Market value down despite big increase in volume
Leading market research firm GfK today releases its biannual UK Technology Barometer, revealing the major trends in the IT market. GfK reports that the IT market was worth £3.9 billion in the first half of 2006, a value decline of 3%, despite 14% volume growth.
The fastest growing categories were smartphones, webcams, communication devices and storage products. Within this growth, GfK report that major trends of the IT market for the first half of 2006 are convergence, the growth of wireless, the continued fall of prices and an increased focus in retail in areas previously dominated by enterprise.
The main drivers of the growth were:
* PCs worth
£1,443m
* Printing devices, including Multifunctional devices worth £303m
* Monitors worth £343m
* Consumables worth £813m
* HDD and NAS worth £130m
* Communication devices worth £122m and software worth £239m
* Printing devices, including Multifunctional devices worth £303m
* Monitors worth £343m
* Consumables worth £813m
* HDD and NAS worth £130m
* Communication devices worth £122m and software worth £239m
Commenting on the Technology Barometer Jean Littolff, Business Group Director, GfK, said: “Price barriers falling has been the most significant trend in the first half of 2006. The major obstacle preventing the average consumer from enjoying the sexy technology long enjoyed by business users is now gone. However, our barometer clearly shows that an increasing number of IT sectors becoming commoditised, competing other than on price is losing ground. Both retailers and manufacturers must re-evaluate this, if the value and profit of the IT market as a whole is not to be significantly lost.”
Convergence
In 2006, both consumers and enterprise are increasingly turning towards devices that provide multiple solutions, rather than offering only one functionality. GfK IT Business Group Director Jean Littolff reports: “Not only are we looking at convergence within IT sectors, but also a blurring of lines between IT, consumer electronics, telecoms and photo areas. This long-standing trend is being realised in the marketplace in a substantial fashion in 2006.”
*
Multifunctional devices (MFDs) - GfK reports 17% volume growth of MFDs
in H1 06 compared to H1 05, driven substantially by photo printing
MFDs. Sales of MFDs are now outstripping not only scanners at
a ratio of more than six to one, but when looking at consumer printing,
stand-alone machines also. The remaining robust area of
stand-alone printing is the highly seasonal small photo printers, a
demonstration of the interdependence between the IT and photo sectors
* Smartphones - Sales of smartphones have grown by 17.9% from H1 05 to H1 06, whilst single-function PDAs have suffered heavily, with 38.3% decline in the same period. As telecoms converge with photo as multiple-megapixel camera phones are unleashed on the market, the development of smartphones could point the way towards a new generation of superphones
* Smartphones - Sales of smartphones have grown by 17.9% from H1 05 to H1 06, whilst single-function PDAs have suffered heavily, with 38.3% decline in the same period. As telecoms converge with photo as multiple-megapixel camera phones are unleashed on the market, the development of smartphones could point the way towards a new generation of superphones
Wireless
Sales of devices allowing wireless usage, either continuously or at a wifi oasis, have exploded during the first half of 2006. GfK’s Littolff says: “Although mobile data usage, such as 3G datacards, remains the preserve of enterprise use, wireless networks are increasingly likely to be found in a domestic setting. A wireless home network is no longer a novelty of the early adopter, but rather has become a typical feature of a connected household.”
