1. Asia/Pacific PC Market Analysis Teleconference, 3Q03
Andy Woo
Analyst

2. 3Q03 Market Headlines: Volume and Growth
Total Shipments: 7.58 Million Units
Year-Over-Year Growth: 10.6%
Quarter-Over-Quarter Growth: 9.3%
Units
Deskbased PCs: 6.32 Million
Mobile PCs: 1.26 Million
Year-Over-Year Growth (%)
Deskbased PCs: 6.0
Mobile PCs: 41.3
Third-Quarter Comparisons
The Asia/Pacific market recorded another strong quarter. Year-over-year growth was up 10.6 percent, while sequential growth was up 9.3 percent. Positive growth rate has not been limited to emerging countries/markets skewing the data. Quarterly growth has been spread evenly across most countries/markets across the region. With the exception of South Korea, all countries/markets recorded positive year-over-year growth. Clearly Asia/Pacific, barring future unforeseen circumstances, has moved on from the SARS impact and economic uncertainties. The global economy is looking much more positive compared to a year — or even six months ago. Hence it come as no surprise that Asia/Pacific has clearly benefited from this positive outlook, and the PC market has been a key beneficiary of this global optimism.
From a platform perspective, mobiles PC again continued their high double-digit growth rates with year-over-year growth of 41.3 percent. Deskbased PCs, although not as spectacular, managed 6 percent year-over-year growth. The concept of mobility has gained strong momentum among end users across the region. Developed countries/markets, such as Australia, Taiwan, Singapore and South Korea, have traditionally led the mobile uptake in the region, and now the emerging or markets, such as India, Thailand , Indonesia and China have been putting on impressive growth rates over the past few quarters. Falling average selling prices (ASPs) across the board in the mobile space have fueled growth in the consumer and enterprise spaces.

3. 3Q03 Market Headlines: The Leaders
By Asia/Pacific:
Legend: 9.7%
Hewlett-Packard: 8.7%
Dell: 5.8%
By Platform:
Deskbased: Legend 10.4%
Mobile: IBM 16.5%
By Segment:
Professional: Hewlett Packard 10.6%
Home: Legend 8.9%
0.2%
1.2%
1.4%
1.1%
1.9%
The three leading vendors for the quarter remained unchanged from the previous quarter: Legend, HP and Dell. All three managed to increase their market share compared to a year ago, although Legend’s increase was only 0.2 percentage points. There is still a good 1 percentage point difference between Legend and HP, although the leader only operates in one single market.
Dell continue to be impressive, recording double-digit growth rates across most countries/markets in the region. In China, Dell recorded 53 percent year-over-year growth in deskbased sales and 90 percent growth in mobile PCs. In Australia, one of its key markets, growth was 41 percent year over year. India posted 94 percent year-over-year growth, although some of this growth is coming from a smaller base. Dell is growing from strength to strength and is clearly putting in the investment and effort necessary to strengthen and grow its position across the region.
Legend continued to strengthen its position in China, especially in the consumer market, recording year-over-year unit growth of 12 percent. Legend’s main growth this quarter came from mobile PCs, which recorded 59 percent year-over-year growth compared to deskbased of 8 percent. The promotion of its Tianyi range of consumer mobiles and the significant growth of low-end mobile PCs into the education sector contributed to the success of Legend in the mobile space.
All credit to HP in the third quarter for strengthening its position across Asia/Pacific in the third quarter. Much of this growth came from emerging market s, namely China and India. China posted 81 percent year-over-year growth, while India’s was 74 percent.
1.3%
0.9%
Market share is based on PC shipments (deskbased and mobile PCs only)
Arrows represent increase or decline in year-over-year market share percentage points.

4. 3Q03 Total Market: Top 10 Vendors
Growth Rate Highlights: HP 37.1% Dell 52.8% IBM 23.4%
3Q03 (7.58 Million Units)
3Q02 (6.85 Million Units)
Market Share
Although there was no change for the three leading vendors, from a year-over-year growth perspective, Dell and HP clearly lead the way. IBM also came back strongly this quarter. Much of IBM’s growth lies in its strong focus and brand recognition in the mobile space. Mobile PsC for IBM grew 44 percent year over year. In China alone mobile PCs posted impressive 79 percent year-over-year.
The results in Asia/Pacific clearly reflect our position on the leading global vendors. We recently updated our Magic Quadrants on PC suppliers in the enterprise space and this result also clearly reflects the leaders in the region. This latest research shows that Dell, HP and IBM are viewed as the leaders in a range of vendor selection criteria for both desktop and mobile PCs. Legend was also evaluated but was considered a niche player. Criteria such as customer support, warranty offerings and geographic coverage are considered. These criteria have been updated to take into account new factors such as wireless, longer lifecycles and and lower PC pricing. Gartner Dataquest has evaluated each vendor’s ability to execute against these criteria and its completeness of vision. To learn more, see the Gartner Client Platforms page on gartner.com and click on magic quadrant.

