Indonesia Information Technology Report Q3 2013 - New Market Report

The Indonesian IT market is forecast to be one of the outperforming markets globally in the medium term on the back of strong economic growth and an emerging middle class. Spending is expected to reach IDR64.6trn in 2013, up 16.3% from 2012. The retail market will be a major driver of growth, with PC penetration estimated at below 10% in 2012, meaning significant growth potential from first-time buyers and upgrades/personal devices. Continued strength in government spending will also support expansion of the market, boosting long-term growth potential.

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Headline Expenditure Projections

Computer Hardware Sales: IDR45.9trn in 2013 to IDR65.4trn in 2017, at a CAGR of 10.4% in local currency terms. Rising incomes and the growing affordability of devices, combined with credit availability, will increase sales in the consumer segment.

Software sales: IDR7.8trn in 2013 to IDR13.0trn in 2017, a CAGR of 15.1% in local currency terms. Windows 8 sales will boost spending in 2013, although progress will depend on the success in bringing down illegal software use.

IT Services Sales: IDR11.0trn in 2013 to IDR17.2trn in 2017, with a CAGR of 13.1% in local currency terms. Forecast unchanged, with a key growth area being cloud services, which could be worth more than IDR12.1trn by 2017.

Risk/Reward Ratings: Indonesia's score was 47.5 out of 100.0. Indonesia remained in ninth position in our latest RRR table, below the Philippines but ahead of Thailand.

Key Trends & Developments

The tablet market is expected to experience rapid growth in 2013 as a wide range of low-cost Androidbased tablets hit the market. Consumers have shown a clear preference for mobile computing devices, including netbooks and notebooks, but tablet adoption failed to take off prior to 2012 due the high price of devices, putting them out of reach for the majority of consumers. Higher specification devices are now becoming available at affordable prices, and, with PC penetration at under 10% in 2012, there is a large opportunity for tablets to be adopted as a first device, with consumers skipping ownership of a desktop or notebook. BMI believes OEMs from China, as well as local brands such as S Nexian will be the main beneficiaries of demand for low-cost devices. However, global vendors such as Acer have stated their intentions to target mid- and low-specification devices at the market in order to achieve growth.

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