Summary:

I assisted Frost and Sullivan in analyzing 6 VC-1(Video Format Compliant) Product Categories by assessing the strength of market. This was achieved by segmenting each country and extrapolating available data based on an existing model and Frost and Sullivan’s reports.

VC-1 (also known as SMPTE 421M-2006) is a digital coding standard upon which certain video decoding and encoding functionality used in media players, advanced optical disc players and other products are based.

The methodology involved interacting with major market players in each product category to get the insight of various market trends prevalent in the industry. These interviews and interactions facilitated the identification of various drivers, restraints and challenges present in that segment. Based on various forecasting models available in Frost and Sullivan and some Frost and Sullivan reports, the market potential for each product category was estimated. The product categories were: Graphic Chipsets, IPTV Set Top Box, Encoding Software, Personal Media Players, Smart TV and Decoding Software.  The forecast horizon was tll 2014.

VC-1 is expected to increase its penetration through multi-format-supporting products among segments, including graphic chipsets, video game consoles, Blu-ray players and others. The strongest growing markets continue to be Blu-ray players and Blu-ray discs.  Primary analysis revealed that VC-1 Format Penetration  varies significantly across various products segments, hence each category was analyzed separately.

Based on various primary and secondary data, following were delivered to the client, MPEG LA:

• Country of Manufacture, Country of Sale and Profile Information
• VC-1 Product Categories and Profiles
• Compiled VC-1 Outlook Data
• VC-1 Market Outlook Overview Narrative

Methodology Adopted:-

Frost and Sullivan focuses on collecting Primary Data by using the Bottom Up approach. This is essentially an approach where the analyst measures market potential by collecting and assessing various inputs received from various market players. An aggregate of these inputs would result in estimation of industry potential. Since it is not feasible to get inputs from all prevalent market players the analyst follows the two step model given below:-

Step 1: Collecting Secondary Data:-

Secondary data is defined as all the data which is readily available and can be gathered from public sources like balance sheets, annual reports, census etc. The biggest advantage of this data is that it is readily available and it is either free of cost or available quite cheaply. The disadvantage is that the data available to public may not much significance  as this data is available to everyone and hence the client shall not pay any external entity for the same.

This approach comes handy to analyst when he/she has to get the overview of market, although we will not get the exact shipment numbers using this approach but it is useful in getting a rough picture of the market. It helps us in deciding the major player of market, it also helps us in understanding whether the market is dominated by few players or it is fragmented. If it is fragmented then we have to collect data from many sources.

Collecting useful information from the publicly available data is an art, using balance sheet and looking at the balance sheet we can deduce that whether the company is growing at constant rate or not, if the CAGR (Compounded Annual Growth Rate) is steady for last 5 years and we are not predicting much changes in environment and company structure then we can confidently make the market forecast by using the same CAGR for next 5 years. If the CAGR is fluctuating in past then analyst have to go through various other sources like technical blogs, business magazines, market condition overview to give a reasonable CAGR for forecasted years.

Using various methodology and mathematical models we can form a general overview of the market for particular industry segment.

Collecting Primary Data:-

Analysts use the data collected by Secondary research to facilitate the Primary Research. Based on secondary analysis we form an approximate overview about the market potential. This gives us the idea that which players are major players, what approximate market segment is trapped by these companies.

Frost and Sullivan adopt the methodology of contacting individual leaders through telephonic calls/emails and have a discussion on various parameters pertaining to Project Objectives. While making the call analyst completes his/her initial analysis and ensures that he is making the most out of discussion. It is essential and mandatory to do detail secondary research before making a call to senior person from industry. During call it is tried that he is presenting his secondary research to industry leaders and verifying it from them. This saves the valuable time of senior persons from industry with whom he is talking.

Getting details from these persons is a knotty affair as many times analyst is handling a project of the rivalry company. In this case an industry person tries to get information from analyst. The most effective method to handle situation is to give the general picture of market and to avoid sharing the data related to client’s business. It helps them in avoiding the violation the Non Disclosure Act signed with the client.

Getting Inputs from Other BUs:-

Never reinvent the wheel!! This famous quote comes handy when doing any project in Frost and Sullivan. It is a fifty year old organisation and catering to almost all major industry sectors, hence whenever any analyst gets any project he/she first seeks information from the existing data base of the company. There are many auxiliary units in Frost and Sullivan which supports analyst in areas like economy of any particular country, Govt. Policy and Regulation prevalent in any specific country. Analysts after kicking off the project gets detail reports from these groups which may facilitate his/her work. These additional reports make the work of analyst much easier and also bring the most needed extra winning edge in his/her work.

After getting information from various sectors analyst uses the standard template to prepare Report and Presentation. He has to present his work to various groups of Frost and Sullivan and explain them various aspects of his work. He/she should be able to defend his/her analysis. It is quite similar like “Defence of Thesis” employed in any educational institute.