5. 3Q03 Geographic Market Growth Rates
3Q03 vs. 3Q02
3Q03 vs. 3Q02
Worldwide PC Year-Over-Year Growth:
15.1%
China 8.2%
South Korea -10.8%
India 25.6%
Australia 18.0%
Taiwan 8.3%
Thailand 74.5%
Malaysia 8.4%
Hong Kong 9.4%
Indonesia 22.0%
Singapore 5.6%
New Zealand 29.4%
Philippines 3.2%
Vietnam 13.3%
Rest of Asia/Pacific 5.9%
This quarter, the overall sentiment and economic environment were definitely more positive around the region, with the exception of South Korea. Besides the depressed economic environment in South Korea, the third quarter is normally sluggish because of the summer holidays and the full-moon festival. In the enterprise space, many corporations still face IT budget issues. The government segment, however, was insulated to a certain degree, especially in the mobile PC space. Government agencies in South Korea continue to migrate toward the mobile platform.
Australia’s PC shipments for the quarter recorded were up a solid 18 percent year-over-year. In comparison to some of its developed neighbors in the region such as Singapore, Hong Kong, South Korea and Taiwan, the growth rate is impressive. Much of the growth in Australia is fuelled by the strong demand from mobile PCs in the home and professional segments. In addition, the replacement rate cycle is still going strong, with many end users continuing to upgrade their older systems. Another key driver for Australia have been the home market — we are seeing strong demand return to the home market as consumer sentiment in the third quarter remains relatively strong with both the strong economy and low interest rates contributing to the confidence. Although interest rates increased by 25 basis points this quarter, this will not dampen consumer buying in the fourth quarter, which is shaping up as the biggest consumer spending for the year.
The Indian market recorded year-over-year growth of 25 percent, largely corporate-driven. Unlike the usual trend of big orders from large organizations, this quarter witnessed sizeable deals from medium businesses contributing a significant portion of the corporate shipments in India. These are positive indications of consistent demand across the corporate segment, and some organizations now have fewer budget restrictions. The home segment, on the other hand, recorded just average performance.
Mobile PCs in India also outperformed expectations, growing 86 percent annually, albeit from a small base. Introduction of entry-level models at low prices widened the notebook buying audience to aggressively target small businesses.
China recorded year-over-year growth of 8.2 percent. Demand in the professional segment remained sluggish, because many enterprises are still recovering from the SARS impact. Much of the growth came from consumer and mobile PCs, especially in the education sector where local education centers and institutions prefer mobile PCs. It has been a challenging quarter in China, as price competition continues to be intense. As a result, Linux is the preferred operating system in low-end PC systems.
Worldwide PC Sequential Growth:
13.7%

6. Mobile PCs Continue To Drive Growth
Year-Over-Year Growth
Shipments
Mobile PCs 43.1%
Mobile PCs
Mobile PCs continue to be the “killer” platform according to growth trends. With the exception of the dip during the downturn in 2001 and a minor glitch during the SARS period this year, mobile PCs have consistently achieved strong double-digit growth. Mobile PCs recorded year-over-year growth of 43 percent, while deskbased PCs grew just 6 percent. Although many would argue that mobile PCs are coming from a much smaller base — hence the strong growth rates —what we are seeing is that enterprises and home users alike are beginning to choose mobile PCs as the platform of choice.
One key driver is a narrowing price gap, as ASPs continue to fall. Also. There is a proliferation of entry-level models coming into the market, and mobile PC’s are becoming more affordable than ever. We are also seeing the performance gap narrowing compared to a deskbased system. Mobile PCs are no longer perceived as a luxury items, and many enterprises are actually deploying them because they increase productivity. Gartner Dataquest has conducted research on the total cost of ownership (TCO) benefits of mobile PCs, which can be accessed at gartner.com. Meanwhile, in the home market, consumers are adopting mobile PCs in a big way, especially as desktop replacements. This provides point-to-point portability that is not possible in the lockdown environment of a deskbased system.
Across Asia/Pacific, most countries/markets recorded double-digit growth. Even the more mature markets such as Hong Kong , Singapore and Australia had year-over-year growth of about 20 percent. Emerging markets were mainly fueled by consumers and education sectors in China and by strong demand from small and medium size businesses (SMBs) in India. This growth trend will continue for the next few quarters, as mobile PC continue to gain momentum across the region
Deskbased PCs

