[61]
CHAPTER-FOUR
AN OVERVIEW OF INDIAN CONSUMER DURABLE
INDUSTRY
The Consumer Durable industry consists of durable goods and appliances for
domestic use such as televisions, refrigerators, air conditioners and washing
machines. Instruments such as kitchen appliances (microwave ovens, grinders etc.)
are also included in this category. This industry includes all those goods which are
durable i.e. products whose life expectancy is at least 3 years. These products are
hard goods that cannot be used up at once. According to recent industry reports, the
steadily growing market for consumer durables is estimated at Rs. 300 billion.
Segmentation of Consumer Durables Industry: The consumer durables
industry can be broadly classified into 2 segments: Consumer Electronics and
Consumer Appliances. Consumer Appliances can be further categorized into Brown
Goods and White Goods. The key Product lines under each segment are as follows:
Flow Chart : 4.1: The Key Product Lines Under Each Segment
Consumer Durables
Consumer Appliances
Consumer Appliances
Others like Watches
Jwellery etc.
Brown Goods Kitchen Appliances
like Microwave Owens, Mixtures etc.
White Goods like Air conditioners,
Refrigerators etc.
Mobile Phones Televisions,
MP3 Players, DVD etc.
[62]
India‟s consumer market is riding the crest of the country‟s economic growth.
Driven by a young population with access to disposable incomes and easy finance
options, the consumer market has been throwing up staggering figures. The Indian
durable market in 2009-10, has grown by 8.6% over the previous year.
India officially classifies its population in five groups, based on annual
household income (based on year 1995-96 indices). The groups are: Lower Income;
three subgroups of Middle Income; and Higher Income. Household income in the top
20 boom cities in India is projected to grow at 10 percent annually over the next
eighth years, which is likely to increase consumer spending on durables. With the
emergence of concepts such as quick and easy loan, zero equated monthly
installment (EMI) charges, loan through credit card, loan over phone, it has become
easy for Indian consumers to afford more expensive consumer goods.
Table # 4.1: Segment-Wise Percentage Share Of Indian Durables Household
Industry
Segments Percentage
Air Conditioners 6%
Audio/Video Equipments 12%
Components 7%
Computer And Peripherals 19%
Electric Fans 1%
Industrial Electrical And Electronics 5%
Mobile Phones 20%
Other Domestic Appliances 4%
Others 3%
Refrigerators 2%
Sewing Machines 1%
Telecommunication 18%
Washing Machines 1%
Watches And Clocks 1%
As mentioned in Table 4.1 share of mobile phones segments is highest (20%) and the
lowest share of watches and clocks.
[63]
6
12
7
19
1
5
20
4
3
2
1
18
1 1
0
5
10
15
20
25
Air
Co
nd
itio
ners
Au
dio
/Vid
eo
Eq
uip
men
ts
Co
mp
on
en
ts
Co
mp
ute
r A
nd
Peri
ph
era
ls
Ele
ctr
ic F
an
s
Ind
ustr
ial
Ele
ctr
ical
An
d E
lectr
on
ics
Mo
bil
e P
ho
nes
Oth
er
Do
mesti
c
Ap
pli
an
ces
Oth
ers
Refr
igera
tors
Sew
ing
Mach
ines
Tele
co
mm
un
icati
on
Wash
ing
Mach
ines
Watc
hes A
nd
Clo
cks
Perc
en
tag
e
Figure # 4.1: Segment-Wise Percentage Share Of Indian Durables Household
Industry
CONSUMER CLASSES
Even discounting the purchase power parity factor, income classifications do
not serve as an effective indicator of ownership and consumption trends in the
economy. Accordingly, the National Council for Applied Economic Research
(NCAER), India‟s premier economic research institution, has released an alternative
classification system based on consumption indicators, which is more relevant for
ascertaining consumption patterns of various classes of goods.
There are five classes of consumer households, ranging from the destitute to
the highly affluent, which differ considerably in their consumption behaviour and
ownership patterns across various categories of goods. These classes exist in urban
as well as rural households both, and consumption trends may differ significantly
between similar income households in urban and rural areas.
[64]
The rapid economic growth is increasing and enhancing employment and
business opportunities and in turn increasing disposable income. Middle class,
defined as household with disposable incomes from Rs. 2 00 000 to 10,00,000 a year
comprises about 50 million people, roughly 5% of the population at present. By 2025
the size of middle class will increase to about 583 million people, or 41% of the
population. Extreme rural poverty has declined from 94% in 1985 to 61% in 2005
and is projected to drop to 26% by 2025.
