), Dell (DELL
), Lenovo, and Acer have all announced major initiatives to boost sales there, making India one of their key battlegrounds. The demand is coming not just from big companies but also from consumers and small businesses. "All three segments of the market will grow at 25% to 30%," says Rajan Anandan, Dell's general manager for India. "That's a pretty healthy outlook."
Why the change? For starters, India's economy is booming, with annual growth running at more than 9%. Moreover, the government has eased high tariffs on imported machines and parts, which had helped keep prices high. Over the past three years the average cost of a Windows PC has fallen from $500 to $350, Microsoft Corp. (MSFT
) estimates. So PC sales in India will likely climb at 20%-plus rates annually through 2011, according to researcher Gartner Inc., compared with yearly growth in China of about 14%. (China, though, has some 110 million computers installed, vs. 22 million in India, and consumers there are likely to buy 33.5 million machines this year, compared with 8.8 million in India.)
India is proving an easier sell for the foreigners than China has been. The People's Republic is dominated by Lenovo Group Inc., but HP has overtaken local favorite HCL Infosystems Ltd. in India. After a push into smaller cities, the American company now controls more than 21% of the market, vs. 13.5% for HCL, the No. 2 player, estimates researcher IDC. In March, HP opened a new factory near Delhi, its second plant making machines for the local market. "We have a lot of positive momentum," says Adrian Koch, HP's senior vice-president for Asia Pacific.
HP's rivals are doing their best to boost their own momentum. In August, Dell Inc. opened a factory in the southern city of Chennai, its first in the country. The company expects sales of $500 million this year, up sharply from 2006. And this fall, Dell will likely introduce a new machine tailored for local customers, with a big push in portable computers. But Dell expects to depart from its traditional direct-sales model since Indians prefer to try out products before buying.SETTING UP SHOPIndia is one of the best overseas markets for Lenovo, which inherited a factory in the southern city of Pondicherry after buying IBM's PC division in 2005. Lenovo announced in July that it will spend $11 million on a second Indian facility, in the northern city of Baddi, which will have an annual capacity of 2 million computers—twice that of the Pondicherry plant. And in August the company hooked up with Walt Disney Co. (DIS
) to introduce a desktop machine aimed at children. Taiwan's Acer Inc., meanwhile, is forming partnerships with Indian electronics chains. And Sony (SNE
) is advertising its pint-size Vaio notebooks on prime-time television.
The big loser seems to be HCL. One problem: The Mumbai-listed company, once the strongest player in India, was late to the game with notebooks, introducing them just two years ago. HCL also skimped on brand-building for more than a decade, but it's moving to regain its edge with a new ad campaign showing users ranging from villagers to investment bankers with HCL machines. And it is partnering with Intel Corp. (INTC
) to produce a low-cost notebook called the Classmate PC.
Among the biggest beneficiaries of the boom is Microsoft, and the software giant is doing what it can to keep sales in India growing. One stumbling block, says Microsoft India Chairman Ravi Venkatesan, is that only about half of India's wealthiest households have computers. "Why is it that in China every parent believes that unless their kid grows up with a PC, the kid won't be successful, but not in India?" he asks. "It's the lack of content." So Microsoft has developed educational software with local partners, who will start selling PCs loaded with the programs this fall. "Our No. 1 challenge," says Venkatesan, "is to make the PC more compelling and relevant." By Bruce Einhorn and Nandini Lakshman