7. Different Patterns in Countries/Markets — Platforms
Yearly Shipment Growth Rates by Form Factor
As mentioned before, mobile PCs are the key driver across the region, as indicated by the blue bar where most countries/regions would have achieved 20 percent year-over-year growth.
Deskbased PCs are an altogether different story. Several countries/markets in the region actually recorded negative growth (Hong Kong, Malaysia, Singapore and South Korea) and even China’s browth was flat.
Many enterprises in Hong Kong, China and Singapore are still recovering from the SARS impact, hence not much movement exists there, because much of the support came from the home market. In Malaysia, much activity was driven by strong promotions from vendors and channels targeting the home market.
India, on the other hand, performed relatively well from a deskbased perspective, with much of the volume coming from strong buying from SMBs. In Thailand, the government project to encourage PC buying created a sharp spike in demand for both deskbased and mobile PCs. Some countries/markets where the home market remains strong will continue to do well from a deskbased perspective. New Zealand and Australia are gearing up for a big fourth quarter. We are also continuing to see mobile PCs take sales away from deskbased, especially in the home market. Back-to-school buying in Malaysia and Singapore will help deskbased sales, but the acceptance of mobile PCs, especially among students, means mobile PCs will be the winners
Things will become much tougher for deskbased, especially in the enterprise side of things, as replacement rates are already starting to slow in certain markets, especially mature ones. Most demand will come from the private segment. Mobile PCs will continue to grow and attract buyers at the expense of deskbased.
China
India
Taiwan
Rest of
Australia
Indonesia
Malaysia
Thailand
Vietnam
Singapore
Hong Kong
Philippines
New Zealand
South Korea
Asia/Pacific

8. 3Q03 Mobile Market: Top 10 Vendors
Market Growth Rate: 43.1%
3Q03 (1.26 Million Units)
3Q02 (0.89 Million Units)
Market Share
IBM managed to gained the No. 1 position in the mobile space this quarter replacing HP with a 16.5 percent market share. IBM’s strong focus and attention on the mobile PC space have definitely paid dividends. IBM continue to perform strongly in Singapore , Australia and Taiwan. However its biggest move came from China when it grew its volume year over year from 46,000 to 80,000 units, approximately, with a year-over-year growth of 76 percent. Its rapid growth in China can be attributed to the strong brand-name and expansion of its product line in China. IBM’s strong association with Centrino was also a benefit.
HP came in second with a 15.2 percent share, while Toshiba lost some grounds and came in third at 11.1 percent. HP did have some growth in India and China, but the volume gained was not enough for HP to cling to its No. 1.
Dell and Legend continued to progress steadily and should be the vendors to watch as both have steadily increased their market presence in the region. Dell has been strong in the home market through its aggressive pricing and forcing vendors to match its pricing in many markets. Legend, through its introduction of low priced machines in China, will continue to challenge some multinationals.
IBM
Hewlett- Packard
Toshiba
Dell
Acer
Samsung Electronics
Legend
ASUS
Fujitsu
Founder Electronics

9. Home and SMB Mobile PCs – Price Dynamics
Home Market
Small and Midsize Business Market
Now let’s turn to mobile PCs, which again saw strong growth during the third quarter, with the strongest growth in demand is still coming from home users and SMBs.
Much of the growth from these two segments is driven by price, with demand from these users being highly price elastic. These charts show the relative progress of average prices and shipment growth rates from the start of The correlation is impossible to miss: From the third quarter of 2002, demand has grown as prices have fallen. Prices here are in dollars, so any exchange rate fluctuations have been taken into consideration.
The third quarter also saw notebook prices for SMB users fall to new levels, partly the result of multinationals/regional and country-specific vendors promotions and response to competitive dynamics. All leading mobile PC vendors were forced to respond to some degree.
What effect will price rises have on demand? With capacity limited and demand growing for both flat screen TVs and thin film transfer monitors, notebook panel prices are already under pressure and expected to rise. The capacities currently favor lower-cost notebooks. Memory prices have already risen, but have probably peaked, so that shouldn’t add to the problems. All the same, the industries supplying key notebook components will be pushing prices upward, which could stifle the strong growth from home and SMB. Depending on how much vendors are willing to absorb the price, eventually this will be passed on to end users. If that were to happen, demand may be affected (see the price elasticity chart).
Average Selling Price Change
3Q02-3Q03: -6%
Unit Growth
3Q02: 43.3%
3Q %
Average Selling Price Change
3Q02–3Q03: -7%
Unit Growth
3Q02: 18.0%
3Q %

