World Consumer Electronics Ex-Factory Sales on the Rise Despite Financial Uncertainties

Global sales of Consumer Electronics (CE) equipment rose 15% in 2007 to reach $480bn and look set to rise another 7.6% to $516bn in 2008, despite the impact of the credit crunch on consumer confidence and an unwillingness to spend in key markets like the USA and UK. Desire for flat panel TVs, laptop PCs and other hot products like videogames, digital cameras, personal navigation devices (PNDs) and smartphones continue to be buoyant in Western Markets, while increasing CE consumption in Emerging Markets like China, India and Russia is helping sustain global market growth.

This is one conclusion of a recently completed analysis by Understanding & Solutions, published as part of its Digital Consumer Electronics market information service, sponsored by many major CE vendors worldwide.

CE Market Splits Three Main Ways: ‘AV-Centric’, ‘PC-Centric’ and ‘Mobiles’

The consumer electronics market is segmented out into three main equipment categories, each with a broadly different usage and consumer interest profile:-

* ‘AV-Centric’ products (TV, video, audio), accounted for 33% of ex-factory CE sales in 2007. The share of ‘AV-Centric’ equipment has stabilised over the last 3 years as the flat panel boom has driven up the value of the global TV market at 15% per annum. In addition, strong growth has occurred in handheld MP3 devices, in turn driving demand for smash hit products like ‘Made For iPod’ digital speakers.

* ‘Infotainment’ devices (PCs, peripherals and networking), accounted for 26% of the CE market in 2007. Consumer spending on computers has been driven by 30%+ p.a. increases in shipments of laptop computers, offsetting single digit growth in desktop PC products. Growth in demand for consumer laptops will remain strong for several more years as it has become the ‘must have’ infotainment product for an increasingly Web-centric population.

* ‘Mobility’ (cellphones and converged handheld devices), accounted for 24% of CE ex-factory sales (although handsets are often subsidised or even free to consumers at point of sale). The wireless market continues to expand due to growth in Emerging Markets and buoyant replacement demand in mature countries. “Cellphones increasingly offer better imaging and multimedia functionality and represent a convergent challenge to dedicated products like digital cameras and MP3 players going forward,” says David Sidebottom, Understanding & Solutions’ Senior Analyst in the wireless arena.

These three main segments together account for 80% of all CE sales.

Digital Camera Boom Continues, But May Start To Flatten After 2008

According to Understanding & Solutions research, Digital Imaging (digital cameras, camcorders and photoframes) accounted for another $35bn, or 7.3% of ex-factory CE sales in 2007.

Digital Camera sales jumped 20% worldwide in 2007, driven by product design, innovation and attractive prices but growth may start to slow beyond 2008 as markets saturate and cameraphones (i.e. mobile phones with built-in cameras) begin to cannibalise demand for dedicated products.

Videogame Surge

The global videogame market has more than doubled in size since 2005, driven by new generation consoles from Sony and Microsoft plus the smash hit Wii from Nintendo, which has broadened the demographic of game ownership. Sales of handheld games were also strong in 2007.

Although videogame hardware sales of $16bn represented only just over 3% of the CE market in 2007 (including consoles and handhelds) the sector is strategically important as it is shared by just three competitors and opens to the door to another $30bn+ in software sales, plus the development of online services and added value functionality like Blu-ray high definition videodiscs.

Automotive and Navigation

The remaining 7% of the CE market is accounted for by in-car entertainment and navigation plus the booming market for Personal Navigation Devices (PNDs), shipments of which reached over 30 million units in 2007 as the product moved into pole position as the latest must-have gadget, not least for the Christmas gift market.

Aside from PNDs, the automotive CE market is trending to factory-fitted systems integrating multimedia entertainment, navigation and driver assistance functions to meet variations in consumer preferences and car purchasing price points.

CE Competition Aligns With Market Segmentations

The division of the CE market into AV, PC and Mobile-centric segments means that competitors from different industries are effectively fighting for overall share of consumer electronics wallet e.g. Nokia and HP are incoming competitors to traditional CE players like Sony, Samsung and Panasonic.

CE players with significant presence in multiple segments are best equipped to hold onto leadership as the competitor base widens. For example, overall market leader Sony is a leader in TV/AV, cameras and games and also owns 50% of Sony-Ericsson, currently #4 in the mobile market. Samsung is #1 in the TV market and #2 in mobiles with a strong holding in digital cameras, multi-function printers and other segments.

Successful specialists like Canon (cameras), Nintendo (games), Apple (MP3/PMP) Garmin and TomTom (PNDs) have leadership positions in their respective segments or niches.

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Further Information

For industry comment, forecasting and trends, contact:

Andy C Watson, Head of Marketing & PR, Understanding & Solutions
Dial: +44 1582 500169 Email: andy.watson {at} uands(.)com Web: www.uands.com