It is eager to position itself as a `pure-play' IT hardware company. In an interview with The Financial Express, SEIP assistant general manager IT sales Vivek Prakash spoke to Neeraj Saxena about the company's product plans and its retailing strategy. Excerpts:
What was the idea behind setting up SEIP?
The only common link between the two companies is our common managing director KS Kim. We are different from Samsung India in the way we work and operate and the two do not even have a common HR structure.

Globally, Samsung Electronics is the flagship company which is into consumer appliances, semiconductors and telecom. SEIP, as the new 100 per cent subsidiary, will be responsible for telecom and the digital group businesses as a focused business entity.

Are there any synergies that the SEI would be deriving from the new age Internet-driven appliances? Would you position these products for the SOHO market, or at a retail consumer appliances market?
Let's look at where the IT industry is going. We are all afraid of this thing called 'e'. Lot of people talk about `e' and the channels and the impact this `e'will have on channels. But two things are very clear that `e' is going to cut channels. The only thing that can be debated is how much time will it take to do that. Today, between a manufacturer and the PC buyer, there are seven layers. And each layer costs.

But if we were to use `e' to cut some of the layers, the manufacturer becomes more affordable to the consumer. So, the `e' is going to make things affordable and that is going to drive the e-isation of the channels within the country.

The Indian hardware industry is growing at around 35-50 per cent depending on which product category you are in. This kind of money supply growth is not there and the industry is overheated. So you always work on somebody else's credit. My buyer works on my credit, their buyers work on their credit. Most of the IT distribution industry is actually making profit from rotating capital and not from selling. Hardware sales don't generate money today. So in such a situation, there is a very important element of credit risk. Internet selling cannot take that. And in an overheated environment like that, companies like us, or for that matter Compaq would not touch `e' with a barge pole. So channels will survive.

So you do not plan to take the channel reselling route at all?
The way channels will change with respect to `e' will vary geography to geography, culture to culture. Lot of people say 'e' will kill channels in the US. US is a very `e' savvy market. Lot of people sell direct-to-home or direct-to-customer, but channels still do exist there. And channels have found their own niche in `touch and feel' sales, or the retail sales. Today, Samsung is the largest IT seller in the country. We have more than 6,000 dealers. Each and everybody has a vision to go to retail. Not a single computer retail store breaks even today. There is no way it can break even.

Is SEIP's focus on core IT products or the convergence products?
Within digital group, we have several businesses and SEIP represents only some of those right now such as display and storage business and printers and scanners. In the display business, we are the largest player globally. We are the leaders in all forms of display like tubes and flat tubes, TFT LCD monitors, the plasma displays and the sub-categories, including the projection business. We are talking convergence like nobody else. Suppose, if we install a TV tuner card in a TFT LCD monitor, it becomes a TV and TFT LCD monitor. Now, if one were to watch a TV channel on a 17' TFT monitor, the display would be far superior than a 32" TV. This is only one example of the digital convergence products that we have lined up.

Why are you not eager to set up a manufacturing base here like most of the IT companies? Is India not a lucrative enough market for you to invest?
There is no question of setting up a manufacturing base in the near future. We plan to stay a marketing company and access and address the market needs so that we can invest very heavily on the services side first. As a company, I can afford to have my own services. Our first priority is to try to stabilise the operations of the new company like getting processes and systems in place. Many IT companies believe that India is not a high-end market. But we feel that India is a very large market and if you segment this market, there is demand at all levels. We are already selling about 150 TFTs here every month in a market which is predominantly considered to be a 14" monitor market. So 85 per cent of our business may come from the 14" market, but we also sell 150 TFT LCDs every month which is the way to do it.

What then are your immediate goals in the Indian market? Which other products do you plan to introduce?
Somewhere at stage three, we will look at entirely new line of businesses. For example, Samsung is the world's largest player in the MP3 market. We have a brand called YEPP. It is a very small digital product which means that the functions are on one chipset. On the other hand, we have a digital still camera. What happens if we combine the two and call it Photo Yepp? We are in a position to marry a number of such devices with each other and offer them in the market. I will give you another instance. I have to collect MP3 through a serial cable of my PC.

I also have to capture my digital images through a digital camera through the same route and through the same serial port. So instead of having two different units for two different cables with two different power supplies, I can have one power supply and one cable and on the same system, I can download my music and transfer my photos. Take one step ahead and you have a digital camcorder. Now what happens if I combine my digital camcorder and a DVD? Such possibilities are immense.