What is your comment on Intel's performance in India during the last four
years?
In India, we have had an active presence for the last four years. Here our role
is not just becoming the leading supplier of building blocks. We also play a
very proactive role in accelerating the deployment of information technology in
all segments. Four years back, evangelising the benefits of multimedia computers
in home and education was a relatively new concept.
We are now playing a proactive role in evangelising the benefits of Internet.
We have also done a programme in developing channels in the country. The GID
programme is now now very well recognised. We had taken the completely
unorganised sector, identified better players within the segment, trained them,
provided marketing support, product roadmaps. In turn, they raised the overall
quality of the products available in the market. It subsequently reduced the
amount of grey market in the country. And, it increased the competitveness of
the overall market, consumers got better value.
We have done a lot of work with the local OEMs. Wipro and HCL, Zenith. We
believe that eventually, the market will have three segments- the MNCs, the
local OEMs and then the smaller system integrators, where we have our GIDs. We
have been working on a broad spectrum of programmes, and if we look back in out
four years, we have done tremendous progress.
You pointed out that Intel's focus will increase in networking and other
products that are related to the Internet economy. Does that your revenue
will increase from these segement, as compared to that of the microprocessor?
Yes. Currently, our 75 per cent of our revenues comes from microrprocessor.
Over time, the ratio of other business will grow, though in absolute terms, the
microprocessor business will continue to grow. The growth in other business will
be over and beyond the growth in microprocessor business.
Are you satisfied with Intel's performance in India over the last four
years?
One of the things I have learnt from Barrett (Intel chief executive officer
Craig Barrett) is that we can never be satisfied. We made a lot of progress. On
the other a lot more has to be done. The market has grown rapidly. But, in terms
of the potential and deployment of IT in the country, it is at a very early
stage. Probably, we grew 10 times in the last four years, and there is a
potential to further grow at the same pace in the next four years.
What are the shortcomings that the company has faced in the last four
years?
A real question is what would have made things move faster. Some of the
things that I am about to tell you are more environmental. I think the tariffs
are still too high. If they were brought down faster, we would have grown
faster. If we had a more stable government, we would have had much more progress
from the telecom standpoint. We are still debating the roles of DoT and TRAI. We
should have resolved that a couple of years ago and got on with building a
robust telecom, and therefore, Internet infrastructure. To me, the telecom
infrastructure, the regulatory infrastructure, as far as Cyber Laws are
concerned, and the tariff infrastructure are the three areas that have to be
addressed to ensure an exponential growth.
Intel has been instrumental in creating a new market segment in the home
sector. Before the entry of Intel, this was almost non-existing. How much do you
feel Intel has been successful in penetrating the Home segment?
We are pleased with the role we have played. We have played the role of a
catalyst in accelerating the growth in home segment. The home market is growing
very rapidly. It seems to be doubling every year. The current estimate is that
the home market probably accounts for 25 per cent of the overall computer
market.
What is the potential for this segment in the future?
The Internet revolution began in India only a year ago with the entry of
private Internet Service Providers (ISPs). As that continues, as the telecom
infrastructure improves, there will be more Internet users. That will be the
single biggest reason why the home computer market will grow.
This particular segment is considered to be price sensitive. Do you think
there is any expectation of price reduction in computers?
My argument is that it is not that the customers are price sensitive. The
customers in India are value sensitive. Therefore, we need to add value. What we
have found is that there is a market segment in India which wants an entry level
computer. That is why we had introduced Celeron microprocessor about a year and
a half ago. It has established successfully. The Pentium III microprocessor,
which was introduced six months ago, had a phenomenal reception. If we look into
the market trend in October, which was also driven by festival shopping, a
surprising fact that came to light is that of the 90 per cent Intel market
share, Pentium III processor accounted for almost 60 per cent, while Celeron had
30 per cent market. What does this mean? This proves that the by and large the
consumers have recognised the value being given by Pentium III processors.
But, the fact remains that in order to make a faster penetration of PC in
the country, volumes matter. And, the price does take a precedence there.
If you look back 2-3 years ago, a multimedia machine would cost you about Rs
100,000. Now a state-of-the-art Pentium III machine is available at Rs 50,000.
Part of that is because of increased competition in the market and part due to
the reduction in tariffs. Now, if the government decides to bring down the
tariff one more notch, you can get another 20 per cent reduction in pricing. So,
certainly that helps in the pricing model.
Intel has created a new segment called Genuine Intel Dealers (GIDs) out of
the so-called grey market. What strategy do you have for the GID segment?