10. Mobile PC Processors – Confusing
Ultraportable Notebooks
Desktop Replacement Notebooks
                                        
                  
Mainstream Notebooks
The notebook market has a bewildering range of offerings. The choice of mobile processors has extended over the last 18 months, and there are no fewer than eight main processors to choose from (including the Duron). What’s more, many of these come in different power envelope variants.
Intel’s Pentium 4 portfolio has added the most confusing new options — with the Mobile Pentium 4 a major contributor. Even we sometimes get mixed up between the Mobile Pentium 4 and the Pentium 4 Mobile, so it’s little surprise that users are also confused. The past three months have brought a number of calls from organizations that simply don’t understand how to evaluate the options available. PC vendors would benefit from an investment of time in this area.
But despite this confusion, Intel is certainly pleased with the success of its new Pentium M processor and the Centrino platform. Pentium M accounted for more than 32 percent of third-quarter mobile PC shipments in Asia/Pacific, and its share will rise further by the end of the year. Of these Pentium M models, Centrino’s percentage is steadily rising for most leading vendors (I will further examine the Centrino breakdown in the next slide). We believe IBM is currently shipping the highest percentage of Pentium M-based notebooks, evidence of the new processors success with enterprise users. The confusion is probably working to Intel’s advantage here, because the marketing effort Centrino is focusing attention just where they want it.
Strangely, the biggest casualties of the Pentium M’s progress seem to have been the desktop-processor-based models. Although still representing a substantial part of the market, we expect the release of the Mobile Pentium 4 with hyper-threading to reduce this desktop arbitrage to less than 5 percent of the worldwide market by the end of next year.
End users are still confused about the options available, and more often than not in many markets it all boils down to which is the least-expensive option. Having said that, vendors must make more of an effort to educate the market on the costs and benefits of each available option, be it mobility, value, or portability.
Mobile CPU Market Share, 3Q03
Coming Soon ?

11. Centrino — Wireless Mobility
Mobile PCs With Centrino, 3Q03
Asia/Pacific
Australia
China
Hong Kong
India
Indonesia
Malaysia
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Rest of Asia/Pacific
The demand for Centrino-based systems has been very encouraging across Asia/Pacific. In fact in terms of percentage, demand is higher in Asia/Pacific than in Europe, the Middle East and Africa (EMEA). Asia/Pacific is currently at 31 percent vs.. 27 percent in EMEA. In a way, Intel should be happy with where Centrino is heading in the region. By comparison, in the previous quarter, Centrino represented only about 10 percent of total mobile shipments. We have increased our base from 10 percent to 31 percent in the third quarter.
However, in India, Indonesia, Vietnam, Philippines and Thailand — and even China — the penetration of Centrino is still relatively low. Centrino is one part of the puzzle, but without the proper infrastructure and the investment in wireless network, acceptance will always be hindered. Part of the pickup of Centrino has been in the proliferation of low-end models equipped with the Centrino platform, and this has definitely proved a popular option for experienced users in the home market. Not forgetting that a large portion of wireless network across Asia/Pacific resides in the home rather than in the enterprise space.
Demand for mobile PCs with Centrino in mature markets such as Australia, South Korea, Singapore and Taiwan seemed to reach a significant share (near or more than 30 percent of the total mobile PC shipments were Centrino-based). For example In Taiwan, Centrino was strongly promoted by Intel, which offered a free wireless LAN (WLAN) access passport bundled with notebooks. Meanwhile, in Australia, although the initial pickup has been slow but the awareness is gaining momentum as more product lines are based on the Centrino platform.

12. Patterns in Countries/Markets — Sectors
Yearly Shipment Growth Rates by Major Market
The private market in the third quarter, similar to the previous quarter, grew by 16.7 percent year over year, accounting for 43 percent of the total market share of PCs shipped. The professional market grew 4.3 percent year over year, which represented the balance of 57 percent of the PC market. The home market has gained ground since the downturn in Also, following the SARS scare, consumers in the affected market were much quicker with their spending than those in the professional market.
In China, although some time lag was expected for a turnaround in the professional market, the turnaround has taken longer to occur in the post-SARS environment. Corporations are recovering from the downturn caused by SARS, but full confidence has not yet been restored. Much of the support is coming from the government space to encourage spending patterns back into the economy.
Countries such as Thailand were boosted by government initiatives, such as the information communication technology (ICT) PC program, which helped PC affordability. Australia also continued to show surprising growth rates, mainly because Australia is one of the more mature markets in the region. After two years in the doldrums Australia has shown double-digit growth for the past six to seven quarters. Factors such as replacement rates, a stable economic and political environment and strong consumer confidence are fueling the growth.
China
India
Taiwan
Australia
Indonesia
Malaysia
Thailand
Vietnam
Hong Kong
Philippines
Singapore
Rest of Asia/Pacific
New Zealand
South Korea