Affluent class, defined as earning above Rs. 10,00,000 a year will increase
from 0.2% of the population at present to 2% of the population by 2025. Affluent
class‟s share of national private consumption will increase from 7% at present to
20% in 2025.
Flowchart 4.2: Porter’s Five Forces Model and Consumer Durable Industry
Buyer Power: The buyer‟s power is quite high as they have multiple brands across
different price points, hence giving them a wide variety cross both durable and non-
durable products to choose from.
Supplier Power: the suppliers‟ power is low because of the availability of the large
numbers of suppliers in the domestic market and cheap import options for
components from other suppliers and countries.
Availability of Substitutes:
Low to Medium
Supplier Power: Low
Buyer Power: High
Threat of New Entrants: Medium
Competitive Rivalry : High
[65]
Competitive Rivalry: Presence of a large number of players in the domestic
consumer durable market in each segment leads to high rivalry.
Availability of Substitutes: The threat of availability of substitutes in the Indian
Consumer Durables market is medium. Where the white goods segment (air
conditioners, refrigerators) face low threat of substitutes, the brown goods segment
and consumer electronics segment do face a threat of substitutes. As new technology
enters the market at an increasing pace, the manufacturers need to upgrade their
products accordingly. For e.g. the VCR got replaced by DVD player. On a different
note, televisions face the threat of multiplexes. Also, brown goods like pressure
cookers face the threat of microwave ovens etc.
Threat of new entrant: For any new company, to establish and build a new brand,
cope with the technological advancement and create a wide-distribution network is
difficult. One the other hand, cheaper brands from Asian countries like china and the
entry of other global brands is a concern.
OVERVIEW OF INDIA’S CONSUMER DURABLE MARKET
The Indian consumer durables segment can be segregated into 2 consumer
electronics groups:
Table 4.2(a): Segment-Wise Consumer Durables
White goods Consumer electronics
Air conditioners Televisions
Refrigerator Audio and video systems
Washing machines Electronics accessories
Sewing machines PCs
Electric fans Mobile phones
Watches and clocks Digital cameras
Cleaning equipments DVDs
Microwave ovens Camcorders
Other domestic appliances
[66]
Most of the segments in this sector are characterized by intense competition,
emergence of new companies (especially MNCs) and introduction of state-of-the-art
models, price discounts and exchange schemes. MNCs continue to dominate the
Indian consumer durable segment, which is apparent from the fact that these
companies command more than 65 percent market share in the colour television
(CTV) segment.
In consonance with the global trend, over the years, demand for consumer
durables has increased with rising income levels, double-income families,
changing lifestyles, availability of credit, increasing consumer awareness and
introduction of new models, products like air conditioners are no longer perceived
as luxury products.
Table 4.2(b): Net Profit Margin (NPM) and Compound Annual Growth Rates
Company
Name What is it into?
Net Sales (Rs. Cr.) Net Profit (Rs. Cr.) 6-yr Avg
NPM 2005 2010 CAGR 2005 2010 CAGR
Titan Watches & Jewelry 1113 4776 34% 54 253 36% 6%
Blue star White Goods 917 2525 22% 12 203 42% 5%
Whirlpool* White Goods 1476 2544 20% 13 150 126% 4%
Videocon* Consumer Electronics 7219 9163 8% 820 408 (21)% 8%
MIRC Electronics Consumer Electronics 1088 1502 7% 28 18 (8)% 2%
Bajaj electrical Brown goods 642 2229 28% 14 118 53% 4%
TTK Prestige Brown Goods 181 508 23% 3 52 74% 5%
* 6 year assessable data is not available, hence a 3-year CAGR is calculated
Titan, the market leader in watches and branded jewelry, has clocked the
highest Net Sales CAGR of 34% over the last 6 years. It has the competitive
advantage of a strong brand, which has helped it become the market leader. Titan has
successfully captured the watch and jewelry market. It has also managed to maintain
& NPM of 6%.
[67]
FACTORS AFFECTING DURABLE CONSUMER GOODS INDUSTRY
IN INDIA
The following factors are affecting Indian durable consumer goods industry
in India:
1) Rise in Disposable Income
The demand for consumer durables has been rising with the increase in
disposable income coupled with more and more consumers falling under the double
income families. Also, growing Indian middle-class plays a major role in increasing
the demand. This, along with a fall in the prices of durable goods mainly due to the
advancement of technology, easy import of components has led to an increase in the
consumption expenditure on durable goods.
2) Easy-Availability of Consumer Financing
Apart from steady growth in income of consumers, consumer financing has
become a major driver in the consumer durables industry. In the case of more
expensive consumer goods, such as refrigerators, washing machines, color
televisions and personal computers, retailers are marketing their goods more
aggressively by providing easy financing options to the consumers by partnering
with banks. The easy-availability of consumer financing is beneficial mainly for the
lower and middle income group, especially when the cost of capital and flexibility of
the scheme is in their favour.
