BMI View: W e made a minor downgrade to the growth forecast for 2015, with ringgit depreciation expected to exacerbate the slowdown from the tablet market plateau and the fact some hardware and software upgrade demand was brought forward to 2014 by Microsoft XP support withdrawal. Even after the downgrade we have a positive outlook for the growth of the Malaysian IT market, and BMI forecasts a CAGR of 6.6% 2015-2019 in local currency terms. In the hardware market, rising incomes and increased access to affordable data connectivity, along with cuts to Windows licensing fees, will boost consumer and enterprise spending. In the enterprise software and services market growth will be also be robust as firms look to harness increasing volumes of data - as well as respond to heightened competition across South E ast Asia with efficiency generating investments. Areas we identify for especially strong growth include security software and services, as well as outsourcing and cloud computing.
Although the Malaysian IT market is one of the most developed markets in the region, BMI believes that there is further scope for growth with the sector expanding an average of 7.1% until 2019. This is driven by a supportive economic environment and a government policy framework encouraging the development of the market. In the hardware market, rising incomes and increased access to affordable data connectivity, along with cuts to Windows licensing fees, will boost consumer and enterprise spending. Meanwhile, over the medium term, vendor innovation based on Intel's Haswell chips and Windows touch functionality will help vendors capitalise on the strong consumption story in Malaysia. In the enterprise software and services market growth will be also be robust as firms look to harness increasing volumes of data - as well as respond to heightened competition across South East Asia with efficiency generating investments. Areas we identify for especially strong growth include security software and services, as well as outsourcing and cloud computing.
Headline Expenditure Projections
Computer Hardware Sales: MYR9.3bn in 2014 to MYR9.5bn in 2015, +2.6% in local currency terms. Forecast revised downwards, with ringgit depreciation forecast to dampen demand for imported hardware, with the strongest impact expected in the retail market.
Software Sales: MYR4.0bn in 2014 to MYR4.2bn in 2015, +5.9% in local currency terms. Spending growth expected to slow from 2014 as OS upgrades were brought forward by the withdrawal of official support for Windows XP in April 2014.
IT Services Sales: MYR6.0bn in 2014 to MYR6.6bn in 2015, +9.2% 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
Strong cloud computing and data centre revenue growth was reported for 2014, ensuring that our bullish view of Malaysia's prospects as a 'Big Data' hub for Southeast Asia continues to play out. Robust government support through national policies and a structured approach to promoting local IT and telecoms companies will benefit both the IT market as well as the economy. Data centre and cloud computing-related services and infrastructure revenue grew by 26.2% to MYR795mn (USD219mn) in 2014, according to new data from the Malaysian government's Performance Management and Delivery Unit and the Multimedia Development Corporation. Although less pronounced than the 39.4% revenue increase seen in 2013, this was still a remarkable achievement and highlights the potential for Malaysia to achieve its goal of becoming a cloud-centric IT services hub for the South East Asian region.
Since 2011, the most prominent trend in the Malaysian IT hardware market has been the explosive growth of tablet volumes - which we estimate surpassed notebook volumes for the first time in 2013. However, BMI forecasts a sharp slowdown in growth from 2015 as a result of saturation in the core market of affluent urban consumers. Furthermore, there are signs that existing tablet owners in Malaysia are following similar replacement decision trends for tablets to developed markets. In 2014, tablet replacement cycles lengthened as consumers were less willing to upgrade tablets based on only minor changes from vendors, while at the low-end of the market demand for small screen tablets was also squeezed by the rising popularity of phablets. As a result, we expect 2015 will market the beginning of a partial shift back towards notebooks as a growth engine in the PC market.