Thiland-1

Thiland Information Technology Report Q2 2011

CONTENTS

Executive Summary ..................................................................................................................................5
SWOT Analysis ...........................................................................................................................................8
     Thailand IT Sector SWOT ........................................................................................................................8
     Thailand Political SWOT ..........................................................................................................................9
     Thailand Economic SWOT ....................................................................................................................10
     Thailand Business Environment SWOT ...............................................................................................11
IT Business Environment Ratings ........................................................................................................12
     Asia ...........................................................................................................................................................12
     Table: Asia Pacific IT Business Environment Ratings .........................................................................15
Asia IT Markets Overview ..........................................................................................................................16
Thailand Market Overview .........................................................................................................................22
     Government Authority ................................................................................................................................22
     Background .................................................................................................................................................22
     Hardware .....................................................................................................................................................23
     Software ......................................................................................................................................................25
     Services ......................................................................................................................................................28
     Industry Developments ...............................................................................................................................29
Industry Forecast Scenario .......................................................................................................................31
     Market Trends .............................................................................................................................................31
     Drivers .........................................................................................................................................................32
     Policies .......................................................................................................................................................32
     Segments ....................................................................................................................................................32
     Summary .....................................................................................................................................................33
     Table: Thailand, IT Sector, 2006-2015 ....................................................................................................33
     Internet ........................................................................................................................................................34
     Table: Telecoms Sector – Internet – Historical Data & Forecasts, 2008-2015 .................................34
     Macroeconomic Forecast .........................................................................................................................36
     Table: Thailand – Economic Activity, 2006-2015 ....................................................................................38
Competitive Landscape ...............................................................................................................................39
     Hardware ......................................................................................................................................................39
     Software ........................................................................................................................................................41
     IT Services .....................................................................................................................................................43
     Internet ..........................................................................................................................................................45
     Wireline (Fixed-Line And Broadband) Developments ............................................................................52
     Table: Wireline Developments, 2008-2009 .............................................................................................52
Company Profiles ..........................................................................................................................................55
     Microsoft Thailand ........................................................................................................................................55
     Hana Microelectronics .................................................................................................................................57
Country Snapshot: Thailand Demographic Data ...................................................................................58
     Section 1: Population .............................................................................................................................58
     Table: Demographic Indicators, 2005-2030 ........................................................................................58
     Table: Rural/Urban Breakdown, 2005-2030 .........................................................................................59
     Section 2: Education And Healthcare ....................................................................................................59
     Table: Education, 2002-2005 .................................................................................................................59
     Table: Vital Statistics, 2005-2030 ..........................................................................................................59
     Section 3: Labour Market And Spending Power ...................................................................................60
     Table: Employment Indicators, 2001-2006 .............................................................................................60
     Table: Consumer Expenditure, 2000-2012 (US$) ..................................................................................60
     Table: Average Annual Non-Agricultural Wages, 2001-2012.................................................................61
BMI Methodology ....................................................................................................................................62
     How We Generate Our Industry Forecasts .........................................................................................62
     IT Industry .............................................................................................................................................  62
     IT Ratings – Methodology ....................................................................................................................63
     Table: IT Business Environment Indicators ........................................................................................64
     Weighting ...............................................................................................................................................65
     Table: Weighting Of Components .......................................................................................................65
     Sources ...................................................................................................................................................65

----------
Executive Summary

Market Overview
The Thai IT market is the largest in the South East Asia region and, despite ongoing political uncertainty,
is projected to grow at a CAGR of 9% over the 2011-2015 period. The total value of Thai domestic
spending on IT products and services should pass US$6.7bn in 2011 and approach US$9.4bn by 2015. As
the economy expands, a national PC penetration rate of about 15% indicates plenty of untapped market
potential, particularly in upcountry areas.

The IT market is expected to grow about 5% in 2011, consolidating a recovery that was strong overall in
2010 despite a number of exogenous disturbances, including political disturbances and severe flooding.
Cloud computing, social networking applications and tablets will all help to drive demand in 2011.

BMI’s view is the fundamentals of growing affordability and low PC penetration, supported by
government ICT initiatives, will keep the market in positive territory during the forecast period. There are
a number of drivers including a Government PC for Education programme and growing interest in cloud
computing, in which Thailand has been ranked one of the early adopter countries in the region.

Industry Developments
The government has announced a new fund to encourage Thai SMEs to utilise cloud computing, which it
sees as a cost-effective way for smaller companies to access IT. Government assistance will also be an
important driver of this segment, with Thai SMEs eligible to receive between 200,000 – THB400,000 (up
to US$13,000) to adopt cloud computing. Thailand has around 2.8mn small- and medium-sized
enterprises SMEs.

In 2010 vendors were left assessing the effects of a number of exogenous effects on the market, including
political disturbances and severe flooding. The political crisis in Bangkok and other major cities in H110
had an impact on consumer IT demand, particularly in Bangkok, which accounts for about half of
national consumer IT spending. Government and business demand held up relatively well, but during the
troubles some vendors reported their customers were delaying IT purchase decisions by one or two
months.

The Thai government announced an ambitious target to increase the local software market share of Thai
software companies to about 50% in 2010. The Thai government announced a series of measures to
support the local software industry. SIPA (Software Industry Promotion Agency) has led Buy Thai First
campaigns to persuade local SMEs to buy Thai-developed software and lobbied the government to
endorse tax incentives for local developers.

Competitive Landscape
A notable development in 2010 was the emergence of tablet notebooks, spearheaded by Apple’s iPad.
The iPad did not receive its official release in Thailand until Q410, but grey market versions had already
proved popular. The official versions of the iPad that were available in Thailand included the 16, 32, and
64GB WiFi and 3G versions, with prices ranging from THB15,900 to THB25,900

In 2011, market leader Acer has targeted 20% growth in Thai market sales, has earmarked an 2011 IT
market budget of around THB400mn, up from THB350mn in 2010. Meanwhile, Lenovo also plans to
spend substantially to increase its share of the Thai PC market, with a marketing budget of around
THB200mn in 2010, as it targets a 10% PC market share in 2011.

Microsoft targeted growth of 12% in fiscal 2011, compared with 13% in fiscal 2010. As of Q410, sales of
Microsoft’s Windows 7 in the Thai market were estimated at about 800,000, 50% higher than for the
previous Windows Vista operating system in an equivalent period. Meanwhile in January 2011, Microsoft
announced a tie-up with local software firm Senior Com to provide cloud computing services to the Thai
market.

Computer Sales
According to BMI projections, Thailand’s PC market will be worth about US$4.1bn in 2011, up from an
estimated US$3.8bn in 2010. In 2010, the consumer segment is expected to continue its dominance and
will comprise nearly two-thirds of the market. PC penetration of about 15% represents considerable latent
growth potential.

The Thai PC market has matured and there is greater segmentation. There is also a first-buyer market for
desktops, particularly in large provincial cities such as Chiang Mai and Hat Yan. However, even firsttime
buyers have higher expectations concerning functionality and performance. The main driver of the
computer market will be notebooks, which comprised nearly two-thirds of PC sales in 2010.

Software
In 2011, Thai software sales are projected by BMI at US$772mn and software CAGR from 2011-2015
should be in the region of 10%. The baht’s appreciation reportedly allowed retailers to reduce local prices
and this boosted vendors’ sales of legal software in 2010. Growing PC penetration as well as new
technologies and business models, including 3G mobile and WiMAX, and industry trends such as cloud
computing are all market drivers.

There is a growing emphasis on cost efficiency as enterprises look to enhance productivity through
automating these and other functions. Business intelligence software is another growth area, due to the
issue of data profileration. Thailand’s software market is developing, despite the problem of software
piracy, which still accounts for about 76% of software.

Services
IT services spending is forecast to reach about US$1.5bn in 2011, up from US$1.2bn in 2010. However,
sectoral CAGR is projected at 12% over the forecast period as the market approaches US$2.3bn by 2015.
Vendors are focusing on opportunities developing from cloud computing and are expanding into smaller
cities.

IT services accounts for about 22% of total IT spending. Over the past few years, the size of deals has
increased in key verticals such as banking and telecoms. Despite the financial crisis, some elements of
bank spending will be relatively immune, particularly those driven by regulatory compliance. Meanwhile,
telecoms is another big spending IT vertical, with mobile operators investing to expand capacity and
launch new services.

E-Readiness
Thailand’s internet penetration is set to pass 17% within BMI’s five-year forecast period, from
about 16% in 2008. Broadband penetration will grow from 2.3% in 2009 to 6.6% in 2014, according to
BMI estimates.

By 2009, the Thailand Internet Service Provider Association forecast that Thailand could have between
5mn and 10mn broadband subscribers, although BMI opted for a more conservative estimate of 1.5mn
subscribers. The level of growth in the broadband sector will also be fuelled by the award of WiMAX
licences.

----------
SWOT Analysis

Thailand IT Sector SWOT

Strengths 
􀂃 One of the most substantial growth prospects in South East Asia and, despite current
economic headwinds, is projected to grow at a CAGR of 9% over the 2009-2013
period. Fundamentals of growing affordability and low PC penetration will keep the
market in positive territory.

Weaknesses 
􀂃 Marked income disparities mean market is price sensitive outside major cities.
􀂃 White box goods account for about 60% of the computer market while smuggled
handsets and other products are also readily available.
􀂃 Software piracy accounts for about 76% of software.

Opportunities 
􀂃 Notebook PCs and netbooks will increase their share of PC sales to about 43% by
2013.
􀂃 SMEs and education sectors will be important drivers of PC demand.
􀂃 Government PC for Education programme launched later in 2009.
􀂃 Demand for industry-specific solutions in verticals such as health, education, mobile
telecoms and agriculture.
􀂃 SMEs in particular are becoming more significant consumers of packaged software,
due in part to more flexible payment schemes.
􀂃 Growing internet/broadband penetration as government continues to try and create a
more competitive environment in the telecoms sector.

Threats 
􀂃 Global economic slowdown may continue to affect consumer and business
sentiment.
􀂃 Low prices may undermine margins and profitability.
􀂃 Buy Thai First campaigns to persuade local SMEs to buy Thai-developed software.

Thailand Political SWOT

Strengths 
􀂃 Thailand remains committed to democratic ideals as reflected by the Democrat
coalition government’s commitment to facilitate a smooth transition of power
through general elections in 2011.
􀂃 Genuine efforts by the ruling government to reconcile political interests between the
urban middle class and the rural poor is beginning to gain widespread political
support from the public.

Weaknesses 
􀂃 Thailand’s political scene remains volatile – especially considering that the country
has returned to the coalition governments of the past, which are inherently
unstable. The urban upper and middle classes maintain a dominant influence, at
the expense of the interests of the rural poor, who make up a far larger percentage
of the population and form a backbone of support for the current opposition.
􀂃 The army is widely seen to still play an influential role behind Thai politics, a view
reinforced by the December 2008 change of administration that followed the
dissolution of the then ruling People’s Power Party.

Opportunities 
􀂃 Changes to the 2007 constitution – which effectively trimmed the say of the
electorate – could be one step towards reconciliation between the opposing political
camps, although amendments are likely be resisted by the army and the red-shirted
People’s Alliance for Democracy (PAD) movement which staged the marathon antigovernment
protests in 2008.
􀂃 The new government has expressed its commitment to continuing mix of populist
and market friendly economic policies, which has brought renewed attention to
massive public infrastructure projects. Although economic headwinds remain, these
initiatives should help boost consumer and investor confidence over the longer
haul.

Threats 
􀂃 The current shaky political situation does contain risks to broader political stability,
given the seemingly intractable tension between the rural poor and the urban
middle-upper classes that has manifested itself in recurring protests. An added
complication is that the 2007 constitution handed too much power over to the
military, setting the stage for possible future coups.
􀂃 Violence has increased in Thailand’s three southern-most provinces, after attacks
from suspected Muslim separatist groups. Since 2004, more than 3,500 people
have died in attacks, with the situation, if anything, becoming more serious.

Thailand Economic SWOT

Strengths 
􀂃 Thailand’s economy has performed relatively well over the past few years, despite
the stumbling block of political uncertainty, although many challenges arguably
remain.
􀂃 Thailand’s vulnerability to capital outflows has been reduced substantially, with the
country now boasting a sizeable foreign exchange reserve pile. This has
significantly narrowed the chances of a repeat of the 1997 crisis.

Weaknesses 
􀂃 Risks to the economy remain, including weak business and investor sentiment –
despite comparatively low interest rates – and a structural over-dependence on
exports. The vulnerability brought by the latter is evident in the recent global
slowdown.
􀂃 The size of the skilled workforce is relatively small, meaning that productivity gains
could become increasingly hard to achieve as the pool of cheap rural labour has
been depleted.

Opportunities 
􀂃 The new Democrat-led government is likely to maintain parts of the populist
platform of the previous People’s Power Party-led administration, including the
emphasis on large scale infrastructure projects and providing economic relief for
lower income groups in Thailand.
􀂃 Investment, which has taken a serious knock over the past year due to the
shrivelling up of both external and domestic demand, will likely resume its recovery
when political problems are resolved and the global economy stabilises.

Threats 
􀂃 Volatile prices for many of Thailand’s key export commodities (rice, rubber and
sugar) is likely to damage the livelihoods of many farmers, and force the
government to continue to offer burdensome subsidies.
􀂃 Thai exports have benefited substantially from China’s recent economic boom, and,
while recent signs suggest otherwise, a slowdown in the Chinese economy is
therefore of non-negligible concern.
􀂃 Continued political turmoil risk damaging Thailand’s attractiveness to foreign
investors, who may opt to deploy their capital in more stable regional competitors
such as Vietnam and Indonesia.