3) Existing Potential in Rural Markets
Growth is coming in a big way from the smaller towns and rural markets and
is expected to be the next growth opportunity for the consumer durables market. In
the last year 30-35% of the total sale of consumer durable was from the rural
market. This is expected to grow by 40-45% in the near future. The rural durables
market has been growing by 30% annually, mainly due to the growing affordability
of products as well as the general buoyancy in the economy. Products like mobile
[68]
phones, televisions and music systems are the ones which have witnessed high
growth among the rural market. To further cater to this market are manufacturers
have started using local languages while offering products to the rural crowd.
Some initiatives taken by Top Consumer Durables Companies to tap
rural markets:
Videocon recently launched a mobile with basic characteristics and a long-
battery life. This was mainly done to tap the rural markets where electricity is
an issue.
Bajaj Electrical is in the process of finalizing a special team for each of its
product, specifically to tap the rural market.
4) Increasing Share of Organised Retail
Since the last couple of years there has been an increasing shift towards
organized retail (brands) from the unorganized (unbranded) products. With rising
income and purchasing power, and the younger generation preferring branded
products, the share of organized shopping is increasing. Shopping in malls is
considered more of an experience these days. According to estimates, organized
retail which constituted 4% of the total buying till 2010 is expected to grow to over
10% by 2013.
5) Entertainment and Media to Boost Growth
According to a recent report by KPMG, the Indian Media & Entertainment
(M&E) industry registered a growth of 11% over 2009 and touched Rs. 652 billion
and is expected to achieve a 13% growth in 2011. Overall the industry is expected to
register a CAGR of 14% to touch Rs. 1275 billion by 2015. Out of this, the television
industry is expected to achieve a 16% CAGR and is expected to account for almost
half of the Indian M&E industry revenues. The television segment of the consumer
durables industry is seeing high growth coming form high-end flat panel TV, LCD
[69]
TVs and Plasma TVs. All of these were expected to register a 100%+growth in the last
year. Hence, the growing importance of entertainment and media on our lifestyles is
expected to boost the demand for products like Plasma TVs, LCDs DVD players.
6) Consumer Preferences
Consumers purchase goods by looking at the brand, pricing, and discount
schemes available at the time of buying. So, for the consumer durables industry
following are important growth drivers:
Availability of new and innovative products – A company that upgrades its
technology and comes out with new and innovative products catches the
attention of consumers. Especially in the consumer electronics segment,
manufacturers have to make sure they are updated with the latest technology
that has entered the market. For the higher income groups the brand,
technology and the product features play an important role.
Pricing of the products – For the lower and middle income groups, price is
the deciding factor especially in a price-sensitive industry like consumer
durables.
Festive discount schemes – The sales of many consumer durables goods are
driven by festive discounts. For example people consider it auspicious to
purchase goods like LCDs, Televisions, Washing machines, etc during
festivals like Diwali, Gudi Padwa, etc.
1) Cheap imports form Asian Countries: The cheap imports of consumer durable
products from countries like China, Singapore etc are a major concern.
2) Increasing competition: Presence of a large number of players in each segment
leads to high rivalry. Also, the unorganized market is yet very strong in the case of
many consumer durable goods. The pie of the unorganized sector is relatively large
in most of the segments, hence increasing the competition.
[70]
3) Fluctuating raw material prices: Rising input costs of raw materials viz. copper,
steel, aluminum and plastic – the major raw materials required for this industry will
severely put pressures on margins.
4) Unfavorable duty Structure: Top players in the consumer durables industry
have been demanding a more favorable import duty on durable components imported
by them. Take the case of LCD‟s which is the fastest growing segment is right now –
the industry has been demanding a reduction in the import duty. Contrary to this is
the case of set top boxes, where 80% of the set top boxes are imported. The industry
has been recommending that the custom duty on STB should be increased by 5% to
10% in order to boost domestic manufacturing.
5) Continuously changing technology; a challenge: The consumer durable sector
faces the challenge of a continuous change in technology and the inability to cope
with it. High-end consumers prefer changing their goods along with the up-gradation
of technology and manufacturers have to make sure they cater to this requirement.
The Indian market is fast moving towards high-end products and the
importance of media and entertainment is growing among the young market. The
consumer durables industry needs to constantly focus on innovation and needs to
come out with product variations across categories to meet the different expectations
of a varied class of customers.
