ?Bookmark and Share

Keywords:consumer A/V market? consumer electronics? India electronics production?

The consumer electronics (CE) market is one of the largest segments in India's electronics industry. Valued at $3.89 billion in 2006 and catering to more than 1 billion consumers, this sector is poised for strong growth in the years to come.

iSuppli Corp. predicts the country's audio/video CE industry will grow to $6.59 billion by 2011, rising at a CAGR of 10 percent from $4.5 billion in 2007. Factors that will drive this growth include growing consumer confidence due to rising disposable incomes; easy financing schemes; increased local manufacturing; expanding distribution networks; and sporting events such as the Cricket World Cup.

TV-driven market
According to iSuppli's recent "Consumer Electronics Industry in India" report, TV continues to be the mainstay of the CE industry in the country, with the transition slowly occurring to newer technologies such as LCD and PDP.

Most players in the CE industry have introduced products in the flat panel display (FPD) segment, and for some companiesespecially the Korean chaebolsFPD remains a focus area. But the Indian market continues to exhibit contradictions that may be unique to this market. For instance, as part of an electoral campaign in one state, 7.5 million units of $75 14-inch CRT TV sets were distributed free to poor families over a three-year period. Meanwhile, $3,000 FPD sets are also available in the country. And while black-and-white TVs are obsolete elsewhere in the world, they still sell in large numbers in the country.

Local tastes
Another factor driving India' CE market is increased product customization to suit domestic demand. Companies are focusing on customized products to suit Indian tastes, thereby creating a niche for themselves.

Several companies also conduct market research to understand the psyche of an Indian consumer. Inputs from this research determine product attributes and pricing, and accordingly achieve better acceptance among consumers.

In addition, to tap semi-urban and rural demand, companies are expanding their distribution networks in these areas. The move has positively impacted sales of companies opting for rural expansion. However, rural consumers have not been as brand-conscious as their urban counterparts. Due to lower prices of unbranded products, rural consumers have been inclined to buy these products, although these are often of poor quality. As brand awareness increases among rural consumers, their preferences shift to branded products. This is shown by increasing sales reported by established brand companies in rural areas.

Manufacturing expansion
iSuppli also expects domestic manufacturing to be a key growth driver. Although electronics production has remained a miniscule portion of overall Indian manufacturing for a long time, the trend is gradually changing.

The India government has been focusing on developing the manufacturing sector by upgrading infrastructure, rationalizing duties and creating export-promotion zones. Domestic consumption is reaching a significant enough size to trigger manufacturing in the electronics sector. India is also assuming a significant place in the global plans of several major electronics manufacturers, thereby positioning it strategically as an export base.

iSuppli, however, believes there are still challenges facing India's CE industry as it tries to realize its full potential. These include declining margins for many players, inverted duty structure, expansion of distribution reach, infrastructure bottlenecks, low awareness of new technologies, and low purchasing power among the rural masses.

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