IDC Downgrades IT Market Growth, Sees ‘99 Rebound

Posted on April 3, 1998 
Filed Under AsiaBizTech, Julian

By Julian Matthews

April 3, 1998 (KUALA LUMPUR) — International Data Corp. revised downward its growth forecast for Malaysia’s information technology market to 9.7 percent from 20 percent for the next five years.

IDC predicts the local IT market will experience a compounded annual growth rate (CAGR) of 9.7 percent from 1997 to 2002. Previously, the company forecast a 20 percent CAGR for years 1996 through 2000.

“The currency crisis has affected growth in all sectors,” said IDC country manager Selinna Chin.

Chin said that for 1998, the local IT market is valued at US$1.368 billion, a drastic 28 percent dip from the US$1.9 billion in 1997.

“Even using differing exchange rates, the market value in ringgit was valued at 5.472 billion ringgit in 1998 compared to 5.3 billion ringgit in 1997, reflecting a low growth rate of slightly over 3 percent,” she said.

On the PC market, IDC estimates 324,000 units will be shipped in 1998, even lower than the two previous years. An estimated 394,000 units were shipped in 1997 and 328,000 in 1996.

Chin said the limp growth rates were due mainly to the expected decrease in consumer spending brought on by the ringgit depreciation, the market slump and a credit squeeze.

“Large companies are expected to freeze a lot of their capital expenditures, and we anticipate large IT projects to be postponed,” she said.

Chin said the banking, finance and telecommunications industries, usually the biggest IT- spending sectors, were also expected to trim their budgets in 1998.

“I still see spending for maintenance, service and for solving the Year 2000 problem, but not so much on acquiring new products,” she said.

Chin said she expects growth this year to primarily come from the networking market, and the emerging small- and medium- sized enterprises market, where IT usage is relatively low.

“Many small- and medium-sized businesses will computerize to help them save costs and reach out to customers. There is also a growing trend towards resource sharing, and more users will likely network their PCs to gain efficiency,” she said.

She said there was also growing awareness among businesses of the importance to link up electronically with customers, which could boost local IT spending. Chin said despite the negative impact of the crisis on the growth rates, the industry could see improvement in services as a result.

“In these hard times, we will see a lot of players pulling up their socks and improving their products and services in order to survive. In the end, users stand to benefit,” she said.

Chin also expressed optimism that Malaysia was likely to rebound faster than its neighbors. She cited the setting up of the Multimedia Super Corridor (MSC) and various other technology parks around the country, as well as the recent announcement to allow four more Internet service providers, as factors that could spur growth over the next two years.

“I expect a rebound in 1999. With the MSC and new foreign investors, Malaysia is becoming a good hub for international companies to penetrate the Southeast Asian market. This will bring a lot of opportunities for the local IT market to grow,” she said.

Published in Asia BizTech, Apr 03, 1998

by Julian Matthews, Asia BizTech Correspondent

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