Telecommunications Infrastructure
Computing & Internet Diffusion
Analysis: Strengths & Weaknesses
Analysis: Impacts on non-IT business
Hardware Manufacturing
In examining hardware manufacturing for information and communication technologies in Argentina, it is important to consider consumer market reactions of the last few years, since the increased adoption rate of computers has fueled much of the growth. Personal computers sales increased by 48 % in Argentina during 2000, as reported by the Internet consultants Prince & Cooke. Approximately 880,000 computers were sold, increasing the total number of computers in Argentina to 3.4 million. Prince & Cooke reported that 90% of the computers sold were desktops, pursued by notebooks (7%) and servers (3%). (1)
In previous years, computers sales were also on the rise. In 1999, computer sales in Argentina rose 17 % from 1998. The increase was due to the continued adoption of the Internet throughout Argentina. Around 473,000 home computers were sold in 1999. In this regard, Compaq led the home market with sales of 146,000 units, or the equivalent of 31 % market share. Other major competitors included IBM and Hewlett Packard, which had market shares of 8.2 % and 7.2 % respectively. Other brands, mostly foreign, accounted for the remaining 53.6 %. (2)
The previous estimates were shared to show the U.S. domination / penetration into this viable market. Argentina firms are mainly used as assemblers, integrators, or consultants to the companies listed above. However, it is their machines, which reside in this lucrative market. Since this intense foreign penetration of hardware goods is continuously increasing, it does not seem as if Argentine firms will have an opportunity to compete at the same level of penetration and challenge many of these foreign suppliers in the market. Instead, many companies have emerged to surround this adoption of computer imports as support entities.
In this section, an authoritative and leading B2B portal, Mercantil.com, will again be used to better evaluate the current state of Argentina’s computer-related hardware manufacturing. Under the import / export section of Mercantil.com’s business database, hundreds of firms appear under the hardware category. These categories include companies listed under a myriad of groupings including: antennas (50 companies), computer accessories (93), computer equipment parts (6), data communication equipment (90), computer furniture / racks (693), computer supplies (291), electronics (287), information technology (15), integrated circuits (5), telecommunications equipment (137), computers (358), and satellite aerials (9). As mentioned in the software section of this portal, some companies work in a multifunction capacity, stretching their experience into other like industries and or industry sub segments. Therefore, some companies that appear in these separate sections might appear in others. Nonetheless, after careful examination, many companies are listed individually. Moreover, what is interesting to notice is how these firms classify themselves. In other words, when they enable themselves to be indexed in this database, they classify themselves in categories within which they believe they can do business. In this regard, it is interesting to notice what Argentine firms believe they cannot do. For example, there are a high number of companies listed under telecommunications equipment as well as computers, but a low number listed for integrated circuits. This comparison might demonstrate Argentina’s ability to assemble, rather than innovate or assemble the most complicated technological components, such as computer processors. Therefore, one might question whether the labor market in information and communication technologies is advanced enough to become more than just assemblers for other companies, such as IBM, Sun Microsystems, Hewlett Packard, Microsoft, and Bellsouth.
For further information about this sector’s companies according to Mercantil.com, please visit:
http://www.mercantil.com/rc/port_select_activities.asp?area_code=1139&lang=eng
Missed Opportunities
The following will provide insight into how Argentina is developing a missed opportunity in computer related hardware production. Currently, the U.S. market share in servers (multi-user systems) and data communications equipment is around 90 % in Argentina. In the single user PC segment, the U.S. share of direct imports is decreasing significantly. However, many PCs imported from Brazil and Mexico have 80 % U.S.-sourced components and bear a U.S. brand name. Therefore, one way or another Argentine computers will certainly have U.S.-made components. Some U.S. brands that dominate the market are IBM, Compaq and HP. However, Acer of Taiwan ranks fourth in PC sales, with estimated sales projections rising. (3)
Aside from PC assembly, local suppliers offer little competition to the U.S. computer invasion. U.S. vendors shipping directly from the United States or from other countries, such as Brazil, account for nearly 70 % of the Argentine computer equipment import market. Companies that offer complete solutions such as hardware, software, installation, and after sales technical assistance will have better sales opportunities in this market. It is in this category that many Argentine firms have built businesses, attempting to provide different levels of technical service / support for machines already in the market. (4)
Most products that have electronic functions contain interconnected electronic components that are mounted on printed circuit boards (PCBs). These PCBs present another missed opportunity for Argentine computer hardware companies. Currently, the PCB sub-sector presents the greatest market potential for U.S. exporters, since Argentina has not done a substantial job in creating a nitch for itself to produce the necessary PCB supply for a growing PC market. Therefore, Argentina has turned to its main telecommunications and information technology importer, the United States, to fill this gap. (5)
Two essential catalysts sparked growth in these industries. First, foreign trade liberalization resulted in a drastic reduction of computer prices and increased availability of computers and peripherals. These sales were further pushed by a growing demand for connectivity to the Internet. Consequently, large U.S. firms, with products built to order, such as IBM, Hewlett Packard and Compaq have enjoyed greater sales. Second, small computer assemblers (middlemen) emerged throughout the country, especially in Buenos Aires, that began making computers more accessible to the population at large. Yet, these manufactures have still allowed for PCB sales to grow for U.S. companies seeking to expand their markets. Therefore, having the ability to mass-produce computers and peripherals, Argentina seems to be leaving more profit on the table. Part of the reason why Argentina has left doors opened is the government’s necessity to attract foreign direct investment for its newly opened deregulated information technology markets. Therefore, a tradeoff exists between letting one’s own businesses meet and excel demand and using the advanced learning curves of fully functioning, global suppliers that can easily plug their products into the equation to meet demand with credible technology. After all, the consensus in Argentina seems to be that U.S. made computers products have a superiority to others. Moreover, allowing foreign entrants continues to build international awareness that Argentina is a worthwhile market in which to invest. To gain further investment, the “give” is to allow these supplier / investors to profit from a growing market. However, in this trade off, Argentina gives away the ability to mass-produce computer hardware and establish a nitch for itself regionally in Latin America as an exporter with "home grown" goods.
