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WORLDWIDE CE REVENUES RETURNED TO GROWTH IN 2016
20 Jan 2017 - CE market revenues returned to growth in 2016, following 2015's 'blip'. Growth was modest, however, at 1.2% (to reach $680 billion), as 'emerging' markets faltered, mobile revenues slowed and categories such as small-screen TV's and cameras continued to be squeezed by convergence. Despite the challenges, which also include the ever present threat of another worldwide recession, several hotspots of innovation are fuelling growth in CE, including VR & AR, connected cars, voice assistants, smart home, as well as stability returning to TV and PC.
Representing almost one in five dollars spent on CE, 'traditional' categories such as TV, audio and video equipment stabilised last year thanks to improving TV sales and continued growth in wireless speakers, headphones and digital media adapters (which includes the likes of Amazon Fire TV Stick, Roku, Apple TV, etc.), offsetting declines in set top boxes and Blu-ray/DVD equipment.
Mobile grew 5% to represent half of total CE revenues for the first time, at $338 billion.
Consumer PC sales fell marginally, but look to be relatively stable going forward, helped by the boom in online gaming, growth in 2-in-1 tablets and Chromebook. Consumer tablet sales fell 16% as shipments of 'phablets' surge.
Game consoles fell 9% to $10.5 billion, but within this handheld games fell 40% as a result of competition from mobile apps. VR will boost this market in 2017.
Imaging equipment declined 16% to $11.4 billion in 2015, and will continue to decline before the traditional camera market starts 'bottoming out' over the next 2-3 years. Hotspots like High-end ILC, video-drones and instant print 'Polaroid-like' cameras offset some of the decline in this category.
Despite a significant market slowdown in 2016 for wearables, the market is expected to recover as smartwatch designs improve and applications emerge such as wearable pay and LTE. VR will fuel headsets for PC, console and mobile gaming. The market for fitness wearables remains relatively robust at the enthusiast level; however the volume end of the market is softening, as the novelty of activity tracking wears thin.
Despite not living up to expectations to date, resulting in some industry fallout in 2016, the smart home market will grow 30% this year to achieve $3 billion in sales across diverse product categories. The market is skewed to the US which will represents more than 50% of spend this year, driven by convenience lifestyle, technology awareness, affluence and a high level of security and safety awareness. We estimate up to 40% of connected home devices are now supplied by service providers, notably security and communications firms. The impact of Amazon's success with Echo will open up a scenario where smart home might 'piggy back' as added value on a primary acquisition driver (audio in the case of Echo).
Emerging markets, which now represent over half of the worldwide CE market, have badly weakened since 2014, largely due to weakening economies in important regional hubs, such as Russia, Brazil, and more recently Nigeria, Africa's largest economy and market. The falling price of Oil, unrest in the Middle East, and currency fluctuations brought about by sanctions on Russia and more recently Brexit, are contributing to price pressure and slowing demand. N America remains strong at 21% of global CE demand, driven by affluence and avid demand for new technology.
In a competitive context, Apple and Huawei grew strongly in FY 2015, although Apple has flattened in 2016, while most other major CE brands continue to struggle to find growth and profitability in a flat market environment. Barriers to entry within CE manufacturing continue to fall, allowing new entrants with low overheads to slice into market share using available SoC technology and contract manufacturers in China. Internet giants are increasingly competing in CE hardware; Amazon, most notably, took 16% of home audio revenues in Q3 in the USA with its hugely popular Echo.
The 5-year outlook for consumer electronics is 1% CAGR, with revenues reaching $710 billion by 2021, subject to a relatively stable world economy.
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