Work done in various segments:-

As per the client requirements main focus was on Graphic Chipsets hence I did the detail analysis on Graphic Chipsets, other sectors were analysed superficially.

Graphic Chipsets:-

Market Overview

The graphics chipset market includes all video processing chips that are either integrated into motherboards or discrete video cards that are then connected to the motherboard via PCIE, AGP, or PCI.  The aftermarket segment for this market includes all hardware that is purchased after the initial purchase of the PC (normally for repair or upgrade), or as a component for custom-built PC’s.  Additionally, some users may integrate more than one unit per system, particularly for multi-GPU, Crossfire or SLI graphics configurations.

Market for Graphic Chipset comprises of total chipsets used while assembling PCs and Laptops and Chipsets bought by Gaming enthusiasts wanting to enhance their laptop capability. The Graphic Chipset market is showing the promising growth as newer games are being developed requiring sophisticated computer configuration to enjoy it. Games like Halo-Reach, World of Warcrafts, Need for Speed-Carbon may need the Graphic Card of capacity 1 GB to get superior performance.

Another interesting characteristic of this market is that it has high barrier to entry, Graphic Chipset Industry requires a high fixed cost to setup a production unit. This industry also works on continuous improvement of its product which enables that the Market Player has to put lots of resources in R&D to ensure that it is staying ahead of its competitors. Intel one of the largest Graphic Chipset manufacturers spent about $6.2 Billion for R&D, not all resources were utilized by Graphic Chipset Division but it shows the significance of R&D efforts put by various companies to stay afloat. Due to these tremendous costs involved it is very difficult for a new player to jump into the competition and claim its market share. Taiwan is the largest Graphic Chipset Manufacturing Country. This industry needs the huge supply of highly qualified VLSI engineers and this requirement is fulfilled by Taiwan, hence it is the leader in producing Graphic Chipsets to be used across various countries. China is trailing Taiwan in this aspect.

VC-1 in GPU Market

VC-1 support in graphics chipsets is a necessary element for nearly all chipset vendors, and is currently supported on nearly all hardware. With fierce competition and a market moving towards hardware acceleration for multimedia applications, compatibility for VC-1 has become a necessity in order to remain competitive.  This has made it unlikely that support for this standard will diminish in any way in the foreseeable future.  Additionally, given the steady growth rate for the chipset market, support for the VC-1 standard is anticipated to continue growing along with it.

Market Share Analysis

Various Companies holding the market share in this oligopolistic industry along with their current share are given below:-

Here Intel is holding the Top position; currently AMD is holding 2^nd position but earlier it was on third position with NVidia as 2^nd position. By looking at the market share it is evident that more than 50% of market is controlled by Intel and remaining market is divided between AMD and Nvidia. Other important players are SIS, Matrox and VIA/S3, these players are not holding share.

SWOT analyses of these major players are:-

Intel

AMD

NVIDIA

Drivers for this Market

Graphic Chipset market is driven by the forces given below:-

Rise of Gaming Market:-

The Market of Graphic Chipsets is strongly influenced and driven by the rising trends and sophistication of Games played. Sophisticated games need dedicated graphic card of capacity up to 1 GB. As per a report published by Price Waterhouse Coopers, the gaming market should achieve the gigantic figure of $46.5 Billion growing at the rate of 11.4% annually. It suggests that the Gaming Industry is going to show the significant growth and thus it will result in the growth of Graphic Chipsets as it is dependent to it.

Watching Movies Online:-

Lately it has been observed that the trend of watching movies/videos online has been increased drastically. It requires higher capacity of Laptop/PC. This has induced the additional demand for Graphic Chipsets. Netflix one of the largest provider of on-demand and streaming videos reported the revenue of $1.67Billion in 2009. It gives us a fair picture of the scope and volume of this business. It is a significant driver for Graphic Chipset Market.

Trend of Multi-Tasking Laptops:-

The consumer today requires the sophisticated laptops with tremendous computational capabilities. Few years’ back RAM (Random Access Memory) of 512MB was considered to be luxury but now RAM of 4GB is considered as necessity. This trend is similar in Processors and Graphic Card Capacity too. Users not only want their laptops to satisfy their needs but to exceed their expectations. More and more buyers are turning towards laptops from Alienware which are very costly but also help them in satisfying their need of excellent quality. This has increased the sale of Graphic Chipsets by the Laptop manufacturer as well as users.

Restraints:-

Intel is working on a new processor which will enhance the Graphic qualities of the processor and will also eliminate the need of separate Graphic Chipset. This Processor can definitely eat the share of Graphic Chipset Market and thus impair the growth of Graphic Chipsets. This new technology will work as a restraint to the growth of Graphic Chipset Market.

Vijay Kibe

MBA Batch of 2012