Malaysia Information Technology Report Q1 2014 - New Market Report

We expect the IT market will increase to a value of MYR16.9bn in 2013, up 6.8% from 2012, with growth fuelled by a supportive economic environment and government policy. One notable downside is the slower than expected sales of desktop and notebooks to consumers in Q113 as consumers increasingly opt for tablets. Sales of tablets are helping to compensate for the slowdown and we believe lower priced ultrabooks and hybrids/convertibles, as well as new devices using Intel's Haswell chips, will boost sales later in 2013 and into 2014 and capitalise on the strong consumption story in Malaysia. In the enterprise market growth will be slightly slower, with corporate customers more hesitant as a result of ongoing global economic uncertainty. That said, there will be some areas of strong growth, including security software and services, as well as outsourcing and cloud computing.

Headline Expenditure Projections

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* Computer Hardware Sales: MYR8.3bn in 2012 to MYR8.7bn in 2013, +4.8% in local currency terms. Sales of tablets will ensure volume growth continues, but with consumers opting for low priced tablets, increases in market value will fail to keep pace.
* Software Sales: MYR2.6bn in 2012 to MYR2.9bn in 2013, +10.1% in local currency terms. Although piracy remains a drag on consumer software sales, SME spending on enterprise resource planning (ERP) and customer relationship management (CRM) is growing, while larger enterprises are deploying increasingly complex solutions.
* IT Services Sales: MYR4.9bn in 2012 to MYR5.3bn in 2013, +8.2% in local currency terms. IT services is expected be the fastest growing segment of the market, with enterprise spending on outsourcing, cloud computing and security services driving demand growth.

Key Trends And Developments

The popularity of tablets is having a major impact on the Malaysian hardware market, although shipments of desktops are not in decline as in more developed markets, with PC vendors able to tap demand from first time buyers. Government procurement is also supporting the market for traditional PC devices via its netbooks for education programme. There have been reports of increasing consumer interest in convertible notebooks/ultrabooks with integrated touch functionality, which BMI believes will take an increasing share of sales through 2014 as vendors innovate with design and prices decline.

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