With easy availability of finance, fall in prices due to increased competition,
growth of media, growth in consumer base of rural sector, the consumer durables
industry is growing at a fast pace. Given these factors, a goods growth is projected in
the future too.
With the Indian Economy expected to grow at 7-8%, the existing potential in
the durables market augurs well for the consumer durables industry. Hence, we can
say that the consumer durables sector is expected to grow with a good growth rate
and have a bright future.
[71]
GROWTH OF CONSUMER ELECTRONICS PRODUCTION IN INDIA
The biggest attraction for MNCs is the growing Indian middle class. This
market is characterized with low penetration levels. MNCs hold an edge over their
Indian counterparts in terms of superior technology combined with a steady flow of
capital, while domestic companies compete on the basis of their well-
acknowledged brands, an extensive distribution network and an insight in local
market conditions.
One of the critical factors those influences durable demand is the government
spending on infrastructure, especially the rural electrification programme. Given the
government's inclination to cut back spending, rural electrification programmes have
always lagged behind schedule. This has not favoured durable companies till now.
Any incremental spending in infrastructure and electrification programmes could
spur growth of the industry.
The digital revolution is shaking up the consumer durables industry. With the
advent of MP3 music files, personal video recorders, game machines, digital
cameras, appliances with embedded devices, and a host of other media and services,
it is no longer clear who controls which part of home entertainment. This has set off
a battle for dominance, and the shakeup is spanning the entire technology spectrum.
Microsoft Corporation is spending billions on entertainment initiatives such
as its Xbox video game console. Compaq and HP sell MP3 music players that plug
into home-stereo systems. Apple Computer is positioning its new iMac as a digital-
entertainment device. Sony is building Vaio computers that focus on integrating
multimedia applications.
Philips sells stereos that hook into a high-speed Internet connection to play
music from the Web. More startups are trying to carve out profitable niches in digital
music, video, and home networking. The industry is witnessing a number of strategic
alliances, to develop a range of capabilities - electronic hardware, software, and
entertainment content.
[72]
As more consumers grow comfortable with technology, companies need to
build simpler devices that offer more entertainment and convenience. These new
machines need to work together readily, and should be as easy to set up and use as a
telephone or a television. Consumerization of technology could be a major
phenomenon over the next 5 to 10 years. This could hasten industry consolidation, as
healthy companies gain market share by buying out weaker ones at attractive prices.
Apart from steady income gains, consumer financing has become a major
driver in the consumer durables industry. In the case of more expensive consumer
goods, such as refrigerators, washing machines, color televisions and personal
computers, retailers are joining forces with banks and finance companies to market
their goods more aggressively. Among department stores, other factors that will
support rising sales include a strong emphasis on retail technology, loyalty schemes,
private labels and the subletting of floor space in larger stores to smaller retailers
selling a variety of products and services, such as music and coffee.
Figure 4.2: Consumer Electronics – Products
Rising disposable income and declining prices of durables have resulted in
increased volumes. An increase in disposable income is aided by an increase in the
number of both double-income and nuclear families. Production in the consumer
Colour TV
(CTV)
CTV is the largest contributor in this segment and the market has been estimated
at 15.15 million units in 2009-2010.
Liquid crystal
display (LCD)
LCDs are perceived as high-end products.
The LCD market has been estimated at 0.8 million units, registering a growth of
over 130 percent during 2008-09 over the previous year.
Digital video
disc (DVD)
Indian DVD market was estimated at 6.2 million units in 2009.
Direct-to-
home
(DTH)
Due to the expansion of DTH and introduction of conditional access system (CAS)
in the metros, the set top box (STB) market is growing rapidly.
Multimedia
mobile phones
Multimedia mobile phones have been growing at a fast rate, from 800,000 units in
2008-09 to 1.8 million units in 2009-2010.
[73]
8867
9436
10029
10655
11204
11795
693
789
894
1026
1178
1352
4230
4626
5048
5505
5996
6542
121
121
125
127
128
129
0
2000
4000
6000
8000
10000
12000
14000
2005 2006 2007 2008 2009 2010
'000 u
nit
s
Television Sets Personal Computers Refrigerators Video Recorders
`
electronics industry has been estimated at US$ 6.7 billion in 2009-10. The segment
registered a growth of 18 percent in 2009-2010 from US$5.5 billion in the previous
year. The consumer electronics segment contributes about 27 percent to the total
hardware production in the country.
Air conditioners (including industrial and office conditioners) constituted 38
percent of the consumer appliances market, followed by refrigerators at 14 percent,
electric fans at 7.5 percent, washing appliances at 7 percent and sewing machines at
5 percent.
