PCs and wearables
The IDC analysts said that GST will negatively impact the local PC market in Q2 2015 with both consumer and commercial spending expected to slow down "for a few months while the market will take a few months to adapt to the new tax but should return to normal by mid Q3 2015."
In the long run, notebooks should still show a marginal decline due to competition from smartphones and tablets. Desktops are expected to remain flat due to sustained refresh cycles coming from the enterprise segment and the public sector.
"The current situation for PCs in Malaysia does not appear to be positive," said Ng. "Smartphones continue to compete for consumer wallet and mind share, mega projects from the government have slowed down and there is still a lot of uncertainty regarding GST impact. However, PCs will still be a significant player in the IT hardware market as new PC form factors are regularly introduced in the market. This shows IT vendors are still creating value and driving innovation."
In addition, the "one-store-many-brands PC store used to be the retail business model of choice but has fallen out of favour in recent years."
Based on observations in the region, foot traffic in these stores was dropping, he said. "The margins are growing slimmer now and the retail structure has to go in a new direction. IDC is of the opinion that the distribution model has to transition towards a more exciting consumer-centric model which is usually employed by mobile phone vendors."
IDC recommended that vendor stores should "be identifiable as one stop centres for the vendor's products and have to offer an attractive, exciting and familiar experience to consumers. For this to succeed, the different devices in stores should promote the overall brand rather than being a source of competition to PCs."
Daniel Pang, IDC ASEAN client devices senior research manager, in his presentation showed that wearables such as fitness bands and smartwatches were commonly available but not widely adopted due to uncertainty about the value such devices delivered.
However, as the Internet of Things (IoT) becomes more prevalent, there are signs that these technologies are starting to live up to the hype, said Pang.
"IDC expects this trend to accelerate much more quickly over the coming years," he said. "There are a number of reasons why we're seeing more and more consumer wearables entering the enterprise sphere. Besides the lower costs of producing white labelled accessories, the variety of products is also increasing. More importantly, these products are improving on functionalities and capabilities and gaining more visibility along the way."
Pang added: "IDC also expects to see greater adoption of band, watch and glass solutions by retailers, hospitals, insurance companies and large equipment manufacturers as more solutions are developed. Solid business cases for deploying wearables in enterprise environments now exist, and as competition grows in this space, there are definitely going to be exciting solutions in the pipeline."
GST and smart devices
GST implementation on smart devices will have a positive effect on Malaysia's economy in the long run, as it will boost government spending power through reduced bureaucracy and higher tax-compliance, said Pang.
"IDC is of the opinion that there will be an initial impact to consumer spending power as many other countries have recorded a 2-3 percent increase in inflation rates upon introducing GST, though it should be said that things usually start to normalise fairly quickly," he said.
"The introduction of GST on smart devices should boost the economy through higher government revenue and spending. Whether or not the government reallocates some GST revenue into the expansion or development of the ICT sector still remains to be seen, but this certainly seems to be the direction the government is taking. IDC expects very minimal impact to consumer spending on PCs, phones and tablets post-GST implementation," said Pang.
He added that the commoditisation of the market has "lead to heightened price competition for vendors and it will be a bigger issue for them ahead of GST. In fact, consumer spending on devices in Malaysia has been quite resilient over the recent period of economic challenges and international device vendors continue to see Malaysia as an important market within Southeast Asia."
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