Thailand Business Environment SWOT

Strengths 
􀂃 The 2010 ‘Index of Economic Freedom’, compiled by the Heritage Foundation and the
Wall Street Journal, regards Thailand as a ‘moderately free’ economy, in 66th place
worldwide and 10th place regionally.
􀂃 Thailand ranked at a very strong 19 out of 183 countries under the ‘Ease of Doing
Business’ category in the World Bank’s 2011 ‘Doing Business Report’.

Weaknesses 
􀂃 Protection of intellectual property in Thailand is poor. This is reflected by its place on
the Priority Watch List of countries in the US Trade Representative’s 2010 Special
301 Report.
􀂃 Thailand is finding it difficult to attract foreign direct investment amid growing regional
competition, and domestic political woes, fuelling fears that investors that have
previously warmed to the country are now going to low-cost China.

Opportunities 
􀂃 Thailand has been trying to move up the value chain to differentiate itself from China,
which now dominates the supply of labour-intensive goods. New sectors of the
economy, including petrochemicals, the auto sector and food processing, have
registered buoyant growth in recent years.
􀂃 A more vigorous effort to protect intellectual property rights would help bolster
Thailand’s attractiveness to foreign investors.
􀂃 The government’s proposal to slash the corporate tax rate from 30% to 18% could
help bolster Thailand’s appeal to foreign investors and narrow the gap with other
regional economies.

Threats 
􀂃 Thailand’s privatisation programme was thrown into doubt after the government was
forced to shelve the controversial privatisation of the state-owned power company
EGAT following a mass demonstration by workers. Most recently, unions have staged
protests against what they see as a stealthy plan by the government to auction off
parts of the unwieldy and chronically loss-making State Railway of Thailand to the
private sector.
􀂃 Corruption is still a major barrier to doing business in Thailand, with the country
coming in at 78th in the 2010 Transparency International Corruption Perceptions
Index, equal with China.

----------
IT Business Environment Ratings

Asia

BMI’s Asia IT Business Environment Ratings compare the potential of a selection of the region’s
markets over our forecast period through to 2015. Our Q211 ratings reflect our consideration of the
political and economic risks, as well as risks associated specifically with IT intellectual property (IP)
rights protection and the implementation of state spending projects.

In our updated Asia Q211 ratings, country rankings are unchanged, reflecting stabilisation in most
markets after the impact of the global economic downturn in 2008-2009. Across the Asia Pacific region,
global economic recovery and improved consumer confidence resulted in improved trading conditions for
IT vendors, and a stronger than expected rebound in PC sales.

Australia retains its top regional rating this quarter. The market was boosted following confirmation that
the new government will continue to implement the National Broadband Network project, which will
drive the development of Australia’s digital economy and feed demand for PCs. Sectors such as
government, telecoms, healthcare and banking should continue to supply demand for implementation,
consulting and managed services in future.

One area of opportunity should be growing demand for cloud computing services. In 2010 a wide range
of leading Australian private and public sector organisations launched cloud initiatives, including many of
the country’s leading banks. Meanwhile, the government unveiled a six-year cloud computing strategy.

The smaller, but mature IT markets of Singapore and Hong Kong take second and third positions
respectively in our ratings table, due primarily to their high Country Structure scores. Key sectors of the
Hong Kong economy such as financial services are investing in modernisation as Hong Kong strives to
maintain its regional hub status in the face of competition from rivals such as Shanghai. Hong Kong also
continues to offer IT investors opportunities associated with its growing links to the vast Chinese market.

Singapore benefits from high broadband penetration and initiatives such as the government’s ambitious
Intelligent Nation 2015 plan, and the standard operating environment. Spending on IT services will be
boosted by the continuing boom in IT-enabled services such as call centres and back-office financial
services. Other promising sectors for IT services include healthcare, as the government launches a series
of initiatives to develop health technology. Hong Kong and Singapore are expected to emerge as cloud
computing hubs due to growing interest in cloud computing across the region.

On the downside, the continued restructuring of both economies, towards a more service-oriented model,
may limit long-term growth prospects. However, this also brings opportunities in sectors such as financial
services and banking. Businesses will probably remain cautious and value-focused over the short term.

BMI forecasts per capita IT spending in South Korea, in fourth place in the table, will rise by one-third to
US$1,000 by 2015. South Koreans will increasingly choose to spend money on IT products due to a
substantial increase in disposable incomes. Consumers appear willing to upgrade their PCs and there is
also a trend for households to own more than one computer. New cloud computing offerings and
increased competition in this segment are expected to fuel growing demand from end-users, to utilise this
technology. There will be many key growth areas and IT outsourcing is expected to show a strong
demand trajectory.

Malaysia remains in fifth position in our Q211 regional ratings. IT spending growth will be driven by the
government’s drive for greater broadband penetration. It has set an optimistic target of 75% by 2015. The
roll-out of a high-speed broadband network will boost IT spending outside the Klang Valley. Other
projected growth IT market drivers include a rise in the PC penetration level from about 35%, tax
exemptions for notebooks, and growth in disposable incomes. There are increasingly attractive
opportunities in the IT services area as the government implements measures to make Malaysia a growing
regional services and outsourcing hub.

In China, factors such as the vast potential rural market and a commitment to modernisation in sectors
such as education, healthcare and manufacturing will help sustain market growth. Over the forecast
period, government spending, an expansion of consumer credit and expectations about China’s long-term
economic growth will also drive IT investments. In the services segment, growing interest in cloud
computing will be stimulated by the establishment of government pilot programmes in five cities.
However, there are still market risks associated with IP rights protection in China, as well as piracy and a
lack of business transparency. Pressure on hardware prices is also a risk in the current environment.

Vietnamese IT demand, although with a rather smaller market than its leading neighbor to the north, is
expected to have several long-term drivers. Vietnam’s improving ICT infrastructure will facilitate the
development of the nation’s IT market in a country with just 15% PC penetration. Government digital
divide programmes to boost internet and digital utility in rural areas will help addressable market growth
and open PC ownership to a growing number of rural inhabitants. Vietnam’s gradual integration into
global trade networks such as ASEAN and the WTO has helped reduce tariff barriers and prices, and has
increased opportunities

In the Philippines, the IT market will be driven by further growth in the local IT and business process
outsourcing (BPO) sector. The Philippines has a lower PC penetration than many other Asian countries
and the IT market offers corresponding high growth potential over the forecast period. However, there are
challenges such as labour shortages and rising wages.

India also recorded impressive double-digit y-o-y computer sales growth in 2010. The potential is clear,
with less than 2% of the population owning a computer, which is about 20% of the level in China. It was
estimated that 5% of India’s 7.5mn SMEs could implement a technology solution in 2010 and there is
increasing interest in cloud solutions. Realisation of this growth potential depends on fundamental drivers
such as increasing India’s low computer penetration, rising incomes, falling computer prices and the
government’s ambitions to connect the country’s vast rural areas to the rest of the world.

The last three markets in our regional ratings have low scores due primarily to business environment
factors, despite considerable growth potential. In Thailand, the fundamentals of growing affordability and
low PC penetration should keep the market in positive territory during the forecast period. A number of
factors should also support momentum, including the government’s PC for Education programme and 3G
mobile and WiMAX broadband service roll-outs.

Similarly, with ICT penetration of only about 20% and development restricted to richer areas such as
Java, the Indonesian IT market has much growth potential. BMI expects the Indonesian market to be one
of the fastest growing in the region over the five-year forecast period. The SME sector will drive demand
for basic hardware and applications as enterprises focus on enhanced productivity.

Sri Lanka’s IT market has benefited from the restoration of peace and improvements in the security
situation, which helped release pent-up demand for IT solutions. The country has felt the effects of
instability over the years, from disruption of distribution channels and a flourishing grey market to the
underdeveloped telecoms infrastructure. However, the market will feature on IT vendors’ radars as one of
the best potential growth prospects in South Asia. Computerisation has only started in government
services. Major public and private sector organisations remain largely underpenetrated in terms of basic
enterprise software.

Table: Asia Pacific IT Business Environment Ratings
Scores out of 100, with 100 the best. The IT BE Rating is the principal rating. It comprises two sub-ratings, Limits of
potential returns and Risks to realisation of returns, which have a 70% and 30% weighting respectively. In turn, the
‘Limits’ rating comprises Market and Country structure, which have a 70% and 30% weighting respectively and are
based on growth/size/maturity/government policy of IT industry (Market) and the broader economic/sociodemographic
environment (Country). The Risks rating comprises Market risks and Country risk, which have a 40%
and 60% weighting respectively and are based on a subjective evaluation of industry regulatory and IP regulations
(Market) and the industry’s broader country risk exposure (Country), which is based on BMI’s proprietary Country Risk
ratings. The ratings structure is aligned across all industries for which BMI provides Business Environment Ratings
and is designed to enable clients to consider each rating individually or as a composite. Source: BMI

----------
Asia IT Markets Overview

IT Penetration
Across Asia, government ICT initiatives and growing affordability will drive increases in PC penetration
during BMI’s five-year forecast period. While some cities and regions stand out, there is an unbalanced
pattern of regional development, with PC penetration in countries such as Singapore being above 50%,
while in other countries such as Indonesia, it is less than 2%.

The two Asian leaders, China and India, embody the region’s growth potential, as computer ownership
remains the preserve of a minority in both countries. In China, PC penetration was only around 18% in
2008 – although it was far higher in cities such as Shanghai and Beijing – and is projected to pass 30%
overall by 2014. In India, less than 2% of people own a computer. However, some 45% of the population
is under 25, which provides a promising demographic context for increased PC ownership.

Lower prices will help to drive higher PC penetration in developing markets. The average price of a PC in
India has nearly halved over the past few years, and rising incomes and greater credit availability will
continue to bring computers within reach of lower-income demographics.

Around the region, affordable computer programmes continue to find favour with governments. In 2009,
China launched a subsidised PC initiative aimed at rural residents. Australia’s computers for schools
programme had provided almost AUD260mn of computers by the end of 2009. In Indonesia, penetration
of around 2% could double by 2013 if government initiatives are followed through. The Indonesian
government is also rolling out new e-learning initiatives, with a target of raising the current 1:3,200 ratio
of PCs to students in public schools to 1:20.

A similarly broad range is found with respect to internet penetration. The highest levels of internet
penetration are found in South Korea, Hong Kong and Australia, with estimated 2010 narrowband
penetration rates of 74.3%, 73% and 67.7% respectively. Singapore has by far the highest rate of
broadband penetration, which was estimated at 154% in 2010. Meanwhile, the Philippines has the lowest
level of internet usage, with just 6.6% narrowband and 4.9% broadband penetration estimated in 2010.

The fastest growth is expected in Indonesia, where narrowband penetration is projected to leap from 30%
in 2010 to 61.2% by 2014. India is now above 20% narrowband penetration despite a lack of fixed-line
infrastructure, and this should reach 30% by 2014. Fast growth is also projected for Sri Lanka, where
penetration is projected to increase from 10.9% to 21.6% by 2014.

Some 48.3% of Malaysians had internet access in 2010. Across the region, government programmes are
an important driver of ICT penetration. The Chinese government has a five-year plan to make the internet
available in every administrative village in central and eastern China and every township in the west.

Dial-up technology is still the dominant access method in many states. However, even in developing
markets, the number of broadband subscribers continues to gain ground steadily. In China, broadband
penetration is on course to reach 34.3% by 2015, surpassing narrowband penetration of 33.6%. In India,
where the government designated 2007 as ‘the year of broadband’, penetration should increase eightfold
to reach 8% by 2013 from around 1% currently. This is, however, a long way below government targets.
Singapore will also see continued strong growth in broadband penetration, which is projected to reach
202% by 2015.

Meanwhile, the growth of Wi-Fi coverage will be
one driver of notebook sales in places such as
Hong Kong, where the government has committed
another HKD200mn to the deployment of a Wi-Fi
network covering more than 200 public venues.


IT Growth And Drivers
Most Asian IT markets were expected to report
stronger growth in 2010. Across the region, IT
spending should have been boosted by systems
upgrades deferred from the previous year,
although much will have depended on business
confidence. In some cases, companies had IT
budgets that were not spent due to economic uncertainty, and in H110 vendors reported a pick-up in
project flows.

Strong fundamental demand drivers of IT spending mean that there will be continued opportunities. Key
factors common to most markets include cheaper PCs and reform in sectors such as telecommunications
and finance, as well as government initiatives.
In the largest market, China, an expansion in consumer credit, as well as a commitment to modernisation
in sectors such as education, healthcare and manufacturing, will help to sustain market growth. BMI
expects China’s IT market growth to be maintained by an expansion into the western region, rural areas
and lower-tier cities, as well as growing demand from small and medium-sized enterprises (SMEs). IT
spending will also receive a boost from government spending and IT projects associated with the
Shanghai World Expo in 2010.

The long-term potential of India’s IT market is plain: less than 3% of people in India own a computer
(about one-fifth of the level in China), meaning there is real potential in the lower-end product range.
India’s IT market appeared to be positioned for a strong recovery in 2010 thanks to an improving
economy and stronger consumer sentiment as well as government support for modernisation in lagging
sectors. It is estimated that around 5% of India’s 7.5mn SMEs may have implemented a technology
solution in 2010. Meanwhile, India’s business process outsourcing industry is growing at around 40% per
annum and will continue to generate opportunities for vendors of IT products and services.