Table 4.3: Sales Trend In Consumer Electronic Market In India
S. No. Year Unit (‘000)
TV PC Refrigerator Video Recorder
1. 2005 8867 693 4230 121
2. 2006 9436 789 4626 121
3. 2007 10029 894 5048 125
4. 2008 10655 1026 5505 127
5. 2009 11204 1178 5996 128
6. 2010 11795 1352 6542 129
(Source:- Overview Report of Consumer Electronic Products 2011)
Figure # 4.3: Sales Trend In consumer Electronics Market in India
[74]
Consumer durables are expected to grow at 10-15 percent in 2007-08, driven
by the growth in CTV‟s and air conditioners. Value growth of durable is expected to
be higher than historical levels as price declines for most of the products are not
expected to be very significant. Though price declines will continue, it will cease to
be the primary demand driver. Instead the continuing strength of income
demographic will support volume growth.
Table # 4.4: Compound Annual Growth Rates (CAGR) Of Different Segment
Categories in India (2008)
S.
No. Product Name
2007-2008 Over 2005-2006
% Growth Driver
1. Air Conditioner 20-22* Decreasing Prices, changing lifestyle
2. Refrigerator 5-8 High Demand for the frost free segment together
with reduction in prices
3. Colour Televisions 5-8 Increasing disposable income and declining prices
4. Washing Machines 8-10* Reduction in prices of fully automatic machines
Source:- Computed *Significant at 5% level
Table # 4.5: Compound Annual Growth Rate (CAGR) Of Different Segment
Categories in India (2010)
S.No. Product Name 2008-2009 Over 2009-2010
% Growth Driver
1. Air Conditioner 30-40* Reduction in Prices
2. Refrigerator 24
Low penetration level in the country
and increase in demand from the
rural and semi urban areas
3. Colour Televisions 30-40 Reduction in Prices of LCD, LED
4. Washing Machines 30* New Models launched and reduction
in prices
Source:- Computed *Significant at 5% level
[75]
COMPETITION OVERVIEW
Samsung India
Samsung India commenced its operations in India in December 1995, today
enjoys a sales turnover of over US$ 1 billion in just a decade of operations in the
country. Samsung design centers are located in London, Los Angeles, San Francisco,
Tokyo, Shanghai and Rome. Samsung India has its headquartered in New Delhi and
has a network of 19 Branch Offices located all over the country.
The Samsung manufacturing complex housing manufacturing facilities for
Colour Televisions, Colour Monitors, Refrigerators, and Washing Machines is
located at Noida, near Delhi. Samsung „Made in India‟ products like Color
Televisions, Color Monitors, and Refrigerators are being exported to Middle East,
CIS, and SAARC countries from its Noida manufacturing complex. Samsung India
currently employs over 1600 employees, with around 18% of its employees working
in Research & Development.
Table 4.6: Market Share Of Major Players In Refrigerator Market
S.No. Players Turnover (Rs. Billion)
1. Godrej 12.05
2. Hair 1.85
3. LG 21.00
4. Whirlpool 15.11
5. Videocon 11.23
Source:- Consumer Electronics and Appliances Manufacturers Association (CEAMA)
[76]
12.05
1.85
21.00
15.11
11.23
0
5
10
15
20
25
Godrej Haier LG Whirlpool Videocon
Tu
rno
ver
2009-2
010 (
Rs B
illi
on
)
Figure # 4.6: Market Share Of Major Players In Refrigerator Market
Whirlpool of India
Whirlpool was established in 1911 as first commercial manufacturer of
motorized washers to the current market position of being world's number one
manufacturer and marketer of major home appliances. The parent company is
headquartered at Benton Harbor, Michigan, USA with a global presence in over 170
countries and manufacturing operation in 13 countries with 11 major brand names
such as Whirlpool, Kitchen Aid, Roper, Estate, Bauknecht, Laden, and Ignis. Today,
Whirlpool is the most recognized brand in home appliances in India and holds a
market share of over 25%. The company owns three state-of-the-art manufacturing
facilities at Faridabad, Pondicherry, and Pune.
In the year ending in March '06, the annual turnover of the company for its
Indian enterprise was Rs.13.75 billion. According to IMRB surveys Whirlpool
enjoys the status of the single largest refrigerator and second largest washing
machine brand in India.
[77]
123
318
620
17.2
340
1258 1215
2000
181
1060
13811533
2620
198.2
1400
0
500
1000
1500
2000
2500
3000
Videocon Whirlpool LG Haier Godrej
Frost-Free Direct-Cool Total
LG India
LG Electronics was established on October 1, 1958 (As a private Company)
and in 1959, LGE started manufacturing radios, operating 77 subsidiaries around the
world with over 72,000 employees worldwide it is one of the major giants in the
consumer durable domain worldwide. The company has as many as 27 R & D
centers and 5 design centers. Its global leading products include residential air
conditioners, DVD players, CDMA handsets, home theatre systems, and optical
storage systems.
