Hardware system builders under pressure in 2006: IDC

Stan Beer
Tuesday, 04 April 2006 08:51

Your IT - Home IT

Research group IDC predicts that 2006 will be a critical year for many hardware vendors in Australia, as they increasingly find themselves overseas players. The maturity and strength of the local economy has attracted a plethora of competitors that will leave many markets overcrowded in 2006, according to IDC.
IDC believes growth expectations of vendors will prove very difficult to attain and will accelerate price aggressiveness in both retail and commercial business. The short term effects are now being felt with price wars affecting many hardware markets.

According to IDC, the post holiday season and aggressive back to school specials were much more extreme than in past years. Additionally, the growth in new IT retail channels such as BigW, Kmart, and Target along with the failure of upmarket retailer MegaMart (purchased by Harvey Norman) points to the increased focus on lower price points in hardware markets.

Michael Sager, IDC research manager for hardware, said, "Strong competition in hardware markets from new vendors such as Acer, Asus, BenQ, Lenovo, LG and Samsung is one of many factors that is hampering the growth of the local system builder market. This restriction of the local system builder market in 2006 is part of the movement of vendors out of the hardware market. Thousands of system builders in Australia will be seeking further support amidst heavily discounted pricing from multi-national corporations, who are seeking to grow their own share this year."

Mercie Clement, IDC market analyst for PC hardware, said, "The monitor market is an excellent example of hyper competition. The drastic changes in pricing and competition has been difficult for the market. Additionally, multi-national corporation vendors such as Acer, Dell and HP are closing the technology gap with branded vendors such as BenQ, LG and Samsung. In the last 18-24 months, Auriga, Hitachi and Sharp have all exited the market and others are fundamentally changing their strategy."

"The overriding message for vendors and their channel partners is that 2006 will be a critical year for their survival heading into the second half  of the decade. Australia is an attractive market for overseas vendors with its solid economy, English speaking background, and mature IT spending. This formula has created many hardware markets that are crowded and commoditizing, but working with a market structure from years ago when there were less competitors and margins were fatter. Those most at risk will be vendors and channel partners whose models are based on competing solely on price and do not have revenue bases to compensate along with those who represent a small share of respective markets", said Mr. Sager.