The Philippines is one of the countries currently
benefiting from low-priced PC programmes
(PC4ALL), which provide opportunities for
vendors to penetrate the low-income segments.
Other regional computer sale drivers over the
forecast period include education, lower prices,
IP telephony, cheaper processors as well as
notebook entertainment and wireless networking
features. Meanwhile, in Indonesia, the basic
demographics of rising computer penetration
and growing affordability should drive growth.
SMEs represent a growth opportunity, as
currently only around 20% of Indonesian SMEs
are estimated to make use of IT. Compliance
with government and international regulations will be a driver in financial, manufacturing and other
sectors.

In more developed markets such as Hong Kong and Singapore, robust retail sales led the way in early
2010 as spending recorded positive growth following a contraction in 2009. In Hong Kong, consumer
spending was expected to remain strong in 2010, as evidenced by the positive early reception of Apple’s
iPad. IT market growth will be driven by government IT spending as well as cross-border trade and cooperation.
The largest IT market in the region is, unsurprisingly, China, estimated at US$92.5bn in 2010, trailed
distantly by Australia (US$19.4bn), India (US$16.1bn) and South Korea (US$16.1bn). Singapore’s IT
market (including communications) is the largest as a proportion of national GDP (2.66%), followed by
Hong Kong (2.07%).

The fastest-growing IT markets over the forecast period look set to be Sri Lanka and India, with 2010-
2014 compound growth of 109% and 104% respectively, driven by increasing PC penetration. China is
third, with the IT market growing by an estimated 64% over BMI’s five-year forecast period.

Sectors And Verticals
Regional IT markets remain hardware-centric, with hardware accounting for 42-71% of total spending in
all markets in 2010. However, spending on software and services will grow faster. Notebook sales are
growing much faster than the PC market as a whole, with growth driven by falling prices and more
features.


BMI expects a trend of rising hardware
investment to establish itself over the next few
quarters. The PC market contracted in many
markets in H109, following a slowdown towards
the end of 2008. However, growth had returned in
most markets by the end of 2009. Sales of
Microsoft’s Windows 7 operating system and new
Intel core technology also had the potential to help
trigger a new cycle of hardware upgrades in 2010
and beyond, although much will depend on
business confidence.

In mature markets such as Australia and
Singapore, PC sales are dominated by replacement sales. In the former, upgrades are estimated to account
for at least 80% of business purchases and more than 50% in the case of households. More than 90% of
Australian households now have a PC, but consumers have appeared willing to spend on upgrading their
notebook computers, and it is also becoming more popular to purchase a second household PC. Indeed,
around 30% of households have more than one PC.

In less developed markets, demand from under-penetrated rural areas, affordable computer programmes
and growing broadband penetration should generally drive growth. In much of emerging Asia, demand
from smaller towns and rural areas will provide the main source of growth, along with replacement of
desktops with notebooks. SMEs will be one of the strong growth segments over the forecast period, with
SME demand for servers and networking equipment providing significant growth opportunities.

In both emerging and more mature markets, the growing popularity of broadband will help to support
computer sales. China Telecom is among regional telecoms companies to have rolled out PC bundling
offers as part of its broadband packages. The Australian government’s National Broadband Network plan
should drive the development of Australia’s digital economy and the growth of services such as online
banking and shopping.

Meanwhile, a wave of 3G launches across the region should also provide a stimulus to sales of notebooks,
with Vodafone Hong Kong among service providers offering 3G/HSPA USB modems bundled with
their 3G services. However, netbooks and notebooks face competition from other form factors such as
smartphones – from PalmResearch in Motion, Apple and other vendors – and tablet notebooks,
spearheaded by Apple’s iPad.

Due in part to high levels of piracy, software’s share of IT spending is relatively low, ranging from 11-
25% among countries covered by BMI. Efforts are being made to tackle the issue of piracy, but despite
government crackdowns in China and the Philippines, software piracy remains above 70% in most of
emerging Asia.

Across the region, there is a growing trend for smaller companies to seek greater efficiency by using IT to
improve productivity and reduce costs (including labour costs). In general, ERP and other e-business
products still dominate the enterprise software market, but vendors are also looking to other areas such as
CRM and business intelligence, where faster growth is possible.

The economic slowdown may have encouraged companies to consider cloud computing solutions such as
software-as-a-service (SaaS). The hosted application model may already account for between one-fifth
and one-quarter of China’s software revenues. SaaS has also enjoyed steady growth in the Hong Kong
market over the past three years with, according to vendor estimates, around 8% of local enterprises now
use a SaaS security solution. Improved broadband infrastructure will assist the popularisation of the
rented software model in markets such as Indonesia.


New platforms and services in the telecoms field are drivers for that key IT spending segment, where an
industry restructuring with the advent of 3G mobile services has led to more competition. Meanwhile,
expanding technology adoption in the logistics industry and public transport will be a source of IT
services projects. Sectors such as hospitals and real estate will also provide opportunities.

The IT services segment accounts for 17-40% of spending in the Asian markets covered by BMI. The
global economic slowdown and credit tightening had an impact on projects in some verticals, but in 2010,
a brightening business climate should have led to more opportunities in key IT-spending verticals such as
financial services, telecoms, government, healthcare and logistics.

Government spending will account for a larger share of spending in many markets. In China, government
stimulus packages should have helped to drive IT-related investments, while in Singapore, government
ICT projects such as SOE2 provide significant opportunities, with the government planning to invest
around SGD1.73bn in ICT projects in its last fiscal year through March 2010. Australia’s National EHealth
Transition Authority has targeted the creation of a ‘paperless environment’ for the health sector
and was also expected to launch a standardised reporting system scheme in 2010. Meanwhile, the Hong
Kong government’s Digital 21 initiative will continue to generate spending.

Regionally, hardware deployment services remains the largest IT services category, with other
fundamental services including system integration, support systems, training, professional services,
outsourcing and internet services. Main spenders across the region include banks and financial institutions
as well as governments. Even in emerging markets such as India, IT vendors are having to pay more
attention to value-added services such as technical support and product troubleshooting, or basic IT and
hardware consulting.

In many countries, the number and size of local outsourcing deals are increasing. Outsourcing could
account for as much as 30% of China’s IT services spending by 2013, while in India there have been
some large contracts such as that awarded by Idea Cellular to IBM. Singapore – where the government
was to tender a major outsourcing contract in 2008 – and Hong Kong have both seen a trend towards
larger outsourcing projects in the public and private sectors.

----------
Thailand Market Overview

Government Authority

Government Authority:  Ministry of Information & Communications Technology (MICT)
Minister:  Ranongrak Suwanchawee

Background

In 2010, political and economic instability, and flooding in the north east of the country, caused some
disruption to the Thai IT market. However, the market remains the largest in South East Asia. The
market’s growing importance is reflected in Microsoft’s recent decision to upgrade Thailand to directly
reporting to APAC management, rather than to an ASEAN level.

Thailand’s IT market is heavily concentrated in the capital Bangkok and surrounding area. Government
and industry campaigns tend to be most active in this area and a measure of market expansion will be the
extent to which development can be extended beyond this core region. A key growth opportunity for
vendors going forward will be first-time buyers in provincial markets and second-tier cities, such as
Chiang Mai.

The government is determined to develop Thailand’s information society and ICT industry, and is wooing
multinationals to play their part. Despite the problematic economic outlook, Thailand is likely to remain
an important regional market for vendors over the 2010-2014 period.

Drivers
BMI’s view is that the fundamentals of growing affordability and low household penetration of key
products such as notebook computers will support market expansion over the forecast period. PC
penetration is currently below 20%. Thailand is a market where much marketing focuses on brand and
emotional appeal rather than more functional approaches.

The retail sector should contribute to IT sales growth due to more financing options for consumers and
more outlets. Expanding internet penetration will also support expanding PC penetration, while the
growing popularity of broadband and possible new wireless broadband licences will drive demand for
devices with multimedia features and wireless capabilities.

The bundling of PCs and notebooks with broadband internet services is likely to grow and the effort by
DTAC is an example of this. Notebooks will account for more than 40% of PC sales by value in the
forecast period and mini-notebooks will be a growth centre, while desktops still have potential for growth.

Hardware
According to BMI projections, Thailand’s computer hardware market will be worth about US$4.4bn in
2011, up from an estimated US$3.9bn in 2010. In 2011, we expect the PC market to report double-digit
growth, following a strong performance in 2010. We expect enterprise spending to increase this year,
thanks to product and technology innovation and hardware upgrades previously deferred as a result of the
economic situation. Cloud computing, social networking applications, and tablets will all help to drive
demand in 2011.

A number of exogenous events had an impact on PC demand in 2010. In the second half of the year,
floods affected demand in the northeast of the country. Meanwhile, political unrest in Thailand had an
impact on consumer sales in the key market of Bangkok in H110. However government and business
spending held up well, meaning the impact on overall sales growth was limited.

According to vendor reports, the Thailand market made a fairly rapid recovery towards the end of Q210
from the political turmoil which disrupted sales in the first quarter. In many cases, demand started to start
to pick up again from late May and the first week in June. In H210, growth continued to be solid, with a
boost from students at the start of the new university year, as well as an uptick in corporate and office
sales.

Spending was down in some key IT retail outlets in the capital during March, after strong growth in the
first two months of the year, as the political crisis worsened. Retailers in Pratunam’s Pantip Plaza and
Ratchaprasong district, which together account for more than 30% of the IT business in Bangkok,
reported a drop in sales of about 15%. The Commart X-Gen 2010 trade show in Bangkok in late June
recorded record sales of PCs and accessories, suggesting demand bounced back.

The Thailand computer market was estimated at 3.8mn units in 2010, up from around 3.0mn in 2009. The
consumer segment accounts for about three-quarters of unit sales in Thailand and is expected to maintain
its dominance in 2011. Demand will be bolstered by market expansion in the relatively underpenetrated
rural areas. Meanwhile in urban areas, PCs are increasingly in demand as multi-function entertainment
hubs which may be used for watching films or TV shows and listening to music. The growing popularity
of social networking is also a major driver of mobile computer purchases, with purchases of second
computers a key driver in this segment.

However, falling prices will mean that margins remain under pressure. The average sales price of a
notebook is about THB20,000, with about 40% of units retailing in the THB18,000-20,000 range.
However entry-level notebooks from vendors such as Toshiba were available in early 2011 for as little as
THB13,000. Prices are expected to continue to fall over BMI’s forecast period, due to fierce competition.
During the economic slowdown, strong demand from consumers kept the PC market in positive growth
territory, but vendors and retailers cut prices to stimulate sales, resulting in revenues growth lagging
volume sales.

Stronger growth is expected in the Thai enterprise PC market in 2011, driven by a revival in business
investment. New CPU technology and migrations to Microsoft’s Windows 7 operating system also have
the potential to help trigger a new corporate upgrade cycle. Much will depend, however, on business
confidence in a sustainable economic recovery. Demand from key segments such as banking and financial
services, telecoms, healthcare, manufacturing and government will provide opportunities for vendors.

Total hardware revenues including notebooks and desktops are expected to rise to US$5.8bn 2015. PC
penetration of about 15% represents considerable latent growth potential. A number of factors should
support an upwards PC market demand trajectory, including a Government PC for Education programme,
launched in 2009. Other positive factors include 3G mobile and WiMAX broadband service launches, and
aggressive vendor and channel promotions.

Volume sales were estimated at about 3.0mn units in 2009, with growth of about 15%, and shipments are
projected to more than double by 2014. Notebooks are increasing their share of the PC market while the
desktop market shrinks as a share of overall sales. The desktop market is relatively saturated and will
grow at a CAGR of about 2%. Around 1mn desktops were sold in 2010 with the desktop share of the
overall PC market now at below one third. Meanwhile, sales of servers in the Thai market were estimated
at about 50,000 units in 2009.

The main driver of the computer market will remain notebooks, which accounted for nearly two-thirds of
sales in 2010. There is a substantial student and first-time buyer market for affordable models, but there is
also replacement demand for slimmer, lighter and more attractive notebooks with multimedia and
entertainment features and wireless connectivity. Even first-time buyers have increasingly high
expectations concerning functionality and performance. 3G wireless network expansion will help drive
sales. Overall notebook shipments were estimated at 2.2mn in 2010 and are expected to grow to around
5.2mn by 2015.

Consumers appeared willing to upgrade notebook computers, and during the economic slowdown, the
growing popularity of mini-computers or netbooks, was one of the brightest areas in the computer market.
Netbook sales were estimated to account for above 10% of Thai notebook sales in 2008, but contrary to
many expectations, growth flattened in 2009 and the share of notebook sales may have dropped to single
figures. In 2010, netbook sales were reported to have dropped below 7% of total notebook sales as there
was a blurring of the distinction between netbooks and notebooks, in terms of price and features.

Netbook models from companies such as Acer and Lenovo continued to sell on the Thai market, but
there were signs consumers were less satisfied with the relatively low-performance netbooks. The average
price of a netbook in Thailand is between THB10,000-15,000, but the price gap with fully featured
notebooks has shrunk. Fully featured notebooks are now available on the Thai market for less than
THB15,000, with entry-level models costing about THB13,000.

Netbook prices also continue to fall, below THB10,000 for the cheapest models. Toshiba and other
vendors predicted the long-term share of netbooks in the Thai notebook segment could be as low as 5%.
However, 3G mobile and low prices could boost the segment, which could result in a higher share.

Meanwhile, netbooks and notebooks face competition from other form factors. In particular smartphones
from PalmRIMApple and other vendors are being offered by vendors as alternative connectivity
solutions and often include a Wi-Fi option. In 2011, tenfold growth in the local tablet market is forecast.
During 2010, tablet notebooks emerged, spearheaded by Apple’s iPad, and tablet sales reached
about 100,000 units last year. Sales were expected to rise as prices fall from a previous level of
THB40,000-70,000.