Table # 4.7: Category-Wise Sales of Major Players
S.No. Players Frost Free Direct Cool Total
1. Videocon 123 1258 1381
2. Whirlpool 318 1215 1533
3. LG 620 2000 2620
4. Haier 17.20 181.00 198.20
5. Godrej 340 1060 1400
Figure # 4.7: Category Wise Sales Of Major Players
[78]
2634 33
27 26
15
14 17
16 16
17
1414
13 14
1514 13
16 16
76 5
7 6
20 15 18 21 22
0
10
20
30
40
50
60
70
80
90
100
2003-2004 2004-2005 2005-2006 2006-2007 2007-2008
Perc
en
tag
e
Others
Godrej
Whirlpool
Videocon
Samsung
LG
Table # 4.8: Market Share of Washing Machines in India
S.
No. Year
Market share
LG Samsung Videocon Whirlpool Godrej Others
1. 2003-04 26 15 17 15 7 20
2. 2004-05 34 14 14 14 6 15
3. 2005-06 33 17 14 13 5 18
4. 2006-07 27 16 13 16 7 21
5. 2007-08 26 16 14 16 6 22
(Sources : CRISIL)
Figure # 4.8: Market Share of Washing Machines In India
[79]
Godrej India
Godrej India was established in 1897, the Company was incorporated with
limited liability on March 3, 1932, under the Indian Companies Act, 1913. The
Company is one of the largest privately-held diversified industrial corporations in
India. The combined Sales during the Fiscal Year ended March 31, 2006, amounted
to about Rs. 58,000 million (US$ 1,270 million). The company has a network of 38
company-owned retail stores, more than 2,200 wholesale dealers, and more than
18,000 retail outlets. The company has representative office in Sharjah (UAE),
Nairobi (Kenya), Colombo (Sri Lanka), Riyadh (Saudi Arabia) and Guangzhou
(China_PRC).
Toshiba India
Toshiba India Private Limited (TIPL) is the wholly owned subsidiary of
Japanese Electronic giant Toshiba Corporation and was incorporated in India on
September 2001). Toshiba had a presence in India since 1985 and was represented in
India through their Liaison Office.
Sony India
Sony Corporation, Japan, established its India operations in November 1994.
In India, Sony has its distribution network comprising of over 7000 channel partners,
215 Sony World and Sony Exclusive outlets, and 21 direct branch locations. The
company also has presence across the country with 21 company owned and 172
authorized service centers.
[80]
210
230245 240
215
250
0
50
100
150
200
250
300
2000 2008 2010 2011 2012 2013
Ho
useh
old
(In
Mil
lio
n)
Table 4.9: Television Penetration Level (2013)
S. No. Year Penetration
(Household in Billion)
1. 2000 210
2. 2008 230
3. 2010 245
4. 2011 240
5. 2012 215
6. 2013 250
Figure # 4.9: Market Share of Television Penetration Level in India
[81]
Table # 4.10: Market Share of T.V. Sets in India (2007-08)
S. No. Year Market share
LG Videocon Samsung MIRC Others
1. 2003-04 26 15 17 15 20
2. 2004-05 34 14 14 14 15
3. 2005-06 33 17 14 13 18
4. 2006-07 27 16 13 16 21
5. 2007-08 26 16 14 16 22
(Note: Others = Sony, Haier, TCL, Philips, Hitachi, Sharp)
Figure # 4.10: Market Share of T.V. Sets in India (2007-08)
[82]
Sharp India Ltd
Sharp India ltd was incorporated in 1985 as Kalyani Telecommunications and
Electronics Pvt. Ltd., the company was converted into a public limited company in
the same year. The name was changed to Kalyani Sharp India in 1986. The company
was entered into a joint venture with Sharp Corporation, Japan - a leading
manufacturer of consumer electronic products to manufacture VCRs/VCPs/VTDMs.
The company manufactures consumer electronic goods such as TVs, VCRs, VCPs,
and audio products. The products were sold under the Optonica brand name. Sharp
has a production base in 26 countries with 33 plants, and its products are used in 133
countries. The company was accredited with the ISO-9001 certification in the month
of February, 2001.
Hitachi India
Hitachi India Ltd (HIL) was established in June 1998 and engaged in
marketing and sells a wide range of products ranging from Power and Industrial
Systems, Industrial Components & Equipment, Air Conditioning & Refrigeration
Equipment to International Procurement of software, materials, and components.