As you said, the GIDs programme has helped decrease prices and increase
quality, thereby increasing competitiveness in the market, giving more choice
and value to the consumers. Going forward, one of the things we are doing as a
subset to the GID programme is developing what we call as an authorised solution
provider programme. The top 10 per cent of the GIDs, we are providing training
to not only sell basic boxes but implement solutions. They will capable of
implementing software solutions, networking, servers for a small ISPs. That is
the next major channels progamme.
Do you have plans to increase the number of GIDs?
We have about 1,000 GIDs which is not expected to increase dramatically.
What we are doing is going much deeper into the country. Currently, the GIDs are
available in top 25 cities of the country. Our goal in next year is to be
present in 50 cities in the country.
How do you see the future of grey market?
Grey market refers to the smuggled goods. We would estimate that roughly 20
per cent of the processors that come into the country comes through grey
channels, due to the tariff coming down and the GID programme. I would think
that if the tariff are brought down further, we could bring the grey channel
share to below 10 per cent.
A completely separate issue is that of the assemblers. It has been seen in
the international markets that roughly a third of the market is of the
assemblers, with the OEMs and MNC manufacturers taking a third each. Over time,
the distribution trend in India will also move in that direction. I see no
reason why India would be different.
What are the factors that hinder an even better growth of the IT industry
in the country despite the vast opportunity?
Telecom infrastructure. Tariffs.
These are the external factors. But, if we look at the market itself, what
elements prevent a faster growth?
Beyond the government issues, the areas that help grow include having lot of
competition. Some of them are happening with more and more MNCs jumping in.
There are lots of GIDs. Competition is fairly healthy now. Secondly, lot of us
in the industry had focussed on the urban areas. If we put up channels and
educate about the benefits computers in the rural areas, we will see a surge in
the demand for computers.
Intel, for the last few years, has been putting up laboratories in several
educational institutes. Have you conducted any reviews of these labs?
Actually, as it turns out very recently, Intel's worldwide director of
education was in India and we carried out an extensive review of our programme.
There are two aspects of Intel's educational programme. One is directed towards
the universities. The second is for the schools.
As far as the universities are concerned, we are in general satisfied with
the performance. By and large these programmes have been successful and we will
continue with the same.
What is the feedback you have got from these labs? Are you satisfied with
the performance?
In general, yes. What we do is to ensure that the students get access to the
latest technology. We also try to drive the research projects that are of future
interest, which are picking up. There are half a dozen research projects going
on.
The other area, which is probably growing faster, is that of kids education
programme, where we strongly believe that deployment of computers in education
is very important. Because, that will ensure that students who graduate will be
better prepared to cope with the requirements of the information age. Here, what
we are explicitly pushing is using computers as a tool for education. Computers
can make both learning and teaching process more effective. We have launched an
extensive teacher's training programme. We have got three pilot schools signed
in. We have trained about 3,000 teachers this year. Next year the intention is
to teach 10,000 teachers.
Intel has been very active as a venture capitalist in India. What is your
strategy and what is the kind of investment that Intel plans to make as VC in
the future?
We are one of the larger VCs in the technology area. We have been doing this
programme on the global basis for about six years. In India, we started this a
year ago. On a worldwide basis, our current portfolio is over 300 companies and
almost $5billion of investments.
As far as India is concerned, we have invested in about six companies during
the last one year. The pace will pick up as we move forward. We do not have a
budget for India. It is a question of identifying the right strategic
opportunities. Budget is not a constraint per se.
Why does Intel look at such investments?
The reason do that is to help a given company has a unique technology or a
unique market leader position that can then help drive or accelrate the broader
Internet economy, which, in turn, helps our strategic objectives. And, most of
these VC investments are profitable financially too.
What are the challenges Intel will face in India in the future?
Worldwide, a new growing class of information appliances is emerging. We are
a leader in supplying building blocks to desktop PCs, which are today the
predominant access devices. Over time, a new category of information appliances
that will emerge. We are committed to being a leading player in supplying
building blocks to these appliances. That is our goal.
In India, our goal is to tap the much bigger potential that lies in the
networking market. On the global level, Internet is the single biggest agent of
change right now. The impact is only going to grow. We now see ourselves as the
leading supplier of building blocks to the Internet economy. So, it is a much
broader goal than just being the largest supplier of microprocessors. The
elements are microprocessors, chipsets, motherboards, lot more focus on
networking and building blocks in servers and finally service.