Advertisment

Internet will be the biggest reason for PC growth in home segment: Atul Vijaykar

author-image
CIOL Bureau
New Update

What is your comment on Intel's performance in India during the last four

years?Atul Vijaykar, Director, South Asia




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.

Advertisment

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.

Advertisment

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.

Advertisment

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.

Advertisment

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.

Advertisment

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.

Advertisment

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.

Advertisment

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.

tech-news