Some of HIL‟s product range includes Semiconductors and Display Components. It
also supports the sale of Plasma TVs, LCD TVs, LCD Projectors, Smart Boards, and
DVD Camcorders.
POLICY AND INITIATIVES
Foreign investment up to 100 per cent is possible in the Indian consumer
electronics industry to set up units exclusively for exports. It is now possible to import
duty-free all components and raw materials, manufacture products and export it.
EHTP (Electronic Hardware Technology Park) is an initiative to provide
benefits to companies that are replacing certain imports with local manufacturing.
EHTP benefits include export credits, no duties on imported components or capital
equipment, business tax incentives, and an expedited import-export process.
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The government, in an attempt to encourage manufacture of electronics in
India has changed the tariff structure significantly.
Customs duty on Information Technology Agreement (ITA-1) items (217
items) has been abolished from March 2005. All goods required in the manufacture
of ITA-1 items are exempt from customs duty.
Customs duty on specified raw materials / inputs used for manufacture of
electronic components or optical fibers / cables has been removed. Customs duty on
specified capital goods used for manufacture of electronic goods has been abolished.
Excise duty on computers has been removed. Microprocessors, hard disc drives,
floppy disc drives and CD ROM drives continue to be exempt from excise duty.
INTELLECTUAL PROPERTY RIGHTS
Protection of Intellectual property rights (IPR) is a prime requisite for
development of R&D and innovation in the consumer electronics sector. The
Government of India has developed a robust IP act to facilitate innovation, growth
and development. Several amendments to the Copyright Act, creation of a new
Trademark Act, a new Designs Act and amendments to the Patents Act show India‟s
continued effort to protect IPR.
The country has already made several changes in its IP acts over the years.
Several amendments to the Copyright Act, creation of a new Trademark Act, a new
Designs Act and amendments to the Patents Act show India‟s desire to change and
adapt. New acts have also been enacted to cover semiconductors and layout designs
which will be of considerable importance to the electronic industry.
In the current WTO regime, India is a party to the “Trade Related Aspects of
the Intellectual Properties (TRIPs) Agreement” and has accordingly, amended most
of its IPR Acts and Rules to conform to the said Agreement. The Indian Copyright
Act 1957 was amended in 1999; the patent Act 1970 was amended in 1999 & 2003
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and Trademarks and Merchandise Marks Act 1959 was overtaken by a new
Trademark Act 1999. The Industrial Design Act 1911 was effectively replaced by
The Design Act 2000, and the Layout Design of Semiconductor integrated Circuit
Act 2000 was enacted.
The agreement on TRIPs takes care of the intellectual property rights by
enforcing the patent rights, copy rights and related rights, and the protection of
industrial designs, trademarks, geographical indications, layout designs of integrated
circuits and undisclosed information. Accordingly, the member nations are asked to
modify their existing laws. Once these laws come into force, unauthorized use of the
patented innovations, trademarks, etc. becomes difficult. Enforcement of the TRIPs
agreement makes the production of any product possible either through internal
innovation or through formal transfer of technologies.
The consumer electronics and durables sector is expected to continue to
benefit from supportive policies and become globally competitive.
REGULATIONS
Free Trade Agreement
WTO regime which came in force in 2005, results in zero customs duty on
imports of all telecom equipment. 217 IT/electronic items were covered under the
Information Technology Agreement (ITA) of the WTO for complete customs tariff
elimination by 2005.
Out of these 217 items, several items were already at NIL customs duty. In
fact, IT/electronics was the first sector in India to face complete customs tariff
elimination. The ITA-1 would result in intensifying competition as more imported
products will be easily available at lower prices.
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Foreign Investment Policy: FDI
Foreign investment up to 100 per cent is allowed in Indian electronics
industry set up exclusively for exports. The units set up under these programmes are
bonded factories eligible to import, free of duty, their entire requirements of capital
goods, raw materials and components, spares and consumables, office equipment etc.
Deemed export benefits are available to suppliers of these goods from the Domestic
Tariff Area (DTA).
A part of the production from such units is permitted to be sold in the DTA
depending upon the level of the value addition achieved. The FDI approval for electrical
equipment (including computer software and electronics) from April 2000 to January
2010 was US$ 21.24 billion, which was 2.01 per cent of the total Foreign Direct
Investment (FDI) approved. During the same period the FDI inflow for electrical
equipment (including computer software and electronics) was US$ 96.30 billion.
Procedure for Approval
Once the investment in equity has been approved, the import of capital goods,
components and raw materials or the engagement of foreign technicians for short
duration does not require any additional approvals.