13. 3Q03 Professional Market: Top 10 Vendors
Market Growth Rate: 4.3%
3Q03: 4.13 Million Units
3Q02: 3.96 Million Units
Market Share
In the professional space, HP managed to maintain its No. 1 position, but only marginally over Legend. HP came in with a 10.6 percent market share, while Legend had a 10.4 percent market share. Dell again was the big mover, growing its market share to 9.3 percent. IBM, through its strong penetration of mobile PCs across the region, is gaining ground on the rest of the vendors.

14. 3Q03 Home Market: Top 10 Vendors
Market Growth Rate: 16.7%
3Q03: 3.45 Million Units
3Q02: 2.95 Million Units
Market Share
In the home space, Legend continued to outperform other vendors in the region. Penetration in the home space has been encouraging because of its strong position in China. However, Legend’s overall market share has dropped below the 9 percent mark. One key reason is that other vendors that play in different markets are slowly catching up, as the home market is putting on impressive growth across the region.
HP is still No. 2 and continues to gain ground and has been successful in gaining momentum in key markets such as China, Australia and New Zealand. Acer, another big mover in the home space, continued to position itself as a mainstream vendor through signing on leading distributors and retailers across the region such as Harvey Norman in Australia.

15. Short-Term Forecast = Challenging Times
Deskbased PCs
Stronger economic performance
Mobile PCs as the alternative platform
Home penetration
Declining component prices
Mobile PCs
Sluggish economic performance
Extended replacement cycle
Y2K replacement slowing down
PC rotation
The growing momentum of overall PC shipments is expected to come from smaller countries, such as Thailand, Malaysia , New Zealand. Emerging markets such as India and China will continue to contribute from the volume end. Overall growth rates are slowing down, especially in the deskbased platform, but this will be offset by the strong demand for mobile PCs. For mature markets, such as Hong Kong, Singapore, Taiwan and Australia, the outlook will also be be tough, because the replacements that we have enjoyed over the past few quarters will continue to slow down as lifecycles continue to extend and most buying has already been done.

16. PC Trends Drivers: Falling ASPs Y2K replacements Flat panel monitors
Aggressive retail promotions
Government initiatives
Emerging markets
PC as digital hub
Mobility
Inhibitors:
Lifecycle extensions
Economic uncertainty
PC budgets remain tight
Developed markets remain saturated, especially professional markets
Consumers remain cautious
Enterprises adopt wait-and-see approach toward PC purchases

17. Asia/Pacific PC and Workstations Team 2003
China
Jennifer Wu
Annie Chung
India
Vinod Nair
Malaysia and Vietnam
Martin Gilliland
South Korea
Chae-gi Lee
Taiwan
Jennifer Wu
Amy Teng
Thailand
Erica Gadjuli n
Australia and New Zealand
Andy Woo
Singapore
Lillian Tay
Suzie Low
Indonesia
Erica Gadjuli
Philippines
Martin Gilliland
Hong Kong
Annie Chung
Jacky Yeung

18. Asia/Pacific PC and Workstation Team — Contact Details
Andy Woo Australia and New Zealand
Lillian Tay Singapore
Suzie Low Singapore
Martin Gilliland Malaysia, Vietnam and Philippines
Erica Gadjuli Thailand and Indonesia
Vinod Nair India
Annie Chung Hong Kong and China
Jennifer Wu Taiwan and China ext 200
Amy Teng Taiwan ext 208
Chae Gi Lee South Korea

19. Related Gartner Dataquest PC and Workstation Research
Personal Computer Quarterly Statistics Asia/Pacific — Database
Workstations Quarterly Statistics Asia/Pacific — Database
Asia/Pacific: PC and Workstation Marketplace Report, 2Q03
Hong Kong: Client/Server Forecast Scenarios,
Singapore: Client/Server Forecast Scenarios,
Indonesia: Client/Server Forecast Scenarios,
Malaysia: Client/Server Forecast Scenarios,
Singapore: Users’ Perceptions of PC Technology Trends and Budget Plans
Australia: Users’ Perceptions of PC Technology Trends and Budget Plans
China: Users’ Perceptions of PC Technology Trends and Budget Plans
Taiwan: Users’ Perceptions of PC Technology Trends and Budget Plans
and more on ...

20. Asia/Pacific PC Market Analysis Teleconference, 3Q03
Andy Woo
Analyst