Market Watch

Consumer Electronics Industry Set for Marginal Revenue Growth in 2012 as Sellers Focus on Price


LCD TV segment to drive revenue growth, but many CE product areas will shrink
Global consumer electronics market revenue is set to expand by a scant 1.3 percent in 2012 as brands focus on low pricing during the holiday season to lure buyers impacted by weak global economic conditions.

Global consumer electronics original equipment manufacturer (OEM) factory revenue this year will rise to $361 billion, up from $356 billion in 2011, according to the IHS iSuppli Home & Consumer Electronics service at information and analytics provider IHS. Revenue during the fourth quarter, encompassing the peak holiday sales season that starts with Black Friday, will amount to $99 billion, up 2.2 percent from $96 billion during the same period in 2011.

Electronics brands at present have little choice but to slash prices to gain the attention of buyers, amid weak economic conditions and a lack of compelling new products. While consumer electronics brands and retailers always offer bargains for Black Friday, this year is likely to bring extremely steep price declines. The result is marginal growth in revenue for consumer electronics manufacturers in 2012.

This is especially true because people want bargains in a down economy, IHS iSuppli believes. Because of this, the consumer electronics industry in 2012 in general is focusing on optimization, rather than innovation. Instead of delivering totally new products or major new features, consumer electronics makers are improving their current offerings by making them smaller, more power efficient and—most importantly—cheaper.

To be sure, consumer electronics makers are offering a small number of innovative, new products, such as large-sized 4K and organic light-emitting diode (OLED) television sets. However, due to their high prices, these products will not generate significant sales this year.

Where growth will occur

While overall consumer electronics revenue is set to increase in 2012, much of that growth will be driven by just a few product categories, with most areas declining for the year.

Products set to contract in 2012 include plasma TVs, rear-projection TVs, analog cathode ray tube (CRT) TVs, video game consoles, digital still cameras, DVD and Blu-ray Video recorders, portable media players and MP3 players, personal & portable stereos, home audio system components, camcorders and e-book readers.

The majority of revenue growth will be driven by the LCD TV segment, which will see an increase in revenue, despite an expected fall in unit shipments for the year. Higher average selling prices for feature-rich sets sold earlier in 2012 models will allow revenue to rise for the year.

Other areas also expected to expand significantly this year include digital set-top boxes and consumer appliances.

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