Other vendors such as Acer and Samsung are expected to follow Apple in releasing net tablet devices
which have a form factor between the size of a smartphone and a netbook. NetTabs are being designed to
appeal to consumers who find a smartphone inconvenient for consuming video media or surfing the web,
but for whom a netbook is still too big or heavy. NetTabs are expected to be significantly more expensive
than smartphones, but despite a previous mixed record with this form factor, should be a growth area in
2011. Another area that vendors will monitor closely is the e-reader market

The Thai PC market has become more mature, with greater segmentation. There is still a first-buyer
market for desktops, particularly in large provincial cities such as Chiang Mai and Hat Yan. The market
for notebooks is still concentrated in Bangkok and other major cities, but the greatest growth potential for
desktops is in rural areas where PC penetration is lower.

PC penetration in upcountry provinces is estimated at less than 10%, compared with penetration of
about 40-50% in Bangkok and other major cities. In 2009, desktops recorded flat or slightly negative
growth due to the economic situation and faster notebook growth, However, desktops will continue to
have a position in the market for the foreseeable future.

Software

In 2011, Thai software sales are projected by BMI at US$772mn, despite the uncertain economic
conditions, and software CAGR from 2011-2015 should be in the region of 10%. With the economic and
political crisis affecting public and private sectors, some vendors and their local partners experienced a
slowdown in some business during 2009. However, in early 2010, software vendors reported business
demand remained strong, despite continuing political unrest. Vendors reported that the baht’s
appreciation provided a boost to sales of legal software by allowing retailers to reduce local prices.

Growing PC penetration and new technologies and business models, including 3G mobile and WiMAX,
and industry trends such as SaaS, Green IT and virtualisation, will provide areas of growth. Sales of
Microsoft’s Windows 7 operating system has the potential to boost revenues, although much will depend
on consumer and business confidence. Microsoft said Thailand is becoming one of the fastest-growing
markets for the adoption of Windows 7, partly due to retail promotions. In 2010, Microsoft report growth
of around 13% in the Thai market. By Q410, sales of Windows 7 in the Thai market were estimated at
about 800,000, 50% higher than for the previous Windows Vista operating system in an equivalent
period.

Meanwhile, new cloud computing offerings and increased competition in this segment should fuel
demand from end-users to utilise this technology. Government assistance will also be an important factor,
after the government announced in 2010 that Thai SMEs could receive between 200,000 – 400,000 baht
(up to US$13,000) to adopt cloud computing. In addition to cost savings, businesses will aim to boost
efficiency and increase flexibility of response to customer needs.

Large businesses are most likely to put IT applications such as mail, phone systems and document
management into the cloud. However, enterprise applications that require a high level of customisation, or
which are subject to regulatory or data-sensitivity constraints, are more likely to stay on premise.

Thailand’s software market is developing, despite the problem of software piracy, which still accounts for
about 76% of software. As usual, the problem is more one of enforcement rather than a lack of legal
provisions. In the past year, the government appears to have taken a tougher stance and, in the first half of
2009, was carrying out raids at the rate of about one a month.

Surveys show there is still potential for enterprises to increase spending on basic solutions, including
security. The economic slowdown and fall in demand for manufactured goods represented a challenge for
vendors as enterprises were tempted to focus more on the bottom line. Many companies, particularly
trading companies, cut back on non-essential systems upgrades because of cash-flow shortages. The
economic crisis was compounded by a situation of political uncertainty, which resulted in the delay of
some projects even before the government launched its austerity plan in June 2008. The Songkran
political clashes also caused some companies to delay investments.

During BMI’s five-year forecast period, the Thai market should offer opportunities in many sectors.
While management software remains at less than 10% of the total software market, basic applications
such as ERP and accounting are finding increasing popularity with the business market. There is a
growing emphasis on cost efficiency as enterprises aim to enhance productivity through automating these
and other functions.

Vendors should also focus on areas such as CRM, where faster growth is possible. Auto manufacturing is
one industry that has been spending on CRM, to help agents and dealers log a record number of customer
service interactions.

Business intelligence software is another growth area, due to the issue of data proliferation. Both Thai
businesses and government agencies face challenges associated with rapidly expanding data, due both to
the use of more ‘smart’ devices, and also to legal and compliance requirements. Local businesses are also
becoming more aware of the ability of timely delivery of information to help with real-time decision
making. Customer intelligence and business analytics solutions are among those in demand to help Thai
businesses optimise product releases and inventories.
Data proliferation will also drive spending on security solutions. A new data privacy bill and new
regulations will provide an incentive for government and enterprises to continue investment in IT security
software. Web analytics is another related potential growth area, as firms look to assess the effectiveness
of their online activities and advertising in more detail.

Considering the focus of many businesses controlling costs, the pay-on-demand Software-as-a-
Service (SaaS) model has grown in popularity and spread beyond the initial core application area of
CRM. The economic crisis may have provided a lasting boost to the SaaS model, particularly as
broadband penetration grows. More vendors are looking for channel partners to help them offer cloud
computing and rented software services to local organisations. Vendors such as Microsoft are targeting
significant expansion in cloud computing services in Thailand market during 2011. A 2010 survey by
Springboard Research ranked Thailand among the top three ASEAN countries adopting cloud computing.
The main drivers, according to the survey, were demand for reduced hardware costs and scalability on
demand.

SMEs will be a growth opportunity, due to growing awareness. In 2010 government agencies renewed
their drive to encourage SMEs to utilise more information technology. According to government figures,
it is claimed that more than 90% of some SMEs are already use some form of IT to manage business
processes and reduce costs. The Ministry of Industry offered to help pay for some SMEs to access
software and IT services.

Manufacturing, banking and finance, and telecoms are projected to be some of the biggest spending
software segments, accounting for about 40% of total spending. Thai financial institutions represent a
growing market for risk analysis solutions. Spending opportunities in the finance segment will be driven
by regulatory compliance due to regulations such as Basel II, HIPPA and the Sarbanes-Oxley Act, despite
the global financial crisis.

Mobile operators such as DTAC are investing in new OSS (operating support systems) to reduce costs
and support delivery of new services. Government is a significant segment, with the increasing use of
KPIs (key performance indicators) within government agencies driving demand for software. Meanwhile,
some hospitals, such as Siriraj, are spending on hospital information systems to improve management and
enhance the efficiency of their operations.

Services

IT services spending is forecast to reach about US$1.5bn in 2011, up from US$1.2bn in 2010. The market
stabilised in 2010 after being affected in 2009 by the economic crisis as projects were put on hold.
Sectoral CAGR is projected at 12% over the forecast period as the market approaches US$2.3bn by 2015.
Vendors are focusing on opportunities arising from cloud computing and are expanding into smaller cities
in order to grow.

IT services account for about 22% of total IT spending. During the past few years, deal size increased in
key verticals such as banking and telecoms. Government spending remained fairly strong in 2010, despite
the ongoing political crisis in Bangkok. Meanwhile, the need to cut costs will encourage banks aiming to
streamline and consolidate data centres, and vendors reported little decline in demand in this area. The
government continues to try and create a more competitive environment in the telecoms sector. Telecoms
is another big spending IT vertical, with mobile operators investing to expand capacity and
launch services.

The three major services categories currently are reported to be systems integration, deployment, and
support and outsourcing. Systems integration remains the largest category in terms of revenues. However,
industry informatisation and networking will be a strong growth area. Security is also a fast-growing area,
with systems integrations (SIs) expanding into security consulting, implementation, support and training
services, which require high expertise in networks and anti-virus applications.

Particular areas of growth include outsourcing, which accounts for more than one quarter of spending.
Kasikorn Bank’s 10-year outsourcing agreement with IBM was a landmark for the local industry.
However, banks are focusing not just on back-end systems but on delivering services to customers
through new media such as internet banking. This trend is leading some banks to focus on bringing
certain IT functions back in-house, to integrate more closely with customer service functions. Kasikorn
Bank is among those striving for a balance between in-house capability and outsourcing providers in a
changing IT services landscape.

One potential demand driver will be organisations seeking help, in order to utilise efficiencies from cloud
computing such as SaaS and Infrastructure-as-a-Service. Particular areas of opportunity for cloud
computing include banking and retailing as organisations in those fields aim to save money on hardware
investments.

Although the provision of IT services is still typically focused on hardware sales, the consulting element
has been growing, along with return on investment (ROI). Enterprises are increasingly looking for
external advice in prescribing an IT strategy and identifying vendors. ERP systems are still a key focus.
Meanwhile, like other counties in the region, Thailand is trying to increase its share of the global IT-BPO
market, competing with leaders such as India and the Philippines. A particular target has been Japanese
firms, with Thailand an outsourcing location for many Japanese companies.

Industry Developments

SME Cloud Computing Fund
The government has announced a new fund to encourage Thai SMEs to utilise cloud computing, which it
sees as a cost-effective way for smaller companies to access IT. Government assistance will also be an
important driver of this segment, with Thai SMEs eligible to receive between 200,000 – 400,000 baht (up
to US$13,000) to adopt cloud computing. Thailand has around 2.8mn SMEs.

The funding was announced by the government’s Department of Industrial Promotion, and is part of the
government’s ‘Enhancing SME’s Competitiveness Through IT’ (ECIT) programme which began back in
1998. However funding for ECIT is currently limited, at only around 40mn baht (US$1.3mn) annually.

Digital Divide
Thailand’s government launched a number of projects to close the digital divide. One initiative from the
Ministry of ICT was to offer a special tax reduction to companies that donate used computers to local
communities. The project provides an incentive for communities to set up IT community centres and
donate computers to temples and local authorities. A similar project was attempted six years ago, but was
not successful.

Meanwhile, the government also revealed it was making plans to offer computers as well as software
applications, bundled with broadband services from government telecoms operators CAT and TOT. The
Ministry of ICT said it was negotiating with state-owned banks such as the Bank for Agriculture and
Agricultural Co-operativesKrung Thai Bank and SME Bank to offer special loans to users who
participate in the programme. The expectation was for the programme to enable more than 10,000
communities, or at least 200,000 people, to access ICT more efficiently.

Software Industry
The Thai government announced a series of measures to support the local software industry. Thaideveloped
software is understood to account for only about 20% of the local software market. SIPA
(Software Industry Promotion Agency) was allocated a budget of THB325mn in 2009 to spend on a series
of measures to support local software companies to win a bigger market share. The government wanted to
lift the industry’s value from THB62.9bn in 2008 to between THB6.6bn and THB6.8bn.

The ambitious target was for local companies’ share of the software market to reach 40% in 2009 and
50% in 2010. SIPA has led ‘Buy Thai First’ campaigns to persuade local SMEs to buy Thai-developed
software and has lobbied the government to endorse tax incentives for local developers. Other initiatives
have included the Thailand Software Fair 2009, held in February in cooperation with the Association of
Thai Software Industry (ATSI).

ICT Parks
In support of its ICT industry strategy, the government is attempting to attract global IT companies to
establish regional research centres in Thailand. The government outlined plans to develop software
industrial estates in four major provinces. The focus in Phuket would be software innovation through the
Phuket ICT Innovation Paradise. Bangkok will focus on animation, media and digital work, and Chiang
Mai on outsourcing. Khon Kaen is to be an ICT training hub and development centre for products that
will be exported to neighbouring countries.

However, SIPA believes many companies are currently wary because of the political situation. Microsoft
and IBM reportedly previously expressed interest in Phuket as a site for research centres, but said they
would assess the political situation for another three to four months before committing.

Industry Forecast Scenario

The Thai IT market is the largest in the South East Asia region and, despite ongoing political uncertainty,
is projected to grow at a CAGR of 9% over the 2011-2015 period. The total value of Thai domestic
spending on IT products and services should pass US$6.7bn in 2011 and approach US$9.4bn by 2015.
Despite recent economic and political disturbances, a national PC penetration rate of around 15%
indicates plenty of untapped market potential, particularly in upcountry areas.

Market Trends

The IT market is expected to grow around 15% in 2011, continuing a recovery that was strong overall in
2010 despite a number of exogenous disturbances, including political disturbances and severe flooding.
Cloud computing, social networking applications and tablets will all help to drive demand in 2011.

We expect enterprise spending to increase this year, thanks to product and technology innovation and
hardware upgrades previously deferred as a result of the economic situation. The worst-affected areas by
the flooding in Q310 were northern regions and in the wake of the floods a number of IT vendors
considered offering credit lines to dealers to help them to survive the crisis.

There could be a boost in 2011 from computer hardware tenders previously delayed as a result of the
economic situation. Migrations to the Windows 7 operating system also has the potential to help trigger a
new cycle of hardware upgrades, with Thailand one of the region’s fastest adopters of the new operating
system.

In 2011, consumer demand will continue to drive the IT market, with aggressive promotions and new
products likely to be unveiled by retailers to lure back customers. The consumer segment accounted for
nearly two-thirds of Thai computer spending during the economic slowdown, and helped keep the IT
market in positive growth territory. However, prices are expected to continue to fall, placing pressure on
margins.

A number of other factors should support momentum in 2011, including a Government PC for Education
programme, and fund for cloud computing. Other positive factors include 3G mobile and WiMAX
broadband service roll-outs, new form factors such as tablet notebooks, cloud computing, and aggressive
vendor and channel promotions. BMI’s view is that the fundamentals of growing affordability and low
PC penetration will keep the market on a positive growth trajectory.

