IDC: Local PC Assemblers Lead in LatAm

MIAMI (03/15/2000) - To most people, Alaska is the name of a U.S. state. To PC vendors in Latin America, the name probably triggers a major headache.

Alaska is a Mexican assembler of PCs that did so well in 1999 -- its shipments grew 102 percent over 1998 -- that it earned the fifth-largest market share of desktop PC shipments in the region, behind Compaq Computer Corp., IBM Corp., Acer Inc. and Hewlett-Packard Co.

Alaska, owned by Mexican distributor Mexmal Mayorista SA de CV, is just one of an army of Latin American PC assemblers that, as a group, are making life difficult for the likes of Compaq and IBM.

Why? In 1999, local assemblers as a group snagged a majority of shipments in Latin America, an International Data Corp. (IDC) analyst said Tuesday at a briefing here.

Regionwide, 55 percent of the 5.4 million desktop PCs shipped in the region in 1999 came from local players -- 43 percent were so-called white boxes sold without a brand, while 12 percent were branded PCs, said Alexandra Martínez, a senior analyst with IDC's Latin America research division who focuses on the region's PC market.

The secret to local assemblers' success is simple: money. Desktop PCs built and sold by local assemblers are cheaper than desktop PCs sold by international vendors, Martínez said.

For example, the average price of a desktop PC from an international vendor in Latin America is now about US$1,200, compared to around $900 for a local and non-branded desktop PC, and slightly more than a $1,000 for a local and branded PC, she said.

"Latin America is a very price-sensitive market," Martínez said.

The reason for this is that $1,000 is 3 percent of the per capita gross domestic product (GDP) in the U.S., but a whopping 21 percent of the per capita GDP in Latin America, she added. Put another way, an expenditure of $1,000 in the U.S. is equivalent to shelling out $6,600 in Latin America, Martínez said.

But international vendors are beginning to take heed and are starting to lower their desktop PC prices significantly, a development that could spell trouble for local players, she added.

"If desktop PC prices from international vendors continue to decline, they may force a significant number of local players out of the market," Martínez said.

PC prices have been dropping in Latin America in the past four years. In the fourth quarter of 1996, the average shipment value of a desktop PC in Latin America was about $1,800, compared with $1,052 in the last quarter of 2000, which is currently one of the lowest prices in the world. Thus, with prices shrinking, the gap between PCs from international vendors and local players continues to close.

In the meantime, Alaska and its peers will continue snatching sales from the Compaq crowd. Itautec, a Brazilian vendor, ended 1999 with the region's seventh-largest market share of desktop PC shipments. Two other Latin American assemblers -- Microtec Vision and Procomp -- placed ninth and 10th, respectively.

In fact, local players own an 80 percent market share of desktop shipments in Brazil, which is the region's largest market, around 67 percent in Argentina, which is the region's third-largest PC market, and 59 percent in Chile, Latin America's fourth-largest PC market, she said.

Moreover, local players have other things in their favor, in addition to lower prices. They tend to weather political and economic turmoil much better than vendors from outside the region, often sell desktop PCs with the newest, fastest processors before their international counterparts, and design their desktop PCs in a way that makes it easier to upgrade them, Martínez said.

And, for better or worse, a number of the local players also lower their costs by breaking the law, by, for example, loading their PCs with pirated software, Martínez added.

The PC market in Latin America grew 15 percent in terms of shipments in 1999 compared with 1998, and IDC is forecasting an 18 percent growth in shipments in 2000 over 1999, Martínez said. [See "UPDATE: IDC: LatAm PC Market Grows 15 percent," Feb. 25.] However, Dataquest Inc. reported that the region's PC market had grown 30 percent in terms of shipments in 1999, compared with 1998.

[See "Dataquest: LatAm PC Market Rose 30 Percent in 1999," March 2.]The desktop PC sector of the market is where most of the action is happening so far. Desktops continue to be the overwhelming majority of PC shipments in Latin America, where notebook PCs accounted for about 6 percent of shipments in 1999, she said.

IDC can be reached at its Framingham, Massachusetts headquarters at 1-508-872-8200, at its Latin America headquarters in Miami at 1-305-267-2616, or at http://www.idc.com/.

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