* Sales of 3G cards have
been staggering, growing by 475% from H1 05 to H1 06. This
has, however, been almost entirely through enterprise, as business
channels, including telecom specialists, currently account for 99% of
all 3G datacard sales
* Wireless routers and wireless network interface cards (NICs), on the other hand, the building blocks of a wireless network, are being sold increasingly through retail channels, to spectacular effect: volume growth rates are at 77% and 58% for wireless routers and wireless NICs, respectively. Less than 13% of either routers or NICs are now wired, compared to 22% just a year ago
* Computers likewise have developed, with 85% of laptops and 4% of desktops now wifi enabled, compared to 61% and 1% in H1 05
* Wireless routers and wireless network interface cards (NICs), on the other hand, the building blocks of a wireless network, are being sold increasingly through retail channels, to spectacular effect: volume growth rates are at 77% and 58% for wireless routers and wireless NICs, respectively. Less than 13% of either routers or NICs are now wired, compared to 22% just a year ago
* Computers likewise have developed, with 85% of laptops and 4% of desktops now wifi enabled, compared to 61% and 1% in H1 05
Falling prices
All of the growth enjoyed by the IT sector has come at a cost. According to GfK, volume growth has outstripped value growth dramatically, with the price of IT products down by 15%, as like-for-like prices fall quicker than ever. According to Littolff: “With an increasing number of IT sectors becoming commoditised, competing other than on price is losing ground. Both retailers and manufacturers must re-evaluate this, if the value and profit of the IT market as a whole is not to be significantly lost.” Part of the drive towards lower prices has not simply been reducing the cost of a product, but through bundled deals. With a package of both a wireless router and a wireless NIC selling for substantially less than a router alone sold for a year ago, the temptation to consumers is simply overwhelming. GfK reveals that in some sectors bundled sales account for as much as 45% of sales. The strongest growth areas of IT have grown, in no small part, by slashing their prices:
* Notebooks have dropped
average price from £808 to £686 for the average
laptop from H1 05 to H1 06, which is a major contributing factor for
notebook sales outstripping those of desktops in H1 06, when the
reverse was true a year ago
* LCD monitors, an area that is growing with reasonably robust prices, have done so through a shift towards more expensive features. In H1 05 a 17 inch monitor sold for an average of £184, while in H1 06 a 19 inch monitor averaged at £201
* LCD monitors, an area that is growing with reasonably robust prices, have done so through a shift towards more expensive features. In H1 05 a 17 inch monitor sold for an average of £184, while in H1 06 a 19 inch monitor averaged at £201
Several IT sectors in decline have had no relief through dramatic price reduction:
* A4 Inkjet Printer -
sales are down by 17% despite a £10, or 14% drop in price
* CRT - monitor sales are down by 71.4% despite a £16 drop in price
* Desktop PC - sales are down by 20% in spite of a £45 drop in price
* CRT - monitor sales are down by 71.4% despite a £16 drop in price
* Desktop PC - sales are down by 20% in spite of a £45 drop in price
Consumer creep
GfK reports that products that a year ago sold mainly in B2B to enterprise clients are now in the range of consumers, and that this trend looks set to continue through the remainder of 2006. “With price barriers falling, the major obstacle preventing the average consumer from enjoying the sexy technology long enjoyed by business users is gone, and little seems to impede the anti-Luddite sentiment of the British spending public,” reports Littolff.
* PCs - The switch within
PCs from a majority share for desktops in H1 05 to a majority share for
laptops in H1 06 is a key case in point. Not only has the
average selling price of a laptop dropped by £808
to £686 in H1 06, but the difference in price
between a desktop and a laptop has shrunk from £308in H1 05
to £231in H1 06. This has led to an increase in the share of
laptops being sold in retail channels from 42% in H1 05 to 59% in H1 06
* Hard Drives - Due to the increase in digital media content, coupled with shrinking price difference between internal and external devices, external hard disk drives (HDDs) have seen significant growth in the past year. Not only has the share of external HDD risen to 38% of the total market, but in absolute terms the external HDD market has grown by a factor of 2.4 with the majority of that growth driven by retail channels
* Wireless - Likewise, with the growth of wireless home networks, not only has the wireless featuring grown, but the purchase by consumers in retail channels has also grown dramatically. 75% of all wireless routers are now purchased in retail channels, compared to 62% in H1 05. 78% of wireless NICs are purchased in retail channels, up from 65% a year ago. With value growth rates for these products still in the range of 25% to 51%, the potential windfall for retail channels by these products in the remainder of 2006 is substantial
* Hard Drives - Due to the increase in digital media content, coupled with shrinking price difference between internal and external devices, external hard disk drives (HDDs) have seen significant growth in the past year. Not only has the share of external HDD risen to 38% of the total market, but in absolute terms the external HDD market has grown by a factor of 2.4 with the majority of that growth driven by retail channels
* Wireless - Likewise, with the growth of wireless home networks, not only has the wireless featuring grown, but the purchase by consumers in retail channels has also grown dramatically. 75% of all wireless routers are now purchased in retail channels, compared to 62% in H1 05. 78% of wireless NICs are purchased in retail channels, up from 65% a year ago. With value growth rates for these products still in the range of 25% to 51%, the potential windfall for retail channels by these products in the remainder of 2006 is substantial
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HEXUS.community - discussion thread about this release and related news story
HEXUS.lifestyle - UK Technology Barometer news story
GfK UK - home page