Drivers

Demand for notebooks is driving the replacement PC market, and notebooks should account for around
two-thirds of PC sales in 2011. In the past few years, a number of popular ‘IT Malls’ have sprung up
across the country. Responding to economic uncertainty, retailers are expected to cut prices to stimulate
sales. This helped boost new PC sales, while hitting sales of ‘self assembly’ computers and components.

Netbooks failed to account for as large a share of the notebook market as in some other countries, and in
2010 were expected to comprise only around 7% of total notebook sales. In H210, some vendors ceased
to offer netbooks in the Thai market, as rapidly falling prices of notebooks had erased much of the
distinction between netbooks and entry-level notebooks. There is likely to be a continued blurring of the
distinction between netbooks and notebooks, as vendors bring out lower priced notebooks, and more fully
featured netbooks. However enthusiasm for tablet notebooks will help to driver demand in 2011, with tenfold
growth expected in 2011.

Expanding internet penetration will also help drive demand for computers, assisted by government
policies. In particular, the growing popularity of broadband and new wireless broadband services, and the
multimedia services offered by service providers, will fuel demand for PCs. Bundling of PCs and
notebooks with broadband internet services is likely to grow and has proved successful elsewhere in the
region, such as Hong Kong. The government is encouraging state-owned telecoms companies such as
TOT to roll out bundling schemes. Notebooks will account for more than one-third of sales, and netbooks
will be a special growth centre, with a series of new product launches.

Policies

The government launched a second package of stimulus measure in October 2009, tipped to lead to
THB1.57trn-worth of projects. The government expected this second package to help increase GDP by
5% and create 1.6mn jobs by 2012.

Meanwhile, the government is working on a number of ICT specific projects to reduce the digital divide.
Perhaps the most influential for the IT market are negotiations under way with state banks such as the
Bank for Agriculture to facilitate access to loans for individuals participating in affordable computer
programmes. In other countries, improved access to credit has been a key factor driving PC market
growth.

Segments

The enterprise sector also represents an evolving opportunity in the forecast period, despite reports of
some companies reviewing their IT budgets in the current economic climate. Medium and large
companies will invest in new areas, in particular network technologies. SMEs are becoming more
important as consumers of packaged software, and the Ministry of Industry said that subsidies are
available to help SMEs use software and IT services.

There is a growing emphasis on cost efficiency as enterprises look to enhance productivity through
automating these and other functions. Vendors are also looking to areas such as CRM and business
intelligence, where faster growth is possible. Meanwhile one potential demand driver will be
organisations looking for help with to utilise efficiencies from cloud computing such as SaaS and
Infrastructure-as-a-Service. Thailand has been ranked one of the early adopter markets in the region for
cloud computing. Government assistance will also be an important driver after the launch in 2010 of a
fund to help Thai SMEs to adopt cloud computing.

Some sectors offer more potential than others. Despite the financial crisis, the spending by banks will be
boosted by a drive for more efficient operations and new services, as well as regulatory compliance. The
telecoms sector is one where more large budget outsourcing and managed services deals are likely, as
operators expand networks and services. There will be demand for industry-specific solutions in verticals
such as auto, health, education, mobile telecoms and agriculture.

Summary

Overall, the hardware market is predicted to grow from US$4.4bn in 2011 to US$5.9bn in 2015, with
computer sales rising from US$3.6bn to US$4.9bn over the same period. Software spending should rise
from US$772mn to US$1.1bn, and IT services from US$1.5bn to US$2.3bn over the forecast period.

Table: Thailand, IT Sector, 2006-2015

Internet

Table: Telecoms Sector – Internet – Historical Data & Forecasts, 2008-2015

The last reported data from the National
Telecommunications Commission (NTC)
showed that there 18.10mn internet users
in 2009 and 2.67mn broadband subscribers
in Q310. Market leader True and Triple T
Broadband provide quarterly broadband
figures, but we have utilised NTC’s data as
we believe that the regulator has better
contact with some of the smaller players in
the country.


We forecast that the number of internet
users in Thailand will continue to trend
upwards to reach 21.58mn in 2011, and we
envisage this number to increase at an average of 2.4% from 2012 to 2015 to reach 23.712mn.

Meanwhile, we expect 3.026mn broadband subscribers in Thailand in 2011. TrueOnline and Triple T
Broadband reported strong net additions in Q310 due to the launch of new high-speed broadband
packages with attractive pricing plans. However, the shortage of fixed lines and the relatively high cost of
home PCs remains a hindrance to higher broadband subscriber growth in the country.

Furthermore, until there is a more substantial investment in broadband-capable last-mile infrastructure,
the rate of take-up will slow over the next five years, particularly in the metropolitan areas which are
already pretty well served by high-capacity networks. This is reflected in our forecasts, which show the
annual broadband growth rate tapering to 1.3% in 2015.

While 3G technology could give rise to more mobile broadband dongles and plans, it is still too early to
say that 3G services are a done deal given that Thailand is notoriously fickle when it comes to ICT
development. The country is planning a national broadband network (NBN) but nothing much has
been announced since our last update. Until we see concrete advancements in Thailand’s internet
industry, which include improvements in the Thai political and regulatory environment, we will retain our
previous forecast of 3.488mn broadband subscribers in 2015.

----------
Macroeconomic Forecast

Exports To Remain A Drag On Economic Growth
Net exports were a significant drag on Thailand’s real GDP growth of 6.7% year-on-year (y-o-y) in Q310.
Although a surprise trade deficit in July was a key reason behind the slowdown, we note that the latest
trade figures for October suggest that net exports could rebound in Q410. Going into 2011, we continue to
expect relatively subdued real GDP growth of 3.6% compared to an expected 7.5% in 2010 due to
expectations of a slowdown in external demand.

Thailand’s real GDP growth came in at 6.7% y-o-y in Q310, below the consensus estimate of 7.2%,
according to the latest figures released by the National Economic and Social Development Board
(NESDB) on November 22. This suggests that Thailand’s economic growth remains on track to reach our
real GDP growth estimate of 7.5% in 2010. Going into 2011, we project Thailand’s real GDP growth to
come in at a more subdued pace of 3.6% due to considerable headwinds for global economic growth.

Investment Unlikely To Meet BOI Target
Despite efforts by the Board of Investments (BOI) to attract foreign investments in Thailand, we expect
investments to miss the government’s target of THB500bn for 2010. Gross fixed capital formation
(GFCF) has only managed to contribute an average 2.2pps to real GDP growth over the past three
quarters. In fact, on a quarter-on-quarter (q-o-q) basis, GFCF percentage point (pps) contribution slowed
significantly from 2.5pps in Q210 to 1.8pps in Q310. We expect investment to remain relatively muted in
the coming quarters as global economic headwinds and uncertainties with regard to general elections in
2011 continue to deter investors.

Private Consumption Takes A Breather
Looking at the breakdown of Thailand’s real GDP in terms of expenditure, we note that private
consumption growth slowed from 6.4% y-o-y in Q210 to 5.0% in Q310. However, we believe the
slowdown in private consumption will be temporary as we expect consumer spending to pick up towards
the holiday season at the end of the year. A record low unemployment rate of 0.9%, coupled with an
improving political situation in Thailand will provide support for consumer spending, in our view. Thus,
we reiterate our view that private consumption will remain resilient over the coming quarters. We
are estimating private consumption grew by 6.5% in 2010 and moderate will then grow by 5.5% in 2011.

Growth Driven By Inventory Restocking
We note that inventory restocking played a significant role in supporting Thailand’s economic growth in
Q310. Inventory restocking contributed 4.9pps to real GDP growth of 6.7% in Q310. We believe
inventory restocking could continue into Q410 as businesses feel more confident of maintaining a larger
stock of inventories as the holiday season approaches. Better-than-expected trade export figures in
October could also encourage businesses to be more aggressive at building up inventories to meet demand
for Thai exports over the coming months. Thailand’s economic growth has been heavily reliant on
inventory restocking in previous quarters. Going into 2011, we believe inventory restocking will
moderate on the back of cooling demand for Thai exports. As such, Thailand’s economic growth may
face considerable headwinds in 2011 in the event that inventory restocking begins to turn negative.

Strong Imports To Remain A Drag On Growth in 2011
Due to a surprise trade deficit of US$0.9bn in July, we were not surprised that Thailand’s Q310 real GDP
growth came in at a weaker-than-expected 6.7% in Q310. Net exports were responsible for a negative
2.6pp contribution to real GDP growth in Q310, largely as a result of a strong pick-up in trade imports,
which rose 21.2% y-o-y. The strong momentum in imports is in line with our view that domestic demand
will continue to provide support for trade imports going into 2011. That said, we note that the latest trade
figures released in recent months suggest that we may witness a rebound in net exports in Q410.

October Trade Figures Point To Rebound In Net Exports
Following a better-than-expected 21.2% y-o-y increase in Thailand’s trade exports in September, the
latest figures released by the Ministry of Commerce showed that momentum for exports remained strong.
Trade exports rose 15.7% y-o-y in October, driven by increased demand for goods across the board.
According to the Ministry of Commerce’s classification of trade exports, sugar, tapioca products and
construction materials were the only categories that witnessed a year-on-year decline in October of
77.6%, 17.3% and 19.1% respectively.

However, we note that the total value of these goods represented a small share (4.3%) of total trade
exports. Judging from the performance of key categories of goods, which includes electronics, electrical
equipment, vehicles and food (representing 45.5% of total trade exports), the data suggest that trade
exports are on track to finish the year above the pre-crisis peak of US$17.4bn registered in July 2008.

Back in August, we argued that Thailand’s surprise trade deficit of US$0.9bn in July would be temporary,
and this has indeed turned out to be the case (see ‘Trade Surplus Set To Narrow’, August 31). Despite
better-than-expected trade export figures in October, we reiterate our view that trade exports will grow at
a much more subdued pace in 2011 due to cooling external demand. We are forecasting trade export
growth to cool from an expected 24.4% in 2010 to 7.1% in 2011, and trade import growth to outpace
exports to grow at 8.6% in 2011. Accordingly, we are maintaining our forecast for a more subdued real
GDP growth of 3.6% for Thailand in 2011.

Table: Thailand – Economic Activity, 2006-2015

----------
Competitive Landscape

Hardware

     􀂃 HP and Acer lead the brand PC segment in H110 ahead of Dell, Lenovo and Toshiba
     􀂃 Apple releases iPad on Thai market as rivals prepare to launch competitor devices

International vendors have taken a dominant position in the Thai brand PC market. International brand
PCs were estimated by NECTEC to have taken 75% of the brand PC market in 2010, with local products
being left with just 25%.

Acer and HP were the leaders in terms of shipments in H110, ahead of Dell, Lenovo and Toshiba. Acer
has top spot in the notebook segment, with a close to 40% share, almost twice that of nearest rival HP,
while the shares of other rivals, Toshiba and Dell, are in single digits. Acer maintained its dominance in
the third quarter, with a notebook share estimated at 35% by market research firm IDC, and an overall PC
market share of 26%. Market research firm IDC estimated that in September 2010, Asus had attained
second place in notebook sales with an 11.4% share, just ahead of HP.

Below the top two, the market is competitive, with strong rivalry between the likes of Lenovo, Dell,
Toshiba, and Samsung helping to drive the market. Meanwhile, Sun Microsystems leads in the UNIX
server segment, with at least one-third of the market.

In 2011, market leader Acer has targeted 20% growth in Thai market sales, up from 18% in 2010. The
company plans to achieve the growth through investment in new and existing distribution channels. Acer
will have a particular focus on Bangkok, which is expected to account for around 70% of the company
2011 Thai marketing spend. Acer has earmarked a 2011 IT market budget of around THB400mn, up from
THB350mn in 2010.

Chinese giant Lenovo also plans to spend substantially to increase its share of the Thai PC market. The
company has allocated spending of around THB200mn in 2010. Thailand was also the second Asean
country after Indonesia where Lenovo launched its ‘Are You Lenovo’ campaign to raise brand awareness.
Lenovo has targeted a 10% PC market share in 2011, up from around 6% in the previous year.

Dell reported 19% growth in the third quarter of 2010, and 21% growth for the year through September
2010. The company was boosted by a revival of business demand. Dell is another vendor which has
identified social-networking media as a key part of its Thailand market strategy. Dell’s marketing budget,
at around 3% of revenues, is less than that of its rivals, and the company said that online marketing was
an efficient way to use that money. The company said that it currently had an 8%-9% share of the PC
market, which it hoped to build on.

2010 saw the emergence of tablet notebooks, spearheaded by Apple’s iPad and tablet sales were expected
to reach around 100,000 units last year, with sales expected to rise as prices fall from a previous level of
THB40,000-70,000. The iPad did not receive its official release in Thailand until Q410, but grey market
versions had already proved very popular. The official versions of the iPad available in Thailand included
the 16, 32, and 64GB WiFi and 3G versions, with prices ranging from THB15,900 to THB25,900.

Other vendors such as Acer, Dell, HP, Sony and Samsung announced plans to follow Apple in releasing
net tablet devices. In November, Dell Thailand said that it would bring out tablets of various sizes and
operating systems. However the company said that it had stopped selling netbooks as of the third quarter
of 2010 because of a closing price differential between netbooks and notebooks.

A major factor behind PC market growth has been falling prices, with the average price of a notebook
now down to around THB15,000, while entry level models are available for THB13,000, and some
netbooks at below THB10,000. Despite the growing affordability indicated by these prices, low PC
penetration rates of below 10% in rural areas has encouraged vendors to look for new models to reach
low-income households.