Approval of Ministry of Home Affairs is not needed for hiring foreign
nationals holding valid employment visa.
Approval for setting up units in Export Processing Zones (EPZs) is given by
the Board of Approvals in the Ministry of Commerce. Approval for setting up
export-oriented units (EOUs) outside the zones is given by the Ministry of Industry.
Approvals for setting up Electronic Hardware Technology Park (EHTP) and
Software Technology Park (STP) units are cleared by the Inter Ministerial Standing
Committee (IMSC) set-up under the Chairmanship of the Secretary, Department of
Information Technology.
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Proposals involving foreign direct investment not covered under the
automatic route are considered by the Foreign Investment Promotion Board (FIPB).
FDI/ Foreign Technology Collaboration Agreement
The government facilitates FDI and investment from Non- Resident Indians
(NRIs) including Overseas Corporate Bodies (OCBs), predominantly owned by
them, to complement and supplement domestic investment. Foreign technology
induction is encouraged through FDI and foreign technology collaboration
agreements. FDI and foreign technology collaborations are approved through
automatic route by the Reserve Bank of India.
CHALLENGES AND OPPORTUNITIES
Challenges
Heavy taxation in the country is one of the challenges for the players. At its
present structure the total tax incidence in India even now stands at around 25-30 per
cent, whereas the corresponding tariffs in other Asian countries are between 7 and 17
per cent.
About 65 per cent of Indian population that lives in its villages still remains
relevant for some consumer durables companies. This India, at least a large
proportion of its constituents, still buys black and white TVs and doesn't know
what flat screens are. The rural market has a considerable cost component attached
to it.
Companies not only have to set up the basic infrastructure in terms of office
space, manpower, but also spend on transportation for moving inventory. Even LG
and Samsung, which are having the largest distribution network in the country, have
a direct presence only in 15,000 to 18,000 of the around 40,000 retail outlets (for
consumer durables) in the country.
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Poor infrastructure is another reason that seems to have held back the
industry. Regular power supply is imperative for any consumer electronics product.
But that remains a major hiccup in India.
Opportunities
The rising rate of growth of GDP, rising purchasing power of people with
higher propensity to consume with preference for sophisticated brands would
provide constant impetus to growth of white goods industry segment.
Penetration of consumer durables would be deeper in rural India if banks and
financial institutions come out with liberal incentive schemes for the white goods
industry segment, growth in disposable income, improving lifestyles, power
availability, low running cost, and rise in temperatures.
While the consumer durables market is facing a slowdown due to saturation in
the urban market, rural consumers should be provided with easily payable consumer
finance schemes and basic services, after sales services to suit the infrastructure and
the existing amenities like electricity, voltage etc.
Currently, rural consumers purchase their durables from the nearest towns,
leading to increased expenses due to transportation. Purchase necessarily done only
during the harvest, festive and wedding seasons – April to June and October to
November in North India and October to February in the South, believed to be
months `good for buying‟, should be converted to routine regular feature from the
seasonal character.
Rural India that accounts for nearly 70% of the total number of households,
has a 2% penetration in case of refrigerators and 0.5% for washing machines, offers
plenty of scope and opportunities for the white goods industry. The urban consumer
durable market for products including TV is growing annually by 7 to 10 % whereas
the rural market is zooming ahead at around 25 % annually. According to survey
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made by industry, the rural market is growing faster than the urban India now. The
urban market is a replacement and up gradation market now.
The increasing popularity of easily available consumer loans and the
expansion of hire purchase schemes will give a moral boost to the price-sensitive
consumers. The attractive schemes of financial institutions and commercial banks
are increasingly becoming suitable for the consumer. Consumer goods companies
are themselves coming out with attractive financing schemes to consumers through
their extensive dealer network. This has a direct bearing on future demand.
The other factor for surging demand for consumer goods is the phenomenal
growth of media in India. The flurry of television channels and the rising penetration
of cinemas will continue to spread awareness of products in the remotest of markets.
The vigorous marketing efforts being made by the domestic majors will help
the industry. The Internet now used by the market functionaries that will lead to
intelligence sales of the products. It will help to sustain the demand boom witnessed
recently in this sector. The ability of imports to compete is set to rise. However, the
effective duty protection is still quite high at about 35-40 per cent. So, a flood of
imports is unlikely and would be rather need based.
Reduction in import duties may significantly lower prices of products such as
microwave ovens, whose market size is quite small in India. Otherwise, local
manufacturing will continue to stay competitive. At the same time, there will be
some positive benefits in the form of reduction in input costs. Washing machines and
refrigerators will also benefit from lower input costs.
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