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May 12, 1998


Screen Test

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Domestic monitor industry scores poorly
with bad laws and multinational dumping.

Three years back, Arthur D Little, one of the leading consulting agencies, had conducted a study of the domestic information technology industry and suggested to the Manufacturers' Association for Information Technology that they focus on the local manufacturing of PC monitors.

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According to Arthur D Little, the monitor industry was a key area that had to be tapped and had immense potential.

But over the past two years, the domestic monitor industry is facing a crisis. Now most players are on the brink of closure.

Though the domestic monitor industry, worth an estimated Rs 4 billion market, is expected to grow by 40 per cent this year, the growth of the domestic manufacturers is likely to go down! If this continues, foreign companies will completely take over all of the market in the next five years.

In the last couple of years, the monitor industry has been growing at an average rate of 30 per cent. But domestic players have been gradually losing market share to foreign brands that have consolidated their positions by capturing over 50 per cent of the market.

At present, the domestic monitors industry is operating under uncertain circumstances and under severe competition from international players.

The disparity in the import duty structure of finished monitors and electronic components is one of the reasons for the poor state of the natives.

At present, the differential between finished monitors and components is very marginal and in some cases components have higher duties than finished monitors do.

Samtel India Limited is a major player in the domestic market. Its multimedia division's Vice-President V J Prakash has been reported as saying that "the pressures increased last year when the government slapped an additional 3 per cent duty on all products to offset for the Pay Commission's provisions."

"The duty for the monitors were removed within two days, but the same was not done for monitor components," he complains.

Domestic manufacturers say this has drastically affected their competitiveness. And the situation seems all the more critical because of the huge investments they have made in setting up manufacturing facilities.

The anomalies have compelled even the bigger domestic companies like Microtek, Vintron and Samtel to put further investments on ice.

A senior officer at Vintron has been quoted as saying that "another flaw in the policy is the fact that countervailing duty, or CVD, on imported products is equivalent to the excise duty on manufactured monitors.

"The CVD is applied only on the CIF value whereas excise duty is applied on the selling price of the manufacturer.

"Therefore, the importer tends to gain on its account. To have a similar situation, the CVD should be applied on the MRP value instead of the CIF," he suggested.

Adding oil to fire has been the recent economic crisis in Southeast Asia. It has led to the devaluation of their currencies. But this helped South Korean players to export monitors to India and sell them at a lower cost.

Exporting to the Indian market is profitable and cheap for these players.

The economic crisis in these countries has made the country a viable market for them. Hence, they not only increased their volumes for the Indian market but also started pricing the products at a lower rice than the domestic players.

Most foreign players are bringing in obsolete technology into the country. Even now they are importing and selling interlaced monitors, which they are not selling in any other part of the world.

Countries like Sweden have legislation against interlaced monitors. These monitors which give one picture in two frames is said to be harmful for the eyes due to the flicker.

The domestic market for monitors is about 0.75 million pieces, while the global market is of 80 million, which provides the domestic players an opportunity to export, if they are manufacturing large volumes.

In the past two years alone, major players like 21 Century, Advanced Hi-Tech, Armaan and Gebbs closed shop. These players had been in the industry for four to eight years.

Half a dozen others wound up too. The industry is unanimous in the aftermath: foreign players like Daewoo, Samsung, Philips, LG and a host of other players from Taiwan and Korea are just to big a competition.

The multinationals have improved their business in leaps and bounds in the past couple of years. Many more MNC players are gradually entering the country or are on the way to do so.

The other reasons for the bad condition of the domestic manufacturers is said to be the duty structure which puts imports of components for monitors at par with finished monitors.

With domestic monitor manufacturers in a state of crisis, the component manufacturers do not even think of making any further investments in monitor components.

Domestic players have accused foreign players, specially the ones from the Far East for taking advantage of import duties and dumping obsolete and analogue monitors into the country and forcing the domestic players to wind up.

At this juncture, the industry is expecting immediate steps to be taken by the government to improve on the present circumstances.

According to some of the leading domestic manufacturers like Samtel, Microtek and Vintron, certain measures have to be taken by the government.

Their demands include the repeal of the recently imposed 3 per cent duty on components. They want a clear duty differential of at least 12 per cent to be maintained between components and finished monitors. Another demand is that appropriate steps be taken to discourage selling of monitors with obsolete technology at low prices in the country. They have asked for applying the CVD on the MRP in lieu of the present mode of putting it on the CIF value.

Local manufacturers have said if the government will give in to these demands it will help them improve their tremendous potentials in terms of employment, exports and technology upgradation.

It will also have an impact on the rise of ancillary industries like components, metal parts and packaging.

Owing to these pressures of high duty and tough competition, the domestic manufacturers are seriously considering complete indigenisation of their manufacturing units.

They are seriously working towards indigenous production of picture tubes. Samtel and Microtek are expected to start indigenous production in the second half of the current financial year itself.

This is expected to lower the cost by as much as 45 per cent. Other players who consider indigenisation include Kinetic Merlin, NDS Computers, Competch and Proview.

At present, all Indian players are importing picture tubes and vital components form Taiwan and Korea. Leading domestic players are also considering exports to Europe and South Asia. Vintron, Samtel and Microtek are likely to start exports by the end of this fiscal.

- Compiled from the Indian media

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