In April 2010, Intel Thailand announced that it was in discussions with a partner to launch ‘selfassembly’
PC kits on the Thai market within the next three months. The ‘do it yourself’ packages will
contain all necessary parts and detailed instructions and will be designed to make it easy for a secondary
school student to assemble within an hour. The self-assembly model is expected to provide an opportunity
for local PC manufacturers to increase their market share.

Unbranded ‘white boxes’ still claim up to 50% of the total PC market, although this share has fallen from
around 70% a couple of years ago. The sales of these generic products have received a boost from
government-subsidised PC programmes such as the ‘Economy PC’ initiative, which encouraged the
manufacture of computers priced under THB20,000.

There are also a handful of local brands, including SVOA, the leading local brand that has established a
niche in the market in recent years. SVOA has 12 sales and service centres at locations across Thailand
and reported revenues of around THB5.8bn in 2007.

Software

     􀂃 Government set target for local software vendors to increase local market share to 40% by 2010,
from 20% in 2008
     􀂃 Microsoft among vendors targeting cloud computing opportunity in 2011

Multinational software vendors such as Microsoft, Oracle and SAP are active in the Thai market, where
they compete with a number of local companies. Several software vendors reportedly had their
investment plans on hold in 2009 due to the uncertain political environment. Microsoft and IBM had
reportedly been considering locating regional research centres at the facility in Phuket, but were waiting
for reassurance that the political situation had returned to stability for a reasonable period first.

Microsoft said, however, that it expects to continue investing in Thailand. As of early 2010, Microsoft
commented that the Thai market had one of the fastest rates of growth of adoption of Windows 7.
Microsoft said that Thailand is becoming one of the fastest-growing markets for adoption of Windows 7,
thanks in part to retail promotions. As of Q410, sales of Windows 7 in the Thai market were estimated to
have reached around 800,000, 50% higher than for the previous Windows Vista operating system in an
equivalent period.

Microsoft has targeted growth of 12% in fiscal 2011, compared with 13% in fiscal 2010. Microsoft
regards Thailand as a ‘semi-emerging’ country, and the local unit now reports directly at an APAC level,
rather than an ASEAN level as in the past. In the past three years, Microsoft’s local presence has grown
from 100 employees to more than 300, with additions across a range of functions from sales and
marketing to local language software testing and development.

In 2011, Microsoft will continue its drive to expand operations in the area of cloud computing. The
company said in October 2010 that over the following nine months it planned to roll out cloud computing
offerings on all product groups in the Thailand market. Microsoft will target consumer, enterprise, SME
and government sectors and has said that it will invest US$1.3mn in development of the Thailand cloud
computing market. Meanwhile in January 2011, Microsoft announced a tie-up with local software firm
Senior Com to provide cloud computing services to the Thai market. In the first stage, the collaboration
with Microsoft will allow Senior Com to offer its DS-One and L-One solutions from a cloud computing
platform, and the company also plans to roll out ERP solutions.

The Thai government has announced an ambitious target to increase the local software market share of
Thai software companies to 40% in 2010, and 50% in 2011. Locally produced software vendors claimed
around 20% of the Thai market in 2008. Various measures have been announced to help advance the local
industry, including a ‘Buy Thai’ campaign (Thailand Software Yes) directed at enterprises. According to 
government figures, there are currently nine Thai software firms providing software to local SMEs. The
government is keen to encourage domestic vendors to develop cloud computing and SaaS services for
Thailand’s 2.84mn SMEs.

At the same time, the government recognises that multinationals are essential partners in its drive to
develop and raise the level of the local industry. Through its software promotion agency, the Software
Industry Promotion Agency (SIPA), the government is keen to attract more global software firms to
investment in Thailand and support its programme of new software industrial estates in four provinces.

The economic slowdown led some vendors to look for ways to increase the affordability of their products
for enterprise customers. HP Global Services announced a 0% promotion for licensing and support costs
on business technology optimisation (BTO) and information management (IM) software solutions.
Qualifying deals ran from US$100,000 to US$1mn in the promotion, which ran until the end of April.
The deal was designed to help CIOs have access to capital for software investment in this current
challenging economic environment.

Other leading vendors were planning to invest to expand the enterprise software market. Global ERP
software leader SAP set a target of being first in every customer segment by 2010, including business
user solutions, SMEs, business process platforms and industry solutions. The company wants to triple its
market share by 2010, based on its core ERP software. In 2009, the company is expanding its local
infrastructure to enable customers to link to their legacy and other system. The company is also
concentrating on spreading awareness of SAP through collaboration with universities such as
Chulalongkorn, Thammasat, the University of the Thai Chamber of Commerce and Dhurakijpundit
University.

Meanwhile, US rival Oracle said that it will focus more on the mid-sized sector in 2010, targeting
companies that wish to take the step up to professional software from ad-hoc use of Excel and custom
programs. In early 2010, the company was promoting its ‘Oracle Accelerators’ service to help businesses
speedily deploy key applications such as CRM, HR, or HCM software.

Enterprise software specialist SAS Software Thailand has announced a target to more than triple its local
business and workforce within the next three years. The announcement came after it was revealed that
SAS had grown by more than 50% in each of the two recent consecutive quarters. SAS Thailand
achieved y-o-y sales growth of 56% in Q409 and 86% in the first quarter of 2010. Local clients for
customer intelligence products have included Tops supermarket, and most mobile phone operators, while
financial institutions and the Thai Credit Bureau are among customers for SAS’ risk-intelligence
solutions.

IT Services

     􀂃 IT services segment continues to attract investment from IBM, HP and Indian vendors
     􀂃 IBM plans to expand into smaller cities with high growth potential

The growing IT services market continues to attract investment from global vendors such as IBM, HP and
the big Indian vendors. The market is also characterised by the presence of a number of local systems
integrators, which have built IT services offerings around portfolios of brands such as HP, SAP and IBM.
These companies often have around 20 years experience of providing systems integration and other
services in the Thai market.

Many local vendors have now identified outsourcing as a growth area and are also developing more
industry specific software solutions. Meanwhile, foreign vendors are moving to strengthen their networks
with local partners.

In October 2010, HP launched its Enterprise Services Business in Thailand. The service offers HP’s
corporate customers a one-stop solutions of IT hardware bundled with a variety of consulting services.
HP believes that its acquisition of EMS has strengthened its position in the Thai market, especially its
service business, application service and business process outsourcing. In 2009, HP appointed a new
country manager for Thailand and implemented its ‘One HP Strategy’, which involved appointing a
single contact person for each major account.

Given the economic slowdown, HP said it would be mounting an aggressive campaign to win market
share from competitors. HP still sees plenty of growth areas, especially the public sector, finance and
banking, telecoms, industrial, and the communications and media industries. Telecoms is seen as a
particular target because of anticipated investment in 3G technology and other new platforms. Leading
telecoms company DTAC is among HP’s clients in this segment.

For its part, IBM said in 2010 that it planned to expand its business consultancy services in the Thai
market. The company will offer two main category of services, Business Analytics and Optimisation
(BAO), and Managed Process Business Services (MPBS). IBM was also making plans to expand into
smaller cities with high growth potential. Chiang Mai was targeted as the first step, with offices in Khon
Kaen and the south planned to follow. IBM Thailand expected particularly fast growth in 2010 in
MPBS, which includes outsourcing functions such as supply chain management, HR, and finance and
administration. The company reported record growth for the Thai market in Q409, with hardware,
software and services segments all gaining strongly. Services account for more than half of IBM
Thailand’s revenues.

IBM is investing in its local infrastructure to underpin its service expansion. The company is halfway
through a 10-year outsourcing deal with Kasikorn Bank, which was considered a landmark for the local
industry. IBM recently unveiled an enterprise data centre (NEDC) initiative to help organisations with
costs and service delivery, business resiliency and security, and energy cost saving. IBM believes that by
helping enterprises reduce their IT operational overheads, estimated at up to 7% of their IT budgets,
resources will be freed for new IT initiatives.

Indian IT services vendors are also increasing their presence in Thailand. Tata Consultancy Services
(TCS) has set up a representative office in Bangkok to provide IT and business process outsourcing
(BPO) services for large corporations. Target customer segments for Tata in Thailand include financial
services and banking as well as telecoms. The Thai subsidiary was claimed by Tata to have a cash flow of
THB34mn. The company currently has eight customers including NXP SemiconductorTata Steel, ING
and Citi Bank. For BPO services the company is focusing currently on the insurance sector.

Telecoms, particularly mobile, is a particular source of opportunity for vendors in Thailand. Recently HP
won a contract from DTAC, one of Thailand’s largest mobile operators, to deploy HP’s Next Generation
Operations Support Systems. The decision to deploy followed a strategic analysis of DTAC’s business
and operational needs conducted by HP Solutions Consulting service. Meanwhile, British telecoms leader
BT is also active in the market as an IT services provider through BT Global Services. The company now
has a significant presence in Thailand thanks to recent acquisitions, and local capabilities include data
centres, managed hosting and IT optimisation and full outsourcing.

Healthcare is another promising area. International players winning contracts in this area include
Australian-based IBA Health Group’s subsidiary iSOFT Thailand. The company recently won a
THB200mn contract from one of Thailand’s largest public hospitals, Siriraj, to develop a new hospital
information service. The new investment is additional to Siriraj’s annual IT investment budget of around
THB150mn to THB200mn. Meanwhile, healthcare is also a particular focus for Microsoft Thailand,
following the company’s acquisition of Bangkok-based company Global Care Solutions. The acquisition
formed the basis of a new research and development (R&D) division called Global Healthcare.

Many multinational IT services providers are strengthening their network of local partners. Tata is
building its BPO service offering through its subsidiary First Tech, which is a 20:80 joint venture
(JV) between TCS Asia Pacific and Thai Re-Insurance. Meanwhile, EMC Thailand recently appointed
Metro Systems Corporation (MSC) as its Enterprise Content Management (ECM) solution partner. The
two companies intend to focus on banking and insurance currently. According to EMC Thailand, services
are currently the fastest-growing part of its business, with 26% growth, compared with 16% and 9% for
hardware and software respectively.

----------
Internet

True
True’s grip on the broadband market
appears to be slipping. The operator
reported in Q109 that, while remaining
the broadband market leader, it had
50% market share, down from the
60% reported only a few quarters
earlier.


To strengthen the operator’s market
leadership, it launched in March 2009
a number of new tariffs targeted at
specific market segments. These included the ‘BT 450 3Mbps Local’ and ‘Premium Packages (8Mbps)’,
both of which were well received. The ‘BT 450 3Mbps Local’ is True’s low tariff aimed at the mass
market. The Premium Packages are aimed at the higher end of the market and to help boost its broadband
ARPU rates. Its premium packages offering speeds of 8Mbps are charged at a cost of THB1,199 (US$34)
per month. Although initially offered only to customers in Bangkok, further deployments were made to
residents in Chiang Mai, Phuket and Chon Buri later in 2009.

These premium packages continued to be popular into the rest of 2009. Almost 6,000 new customers
were added in Q209 while 17,955 new customers were added in Q309 and 25,834 were added in Q409,
taking the total user base to 690,519. Broadband service revenue grew by 11.7% y-o-y in FY09 to
THB5.412bn. True also reported a successful reduction in low-end churn and said that it had acquired
new subscribers via an increased focus on direct sales and customer retention. The company had also
been working to deal with the lack of capacity in certain areas.

In Q409, the company said that broadband customers continued to migrate to higher speed packages,
enhancing ARPU. The proportion of customers using 3Mbps or more increased to 88.1% in Q409 (versus
4.8% a year earlier), with 4.6% of customers using 8Mbs or more and 15.9% using 4-5Mbps. ARPU was
much improved at THB723 in FY2009, up from THB711 in FY08 and THB709 in FY07, while Q409
ARPU was down slightly q-o-q to THB721, versus THB724 in Q309. Successful subscriber retention and
acquisition in the low-end offerings offset strong growth of high-end packages.

In early October 2009, a new convergence
package offering 16Mbps, said to be
Thailand’s fastest internet speed, was
launched to meet growing demand for
high-definition content. The new
promotion bundles high-speed internet (3-
16Mbps) with 40 TrueVisions channels for
THB599-2,200 and went a long way
towards supporting retention efforts in the
quarter.

True – Broadband Revenues And ARPU

The operator’s subscriber growth had been
impacted by a competitive market
environment, which was particularly
aggressive in the Bangkok Metropolitan Administration (BMA) outskirts. However, True maintained it
had been able to retain its market leadership due to its ‘extensive fibre-optic network, improved customer
service and product offerings as well as a shorter lead time for new connections’.

As revealed in the operator’s breakdown in premium package speeds, those on 8Mbps and over tariffs had
31,764 subscribers by Q409. Those on 4-5Mbps speed packages reached 15.9% in Q409, representing
109,793 customers.

True plans to spend THB1.5-3.0bn during the 2010-2011 period to increase its broadband capacity in
Bangkok to 800,000 users. As demand for greater bandwidth rises, the operator is to enhance its premium
packages further by raising its broadband connection speeds on a progressive basis. The operator has also
set aside an additional THB420mn to increase international bandwidth from 12Gbps to 17Gbps.

The operator said in July 2009 it would not reduce broadband service tariffs by 50% as requested by the
government. The operator believed its existing prices to be reasonable and cheap. Reducing service
revenues further, the operator argued, would not help to expand the service to rural areas.

