Economic slowdown causes consumer wariness, resulting in revised market outlook this yearAn unexpected slowing in the consumer markets due to continuing economic chaos will cause revenue growth in the global consumer electronics (CE) market to fall short of growth expectations by more than 75 percent this year, according to an IHS iSuppli Consumer Platforms Market Tracker report from information and analysis provider IHS.
CE revenue in 2011 will amount to $357.3 billion, up a scant 1.5 percent from $351.9 billion in 2010, and equivalent to a 77 percent reduction compared to the previous IHS iSuppli forecast of 6.4 percent growth for the year.
The lower CE revenue growth in 2011 represents a signiﬁcant slowdown compared to 2010, when the market ramped up at a much quicker 7.9 percent annual rate. However, CE revenue will resume moderate growth during the next two years before slowing down in 2014 and then ﬂattening out in 2015. By then, overall CE revenue will approach the $400 billion level.
The consumer electronics space covers a variety of devices, including liquid crystal display televisions (LCD TV), DVD and Blu-ray players as well as recorders, digital still cameras and portable media players. Other important categories are video game consoles and handheld game players, ebook readers, digital set-top boxes and battery chargers. For most of these categories, IHS iSuppli recalibrated its forecasts to reﬂect the ongoing economic slowdown in many parts of the world, resulting in revenue projections being pulled back.
The adjustment in revenue this year comes on the heels of a general downgrade of the CE market after a promising start. Though 2011 began on a positive note with CE revenue up 3 percent in the ﬁrst quarter compared to the same time last year, the market visibly slowed in mid year as the global economy sputtered. In particular, uncertainties on the U.S. employment front and the ﬁnancial turmoil resulting from the European sovereign debt crisis have led consumers to hold back on purchases in those regions—the biggest CE markets in the world.
A big factor in this year’s forecast reduction is the slowing of the LCD TV space, which accounts for nearly 30 percent of CE revenues. LCD TV revenue in 2011 is now anticipated to reach $104 billion instead of $110 billion, although the segment retains solid momentum going forward.
A different part of the CE market—the portable media and MP3 player segment—is in even more dire straits, IHS believes. While the LCD TV space is enduring a reduction in growth, the MP3 market is experiencing an accelerating fall in prospects, as the once ultra-hot systems are now being cast aside in favor of high-proﬁle devices like smartphones and tablets. Even the iPod from Apple Inc., the best seller in its class, is not immune: iPod shipments in the second quarter were down to 7.5 million units, compared to 9.4 million units the same time last year.
Not all the news is negative, however. While CE revenue in the second and third quarters fell just short of their levels the same time last year, the trend will begin to reverse starting in the fourth quarter as holiday sales of televisions and Blu-ray players top 2010 levels.. Growth exceeding 4 percent will occur in 2012 and 2013, and most CE segments should regain strength, IHS believes, compared to the current lackluster climate.
Unit shipments also will remain solid, with volumes projected to increase at a pace that will neutralize the effects of any price declines. By 2015, shipments will reach 300 million units for LCD TVs and 80 million for Blu-ray players. Even stolid segments like the set-top box player market and the digital still camera sector will fare comfortably at the 100 million-unit level.
The single most pressing issue remains that of pricing, expected to rear its head sometime in the 2015 time frame. While consumer appetite will remain strong for CE equipment, manufacturers will be increasingly hard-pressed to offer their products at competitive prices. Eventually, price pressure will outweigh the growing number of pieces of CE equipment, capping CE market revenue in the process and slowing growth to a trickle.
Learn More > Economic Woes Threaten Consumer Market