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LatAm PC assemblers trigger vendor headaches

LatAm PC assemblers trigger vendor headaches

To most people, Alaska is the name of a US 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 per cent over 1998 - that it earned the fifth-largest market share of desktop PC shipments in the region behind Compaq, IBM, Acer and Hewlett-Packard.

Alaska, owned by Mexican distributor Mexmal Mayorista SA de CV, is just one of an army of Latin American PC assemblers that are making life difficult for the major vendor groups.

Why? In 1999, 55 per cent of the 5.4 million desktop PCs shipped in the region came from local players - 43 per cent were so-called white boxes sold without a brand, while 12 per cent were branded PCs, explained IDC senior analyst Alexandra Martínez.

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 $US1200, compared to around $900 for a local and non-branded desktop PC, and slightly more than a $1000 for a local and branded PC, she said.

"Latin America is a very price-

sensitive market," Martínez said.

The reason for this is that $1000 is 3 per cent of the per capita gross domestic product (GDP) in the US, but a whopping 21 per cent of the per capita GDP in Latin America, she added. Put another way, an expenditure of $1000 in the US is equivalent to shelling out $6600 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 $1800, compared with $1052 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 per cent market share of desktop shipments in Brazil, which is the region's largest market; around 67 per cent in Argentina, which is the region's third-largest PC market, and 59 per cent in Chile, Latin America's fourth-largest PC market, she said.

Moreover, local players have other things in their favour, 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 per cent in terms of shipments in 1999 compared with 1998, and IDC is forecasting an 18 per cent growth in shipments in 2000 over 1999, Martínez said.

The desktop PC sector of the

market is where most of the action is happening so far. Desktops still

constitute the overwhelming majority of PC shipments in Latin America, where notebook PCs accounted for only about 6 per cent of shipments in 1999, she said.


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