TOT
True’s major competitor is TOT, which has been investing THB64bn (US$2bn) to diversify its core
revenue source away from fixed-line telephony services and into broadband services, under a four-year
turnaround plan that will end in 2010. The project aims to see an increase in the proportion of broadband
revenues to 70% of total earnings by 2010, compared with the 30% recorded in 2006/07. The operator
committed to spend THB16bn (US$506mn) a year until 2010 to convert its core fixed-line network to an
NGN technology using 70% of its investment capital. The plan was expected to turn the ailing TOT into a
strong competitor after suffering declining earnings from fixed-line services and public telephones, which
are its core business.

In July 2009, TOT contracted Alcatel-Lucent to deploy its national IP broadband project. The global
telecoms equipment vendor has in turn outsourced the work to Samart Telecom, a provider of network
system services in the country. The deal is the largest transmission of its kind in Thailand and South East
Asia. Alcatel-Lucent is providing Samart Telecoms with an integrated, end-to-end solution allowing TOT
to meet the increasing number of users while supporting the bandwidths demands driven by next
generation 3G services.

Meanwhile, to remain competitive, TOT introduced two broadband tariffs in August 2009, offering
speeds of 12Mbps and 8Mbps, priced at THB1,500 and THB1,000 per month, respectively. The aim was
to see the number of broadband subscribers reach 1mn by the end of 2009. TOT had not disclosed end-
2009 results at the time of writing.

In March 2010, TOT awarded contracts to value-added service provider and engineering company
Jasmine Telecom Systems and indigenous equipment manufacturer Forth Corporation to expand its
broadband platforms as part of a long-awaited upgrade programme. The companies submitted bids
totalling THB2.96bn (US$93mn), approximately THB82.5mn (US$2.55mn) lower than the median price
set by TOT, reported The Bangkok Post.

This was the second attempt by TOT to procure fibre-optic equipment for its growing broadband
operation. The government had previously cancelled the tender, held through an e-auction process,
because the prices offered by three bidders were only THB10.5mn (US$0.3mn) lower than TOT’s
original expectations of THB3.04bn. In that auction, value-added services provider Loxley Wireless had
also secured a winning bid.

The authorities appear to have accepted that the second set of bids is a true representation of the costs
involved in expanding TOT’s broadband and fibre-optic platform with 577,000 additional ports. The
Bangkok Post also suggests that further delays would impact on TOT’s ability to catch up with its rivals
in the broadband arena. TOT must now finalise contracts and prices with Forth and Jasmine. It is not
known why Loxley did not win in the second e-auction. Forth has secured contracts for three of the four
‘zones’ on offer.

TT&T
Meanwhile, provincial fixed-line operator TT&T, owned by Jasmine International, is looking
elsewhere for growth opportunities and planned to invest THB1bn in its broadband network and data
transmission infrastructure over 2009, and THB3bn in the two years ended 2011 to bring network
coverage to 80% of the population from 60%. Some THB600mn alone was to be utilised to double its
international internet bandwidth to 3.88Gbps in an effort to lift its broadband subscriber base. Its capacity
expansion plan also included doubling domestic bandwidth to 9Gbps. TT&T outlined plans to become a
triple-play service provider offering voice, internet and TV services over a broadband network.

The operator sought to raise the number of
internet ports by 300,000 as of 2011,
bringing the total to 800,000 ports, and
offering services of VoIP, IPTV and IDD.
In late November 2008, TT&T announced
its decision to scrap its US$1.4bn 3G plan,
stating that it saw ‘unpredictable returns’
for such a large investment.

Triple T Broadband Subscriber Growth

TT&T’s broadband operations are gathered
within Triple T Broadband, a company
that is majority-owned by Acumen, a
Jasmine International subsidiary. Acumen
raised its ownership of Triple T Broadband
to 99% from 90.9% in August 2009 as part of a capital increase in the business.

Having launched a 10Mbps service for THB1,490 per month in July 2009, Triple T Broadband launched
in September value-added services such as 3BB Movie Buffet (an unlimited movie preview service) for
THB99 per month, 3BB Spider Hotspot (a Wi-Fi hotspot) for THB99 per month, and 3BB HDTV (highdefinition
video services such as VoD) for THB290 per month. These value-added services are expected
to help generate additional revenues for Acumen/Jasmine. At the end of 2009, Triple T Broadband had
546,000 subscribers (of which 87,000 were based in the Bangkok metropolitan area), up by 28,000 q-o-q
and by 176,000 y-o-y. The company had expected to have 564,000 broadband subscribers by the end of
2009; clearly, the company’s achievements were below expectations, despite the launch of new services.
For FY09, revenues from broadband services amounted to THB3.241bn, a y-o-y increase of 86%.
Average ARPU was THB660 per month in Q409, versus THB616 in Q309 and THB492 a year earlier.
For FY09, broadband ARPU was THB660, up by 34% from THB492 a year earlier.

CAT
Jasmine International is also the majority shareholder with a 65% share in Jasmine Internet, with CAT
Telecom retaining a 32% stake. In late July 2009, CAT announced it had decided to sell its stake at a cost
of THB5.8mn (US$173,000) to Jasmine International. At the time of writing, it was not known whether
the transaction had concluded. Jasmine International reported revenue of THB1.155bn from internet
services in FY09, up by 16% y-o-y. Subscriber numbers are not disclosed, though Jasmine International

claimed that JI-Net accounted for 47% of internet revenues in FY09, followed by JASTEL with 39% and
Acumen 14%.

Earlier in July 2009, CAT Telecom sold its 32% share in JV ISP KSC Commercial Internet to partner
True. The company aims to repeat the process for its minor shareholdings in a further 10 ISPs. This marks
part of CAT’s decision to sell off all its shares in all ISP companies, which it had obtained for free as part
of its licensing terms when internet services were first commercially introduced in Thailand. With the
ability to apply for a Type 1 internet access licence made increasingly easy by the National
Telecommunications Commission (NTC), the ISP business appears to be losing its appeal for CAT.

The operator’s board members have approved a plan for CAT Telecom to spend THB6bn (US$177mn)
on a fibre-to-the-x (FTTx) project. It intends to offer broadband internet and multimedia content, making
the fibre-optic service its flagship business in the future. Work on the project will commence only once
approval from the National Economic and Social Development Board and the Cabinet is granted.

Meanwhile, efforts on the part of the NTC to implement a five-year ICT Master Plan, which is broadband
centric, have been unveiled. The regulator is targeting 50% of households to receive a minimum speed of
4Mbps by 2013, with all high schools achieving speeds of 10Mbps. Furthermore, two broadband projects
are expected during the course of its plan, including a Government Information Network (GIN)
establishing e-government, e-healthcare and e-education, as well as an Inter-University Network (UniNet)
designed for education and research.

In May 2010, CAT Telecom signed a memorandum of understanding (MoU) with a number of local cable
operators to provide fast broadband internet services through its local cable TV network in Phuket. CAT
Telecom signed agreements with Rawai CablePhuket CablePA Business PhuketKPP Rawai and
KPP Enterprise.

IPTV
The IPTV market is occupied by three main operators TOT, True and TT&T. TOT’s IPTV service is
offered under its JV company Advanced Datanetwork Communications (ADC) with mobile operator
AIS. ADC has applied for a national fixed-line licence from the NTC. If a licence is granted, the company
has said that it would invest around THB1bn (US$30mn) towards a fixed-line network, providing
capacity for 100,000 phone numbers, of which 10,000 lines would be installed in Bangkok in its first year
of operation. It would then expand to other provinces in the coming three to four years. This would add to
the operator’s existing product portfolio, which ADSL, internet protocol virtual private network (IPVPN),
frame relay and asynchronous transfer mode (ATM) services offered to the corporate sector, consisting of
more than 800 clients. However, licensing approval from the NTC will be determined by whether the
regulator views ADC’s ownership as anti-competitive, in which case it may face stricter regulations than
its rivals in the fixed-line market.

Second to TOT is True. Latest data available from True with regard to its IPTV services are for
September 2008. The operator announced it had around 3,000 IPTV subscribers and hoped to double that
to 6,000 by early 2009. It believes that the service can be profitable at that level. More recent data have
not been divulged, however.

True had slowed its IPTV marketing over the last year, but is now ready to re-launch the service as a
premium service for affluent Thais and for foreigners rather than as a mass market service. It offers 12
channels including karaoke on demand.

As for TT&T, the operator launched an IPTV service in May 2007, commencing its trial service in highly
populated cities. The operator has already invested THB100mn (US$3mn) in content for its IPTV service,
targeting 1,000 subscribers who were given access to 13 TV stations for its trial.

DTAC had been due to launch its high-speed broadband network but announced that it had delayed the
launch until early or mid-2009 on account of regulatory issues. The operator, having formed a partnership
with CAT to work on its 3G developments, stated that it was awaiting approval from CAT’s board for the
project. DTAC has not been provided with any details with regard to the delay of its services.

WiMAX
WiMAX licensing possibilities are being considered by the NTC. The regulator initially said that it would
release spectrum in the 2.5GHz and 3GHz frequency bands, but has been studying whether opening up
the 5GHz band for commercial WiMAX services would impact Shin Satellite’s broadband satellite
service. There are plans to issue three or four licences, but there is no definite plan or timeframe for doing
so. A study carried out by the World Bank and the NTC found that the best opportunities lay in utilising
the 2.3GHz and 2.5GHz bands, offering three regional licences. The study concluded that the 2.3GHz
band would be most appropriate as a number of state agencies were already utilising the 2.5GHz band for
other purposes.

Naturally, existing broadband service providers are looking to acquire WiMAX licences. True announced
that it had joined together with Alcatel-Lucent Technologies to test WiMAX wireless broadband access in
Thailand. The operator reported in early 2008 it had received approval from the NTC to test WiMAX for
three months. The operator tested the system using the 2.3GHz and 2.5GHz frequencies at the
Ratchaprasong intersection near Central World Plaza. Additional testing equipment was also installed in
Rangsit and was later tried in northern and eastern Thailand. True Wireless Broadband Deputy Director
Non Ingkutanon said the operator was ‘quite confident that we will receive approval for a full WiMAX
licence by the end of the year or early 2009 at the latest, based on commitments issued by the NTC,’ as
quoted by the Bangkok Post. Further to this, True carried out a trial of WiMAX Rev-e technology with
Alcatel-Lucent Technologies in June 2008 in the 2.5GHz frequency band. The trial took place in the
Phatumthanee province on the outskirts of Bangkok.

TT&T Subscriber Services, a subsidiary of TT&T, was preparing to provide WiMAX commercial
services in 2008 through a JV with a foreign telecoms operator, although further information has not been
released. The operator was set to spend THB100mn on a WiMAX trial with a total planned investment of
THB1bn for the deployment of national commercial services. Once licences were awarded, the operator
intended to focus on large buildings in Bangkok and other major provinces. According to the operator, it
was pursuing talks with potential JV partners in the US, Europe and Japan for not only WiMAX but also
3G. This was expected to have taken the form of a leasing agreement. The operator became the first in the
region to deploy a Cisco-based WiMAX network at Mae Fah Luang University, located in Chiang Rai,
north Thailand, in August 2008. However, nothing further has been reported, and it now seems unlikely
that TT&T will take things further now that certain of its operating units have been subsumed into
Acumen, a daughter company of one of its largest shareholders, Jasmine International.

However, in April 2010, the Thai press reported that TT&T was planning to participate in the bidding
process for WiMAX spectrum. Reportedly, TT&T is estimating a WiMAX subscriber base of 500,000
within two years of the commencement of the service.

Mobile operators are also expected to apply for the WiMAX licences. Among them, AIS has reported its
intentions to bid. The operator announced it would spend THB1.5bn on implementing the first phase of a
new super high-speed WiMAX wireless technology service. Its budget could be used to install 350-450
base stations in suburban areas and major cities, with main coverage in areas where there are no fixed-line
networks. Motorola has been selected as a supplier of WiMAX technology for the operator’s trial
services and started trials in Q108 across Bangkok and Lamlukka.

The operator is not alone in trialling WiMAX services. United Information Highway (UIH), a JV
between Benchachinda Holdings and CAT Telecom, held its first trials of 2.5GHz WiMAX wireless
broadband services in Phuket. The trials were for both fixed-line and mobile WiMAX and include
partnerships with Motorola and Internet. UIH remains the only operator to have been awarded a
WiMAX licence by the NCT in 2007 and has been given the go ahead for the commercial deployment of
services. It is still waiting to hear from the NTC on the direction WiMAX policy is expected to take. Over
US$3mn has been spent to bring WiMAX services to Phuket, and it is expected that services will be
extended to Bangkok and other major areas. Benchachinda Holdings is also a stakeholder in DTAC.

In September 2009, The Nation reported that CAT Telecom was keen on using the 2.6GHz spectrum held
by the broadcasting and media conglomerate MCOT plc (77% owned by the government) to offer
WiMAX services. Reportedly, CAT planned to talk with MCOT regarding the joint development of
WiMAX services. However, the NTC is only looking at the 2.3GHz band for WiMAX, since other
potential alternatives, such as the 2.5GHz band, are now being used for broadcasting. BMI believes it is
more likely that any collaboration between MCOT and CAT in this field would be limited to fixed
wireless access at best, or perhaps in using the spectrum for additional backhaul capacity in CAT’s
CDMA network.

In December 2009, the NTC said that it would wait until after the licensing of 3G services before turning
to the issue of WiMAX. Therefore, it seems very unlikely to BMI that WiMAX licences will be issued
before mid-2011. The NTC has suggested that four licences will be made available; at the time of writing,
it was unclear whether these licences would be regional or national in nature. The NTC has also declined
to say whether a minimum bid price would be set for the licences.

