India HCP Market Poised to Rebound Next Quarter After a GST Affected 2017Q2

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The HCP market in India recorded an overall shipment of 714,129 units, which was a decline of 5.8% on a year-on-year (YoY) based on the latest IDC Asia Pacific Quarterly Hardcopy Peripherals Tracker, August 2017. The decline was mainly due to the implementation of the Goods and Services Tax (GST) from July 1, 2017, which caused weak sell-in shipments in the second quarter as the focus of the distributors was on clearing the existing inventory.

Prior to GST, Printers used to have roughly 18% tax which was split between 12% Countervailing Duty (CVD) and 5.5% to 6% VAT depending on the state. However, Post GST, single function printers continue to be taxed at 18% slab while multifunction printers (MFPs) are taxed at 28% which has led to most vendors increasing prices of MFPs by 10-12% from July onwards.

“Owing to GST implementation, there was resistance from distributors in stocking inventory during May/June as the India government was only willing to give input tax credit up to 60% of their total GST liability against the excise duty already paid for goods purchased before July 1 (without furnishing the original excise payment receipt) resulting to a decline in overall demand,” says Nishant Bansal, Research Manager, IPDS, IDC India. “Overall, GST implementation resulted in weak sell-in shipments across the entire IT hardware and client devices market including PCs and smartphones,” adds Bansal.

Top 3 Company Highlights:

HP Inc. regained top position in the Inkjet market with a unit share of 45.9% after posting a 7.2% YoY growth and 5.1% QoQ (quarter-on-quarter) growth mainly due to push of low end Ink advantage models. HP Inc. continues to be the market leader in laser HCP (Printer-based) market with 57.4% market share.

Canon, like HP had a strong quarter in Inkjet with a QoQ growth of 13.0% on the back of strong push of low end PIXMA MG series. Canon also regained its number one position in the copier market with 32.3% market share and registered a 13 percent YoY growth on the back of strong sales through its direct channel to large enterprises.

“Entry level Inkjet models were the major driving force behind HP and Canon volume growth in Q2. Demand from consumers owing to GST clearance sales in smaller cities/towns were the key factors driving the demand in entry level inkjet segment,” says Abhishek Mukherjee, Senior Market Analyst, IDC India.

Epson was impacted by GST implementation and hence took an opportunity to liquidate their excess inventory in traditional IT channels. However, with slower than expected demand during the first half of the quarter as consumer was expecting the printers to become cheaper post GST, Epson had a weak sell-in and suffered a QoQ decline of 28%. However, Epson is expected to rebound in 2017Q3 as demand from both distributors and end user picks up post GST implementation.

IDC India Forecast

Markets are likely to recover in 2017Q3 as July saw good demand for both Ink and laser printers both from distributors and end users. Historically, the third quarter of the year is also the biggest quarter as most of the purchases happen during the festival time and vendors start filling the channel in preparation. “Industry can look forward to strong sequential growth in Inkjet printers as demand for ink tank printers picks up owing to festive and back to school season. Also on the commercial side, the industry can expect good demand from corporate and government deals but may see some initial pushback from SMBs owing to price hike in MFPs,” ends Bansal.

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