----------
Wireline (Fixed-Line And Broadband) Developments

Table: Wireline Developments, 2008-2009

Below the top two, the market is competitive, with strong rivalry between the likes of Lenovo, Dell,
Toshiba, and Samsung helping to drive the market. Meanwhile, Sun Microsystems leads in the UNIX
server segment, with at least one-third of the market.

In 2010, vendors were left assessing the effects of a number of exogenous effects on the market, including
political disturbances and severe flooding. In Q310, HP reported a 15%-20% decline in IT spending as a
result of the floods. In the wake of the floods a number of vendors offered credit lines to dealers to help
them to survive the crisis. In mid-2010, most vendors had reported a strong upturn in sales following the
political disruptions earlier in the year. Toshiba said that sales volume started to recover from late May,
and that its overall Thailand business had grown 10%-20% in H110.

Acer, the overall PC market leader, forecast that its revenues would increase 20% in 2011, up from 18%
growth in 2010. To achieve its goal, Acer will focus on adding new marketing channels. The company
said that it will particularly focus on Bangkok channels, with Bangkok expected to account for 70% of the
vendor’s 2011 Thailand marketing budget. Acer will spend 400mn baht on advertising in 2011, up from
350mn baht in 2010.

Acer and HP were the leaders in terms of shipments in 2010, ahead of DellLenovo and Toshiba. Acer
has top spot in the notebook segment, with share estimated at above 40% in H110, more than twice that of
nearest rival HP, while the shares of other rivals, Toshiba and Dell, were in single digits. Acer
maintained its dominance in the third quarter, with a notebook share estimated at 35% by market research
firm IDC, and an overall PC market share of 26%. IDC estimated in September 2010 that Asus had
attained second place in the notebook market with an 11.4% share, just ahead of HP.

Market leader Acer has targeted 20% growth in revenues in the Thai market in 2011, up from 18% in
2010. The company plans to achieve the growth through investment in new and existing distribution
channels. The company will have a particular focus on Bangkok, which is expected to receive around
70% of Acer’s local marketing expenditure in 2011. Acer has increased its IT marketing budget to around
400mn baht in 2011, up from 350mn baht in 2010.

HP leads in the consumer desktop segment, with a share of close to 30%. HP aims to drive sales through
greater segmentation and the company has focused both on entry level desktops for students and first-time
buyers, and higher performance machines with more multimedia features. HP forecast that it would claim
a 29% share of the Thai laser printer market in 2010.

Lenovo said that it anticipated 300% growth in the Thai market in 2010. The company targeted the
growing business segment with a target to increase its share of enterprise sales from 10% to 15% by
March 2011. The company said that it had a three-strand strategy to achieve growth: launching new
products such as 3G notebooks, expanding its presence with upcountry service centres, and making more
use of social-networking media. Lenovo expected that if it reached its growth target then that would be
enough to win it third place in the market behind Acer and HP.

In Q111, the company launched a pair of new thin and light consumer notebooks, the Ideabook U160 and
U260, on the Thai market. The pair of new notebooks, which were billed by Lenovo as more powerful
than a netbook but without the weight of a traditional notebook, fit a trend forecast by BMI of a blurring
between netbook and notebook categories.

Rival Dell reported 19% growth in the third quarter of 2010, and 21% growth for the year through
September 2010. The company was boosted by a revival of business demand. Dell is another vendor
which has identified social-networking media as a key part of its Thailand market strategy. Dell’s
marketing budget, at around 3% of revenues, is less than that of its rivals, and the company said that
online marketing was an efficient way to use that money. The company said that it currently had an 8%-
9% share of the PC market, which it hoped to build on.

Dell has performed strongly since 2008, when the company shifted its strategy to focus more on the
consumer segment. In 2010, Dell planned to at least double its revenues from the consumer segment in
Thailand and said that it will continue to invest aggressively in the local market. The company plans to
double its marketing budget in 2010, targeted mostly at the consumer segment.

In addition, Dell has strengthened its retail channel, building on its cooperation with Thailand’s largest IT
superstore, IT City. Dell expected that the number of its retail outlets would increase from about 600 now
to more than 2,000 by the end of 2010. In May and June, Dell will launched at around seven new service
centres nationwide, as the company looked to after-sales support and service to drive market share higher.

----------
Company Profiles

Microsoft Thailand

Services
     Software and consulting and support services.
Recent Developments
     As of early 2010, Microsoft commented that the Thai market had one of the fastest rates of
growth of adoption of Windows 7. Microsoft said that Thailand is becoming one of the fastestgrowing
markets for adoption of Windows 7, thanks in part to retail promotions. As of Q410,
sales of Windows 7 in the Thai market were estimated to have reached around 800,000, 50%
higher than for the previous Windows Vista operating system in an equivalent period. In 2009,
Microsoft had laid the groundwork for the new operating system launch and released the
enterprise version of the software in August.
The company said in October 2010 that over the following nine months it planned to roll out
cloud computing offerings on all product groups in the Thailand market. Microsoft will target
consumer, enterprise, SME and government sectors and has said that it will invest US$1.3mn
in development of the Thailand cloud computing market.
Microsoft has signalled its commitment to Thailand with several projects in the pipeline.
Microsoft is reportedly considering locating a regional research centre at the facility in Phuket,
but is waiting for reassurance that the political situation has stabilised for a reasonable period
first before committing. Microsoft launched its cloud computing service in Thailand in 2009. In
the initial phase, Microsoft rolled out pilot projects in collaboration with Sripratum University
and the Thailand Revenue Department.
Future Plans
     Microsoft has targeted growth of 12% in fiscal 2011, compared with 13% in fiscal 2010.
Microsoft regards Thailand as a ‘semi-emerging’ country, and the local unit now reports
directly at an APAC level, rather than an ASEAN level as in the past.
The company has said it expects to continue expanding and investing in Thailand. Microsoft
regards Thailand as a semi-emerging country, and the local unit reports directly at an APAC
level, rather than an ASEAN level as in the past.
In 2011, Microsoft will continue its drive to expand operations in the area of cloud computing.
In January 2011, Microsoft announced a tie-up with local software firm Senior Com to provide
cloud computing services to the Thai market. In the first stage, the collaboration with Microsoft
will allow Senior Com to offer its DS-One and L-One solutions from a cloud computing
platform, and the company also plans to roll out ERP solutions.
Local Market Performance:
     Asia Pacific is the fastest-growing region for Microsoft, although it represents only about 5% of
Microsoft’s revenues.
Presence
In the past three years, Microsoft’s local presence has grown from 100 employees to more
than 300 currently, with additions across a range of functions from sales and marketing to
local language software testing and development.
The company has continued to strengthen its local operations with the establishment of the
Microsoft Innovation Centre (MIC) as a creative hub for Thai developers. Thailand also
received a share of Microsoft’s US$500mn global funding for its Partners in Learning Project,
a collaboration with the education ministry. Microsoft believes Thailand has the potential for
R&D in the the mobile, education, agriculture and healthcare sectors.
Sectors
     SMEs are expected to account for one-third of Microsoft’s local business, and to show the
highest growth rate at 56%. OEMs will account for about one-third, with 16% growth expected.
The other two core segments are enterprise and government. Healthcare is also a particular
focus for Microsoft Thailand, following the company’s acquisition of Bangkok-based company
Global Care Solutions. The acquisition formed the basis of a new R&D division called Global
Healthcare.

-----
Hana Microelectronics

Services
     Hana Microelectronics is a leading Thai electronics company specialising in IC products
(principally for mobile handsets), microelectronics such as laptops, telecoms equipment, GPS
devices, sensors and microdisplay.
Hana reported local currency growth of 26% in 2010 as end-user demand recovered following
the global economic crisis. In US dollar terms, revenues rose 36%. The group’s sales grew
continuously in every quarter from the second quarter of 2009 to the third quarter of 2010,
before dipping in Q410 due to seasonal factors in the semiconductor segment. In H209, Hana
had reported growing sales momentum as revenues rose strongly from the second to third
quarters. The improvement, after disappointing results in Q109, was driven by improved enduser
demand that triggered restocking.
Hana’s Microelectronics division reported below-average but still healthy growth in 2010
overall, with sales revenues up by 17% in Thai baht terms. Growth slowed in the second half
of the year however. Meanwhile CPG sales fell by 21% in local currency, due to the move
towards closure in 2014. The fastest growing segment was Hana Microdisplay Technologies,
whose local currency sales were up 119% year-on-year. The growth was mainly due to higher
microdisplay sales of optical telecoms switch components.
Slowing US demand affected sales during 2009, including RFID business.However the
company continued to make major investments that helped underpin expansion during 2010.
Strategy
     The company’s addition of 7,300m2 completed at its Ayutthaya site by the end of 2010, should
make it well positioned to continue expansion in 2010. The Lamphun site added 4,500m2 of
space, and further acquisitions were expected in H111. Hana has targeted smartphones,
consumer electronics and industrial applications as IC growth drivers this year. In 2010, Hana
expected to benefit from touchpads used in the new BlackBerry handset from Research In
Motion. Hana is one of the world’s largest touchpad and optical mouse producers, and has
benefited from strong global notebook sales. Another key driver was expected to be handset
demand, including some contribution from 3G iPhones.
Performance
     Hana Microelectronics reported revenues of THB17bn in 2010, up from THB13.5mn in 2009.
In USD terms the revenues were USD535mn up from US$392mn in 2009.
Operating profits rose 34% to THB2.5bn in 2010, from THB1.8bn in 2009. Meanwhile, in US
dollar terms, profits increased 45% to USD78mn from US$54mn in 2009.
Presence
     8,000 employees, including 2,000 at Hana’s plant in China. The company’s operation in
Lamphun reported 9% local currency growth in turnover in 2010.
The company has facilities in Bangkok, Lamphun and Ayutthaya in Thailand, as well as
Jiaxing in China and Ohio, US.
Sectors
     Hana Microelectronics’ main application segments by revenues share includes industrial
(approx. 30%), medical (5%), auto (15%), computer (27%), telecoms (15%) and consumer
(8%).

----------
Country Snapshot: Thailand Demographic Data


Table: Demographic Indicators, 2005-2030

Table: Rural/Urban Breakdown, 2005-2030

Section 2: Education And Healthcare

Table: Education, 2002-2005

Table: Vital Statistics, 2005-2030

----------
Section 3: Labour Market And Spending Power

Table: Employment Indicators, 2001-2006

Table: Consumer Expenditure, 2000-2012 (US$)

Table: Average Annual Non-Agricultural Wages, 2001-2012

----------
BMI Methodology

How We Generate Our Industry Forecasts

BMI’s industry forecasts are generated using the best-practice techniques of time-series modelling. The
precise form of time-series model we use varies from industry to industry, in each case being determined,
as per standard practice, by the prevailing features of the industry data being examined. For example, data
for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there
may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than
cyclical booms.

Our approach varies from industry to industry. Common to our analysis of every industry, however, is the
use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the
variable’s own history as explanatory information. For example, when forecasting oil prices, we can
include information about oil consumption, supply and capacity.

When forecasting for some of our industry sub-component variables, however, using a variable’s own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).

In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data
quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a
basis for analysis and forecasting.

It must be remembered that human intervention plays a necessary and desirable part in all of our industry
forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks,
anomalous data, turning points and seasonal features where a purely mechanical forecasting process
would not.

IT Industry

Forecasts
There are a number of criteria that drive our forecasts for each IT variable.

IT forecasting is complicated due to the fragmented nature of the market, with little transparency of
vendor data and low apparent agreement between many sets of figures in terms of market definition, base
and methodology. In addition, forecasts are naturally affected by consideration of a variety of internal and
external political and economic factors.

Within best-practice techniques of time-series modelling, BMI’s quarterly updated forecasts are
improved substantially by intimate knowledge of the prevailing features of each local market.

Individual variables taken into account in creating each forecast include:
     􀂃 Overall economic context, and GDP and demographic trends;
     􀂃 Underlying ‘information society’ trends;
     􀂃 Projected GDP share of industry;
     􀂃 Maturity of market structure;
     􀂃 Regulatory developments and government policies;
     􀂃 Developments in key client sectors such as telecommunications, banking and e-government;
     􀂃 Technological developments, and diffusion rates;
     􀂃 Exogenous events.

Estimates are calculated using BMI’s own macroeconomic and demographic forecasts.

IT Ratings – Methodology

Our approach in BMI’s IT Business Environment Ratings is threefold. First, we seek accurately to
capture the operational dangers to companies operating in this industry globally. Second, we attempt,
where possible, to identify objective indicators that may serve as proxies for indicators that were
traditionally evaluated on a subjective basis. Finally, we include aspects of BMI’s proprietary Country
Risk Ratings (CRR) that are relevant to the IT industry. Overall, the ratings system, which integrates with
those of all 16 industries covered by BMI, offers an industry-leading insight into the prospects/risks for
companies across the globe.

Ratings System
Conceptually, the ratings system divides into two distinct areas:
Limits of potential returns: Evaluation of sector’s size and growth potential in each state, and also broader
industry/state characteristics that may inhibit its development.
Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from
the state’s political/economic profile that call into question the likelihood of anticipated returns being
realised over the assessed time period.

Indicators
The following indicators have been used. Overall, the rating uses three subjectively measured indicators,
and 41 separate indicators/datasets.

Table: IT Business Environment Indicators

Weighting

Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents
equal weight. Consequently, the following weight has been adopted.

Table: Weighting Of Components

Sources

Additional sources used in IT reports include national ministries and ICT regulatory bodies, national
industry associations, and international industry organisations such as the International
Telecommunication Union (ITU), officially released company results and figures, and international and
national industry news agencies.









Comments