Global consumer electronics manufacturing to grow to USD 189.6 B by 2022

Sales revenue of global consumer electronics along with computer devices recorded USD 140.3 billion in 2017. In 2018, revenue from global consumer electronics reached USD 149 billion at a growth rate of 6.4%.

Definition / Scope
Market Overview
Top Market Opportunities
Market Drivers
Market Restraints
Industry Challenges
Technology Trends
Regulatory Trends
Market Size and Forecast
Market Outlook
Distribution Chain Analysis
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References

Definition / Scope

Consumer electronics also known as brown goods falls under consumer durables.

Consumer Electronics includes the manufacture of LED television receivers, audio-visual products such as Blu-ray disc players/ recorders, digital home theater systems, mini disc, electronics games consoles, and digital cameras.

White goods pertain to a broad range of electronic equipment that includes refrigerators, washing machines, and built-in kitchen systems. This report doesn’t include such white goods.

Market Overview

Segment-wise market overview:

Digital Cameras

The number of digital cameras shipped globally has dramatically declined since 2010. There were 121.5 million units of digital cameras shipped worldwide in 2010. The number decreased significantly to 62.8 million units in 2013 and further fell to 25 million units in 2017.

In 2018, sales were down to 19.4 million units. The falling sales of digital camera have a clear impact on burgeoning smartphones use. The advanced built-in lenses in the smartphone cameras and the image editing tools available on smartphones coupled with portability feature have triggered people to switch towards smartphones as an alternative for digital cameras.

Wearables

The worldwide shipment of the wearable device has declined sharply from 113.2 million units in 2017 to 62.8 million in 2018. The overall wearable device market is expected to grow from 62.8 million shipments in 2018 to 190 million in 2020 with a compound annual growth rate (CAGR) of 18.4%.

The demand for a wearable device is again gaining positive trajectory because of the fitness trend, the advanced features that such devices offer, and their easier accessibility. Similarly, global earwear shipments went up from 1.7 million in 2017 to 1.89 million in 2018. The shipment is projected to reach 3 million shipments by 2021.

Televisions

Globally, the shipment of televisions in 2018 surged to 223 million from 210 million in 2017. Of the total TVs shipped worldwide, 70% comprised smart TVs. And of the total smart TVs, more than half were Ultra-High Definition (UHD).

The increased availability and integration of Amazon Alexa, Google Home, and other popular digital voice assistants are driving the demand for smart TVs. Another growth factor is the declining price range of smart televisions. The shipment volume is expected to reach over 235 million in 2020.

Personal Computers and Tablets

Overall, the PCs segment is in a declining trend since 2017. The global PC shipments totaled 259.4 million units in 2018 with an increase of 1.3% from 2017. PCs combined with tablets totaled 407 million in shipments in 2018 and is forecasted to fall 378.3 million in 2022 while the PCs alone is predicted to fall by 1.8% to make up 252 million units in 2020.

Consumer PCs accounted for 40% of the total PC shipments. Lenovo retained the highest market share of 22.5% in worldwide PCs shipment. HP remained second in the race holding 21.7% of global PCs sales.

Smartphones

In 2018, global smartphone shipment declined by 4.1 percent comparing the previous year totaling 1.4 billion in worldwide shipment. Samsung gained a market share of 18.7 percent followed by 18.2% share of Apple in global smartphone shipment. The Chinese brand Huawei is closely competing with the market leaders with attaining 16.1 percent market share in 2018. The total number is estimated to reach 1.5 billion in global sales by 2022.

Top Market Opportunities

Asia-Pacific market penetration

In Malaysia, the percentage of household earning over USD 15000 as an annual disposable income was held above 65% in 2018 and is forecasted to reach over 70% by 2024. Similarly, such percentage for China is estimated to continuously reach 55% in 2024 from 40% in 2018. Other Asian markets such as India, the Philippines, and Thailand are also like to gain positive growth during 2018-24.

Middle-class households are vitally important to the consumer electronics industry as they largely drive consumer spending. Furthermore, Asia-Pacific smart home technology market is predicted to reach a market valuation of USD38.04 billion by 2024 expanding at reasonable CAGR of more than 30% during the forecasted period (2018-2024).

Appliance and consumer electronics industry in India is expected to grow at 9 percent CAGR during 2018-22 to reach USD 48.37 billion in 2022 from USD 34.31 billion in 2018. Import of electronic goods in India amounted USD 53 billion in 2018.

TV application for PCs and PC application for TVs

As computers and smartphones are overtaking TVs since users have the choice of what to watch and when to watch by switching to personal computing devices, consumer electronics companies could explore more opportunities with other companies collaborating in the application market for news, sports, weathers, social/professional networks, and entertainment applications.

Conversely, TV manufacturers can develop applications to support internet content on TVs. TV viewers are gradually decreasing while online streaming is tremendously on the rise. Netflix, Hulu, and Amazon Fire TV are just a few examples that provide unlimited streaming at a lower cost. Netflix, for instance, has a user base of 146.5 million paid subscribers and its total revenue in 2018 reached USD 16.6 billion.

Likewise, Hulu reached 25 million user base with USD 1.5 billion in revenue in 2018. In the coming days, technology will leverage movies to release directly on the devices. The software market is a huge potential revenue source that companies manufacturing electronic devices such as PCs and TVs can tap into.

5G enabled smartphones

Verizon has unveiled the launch of first of its kind 5G wireless services in four cities in the USA in 2019 and Motorola Z3 is the only smartphone device that supports 5G service in the USA.

As the 5G service will be gradually rolling in many countries to become the mainstream service, the demand for 5G enabled devices will grow exponentially in the next few years completely replacing the old devices that support only 4G services. This depicts the huge potential for smartphone makers to deliver such devices in the global market.

Market Drivers

Rapid urbanization

For both the emerging and developing countries, there has been a paradigm shift in the standard of living. The transition from rural to urban areas has led to an increase in consumption of electronics durables. In India, for instance, the percentage of the urban population reached 35% in 2018 from 27.8% in 2001. The global population percentage that resided in an urban area represented 54.82% in 2017. The same percentage stood 46% in 2000.

Surging personal loans

In the USA, the stock of personal loans outstanding has grown to about USD 120 billion till 2018 compared with USD 71.9 billion in 2008. Personal loans were mainly used by borrowers with poor credit who may not have had access to credit cards or home equity loans.

Likewise, household loans rose to USD 133.97 billion (901.6 billion yuan) in the first quarter of 2018. In India, personal loans for consumer durables reached USD 2.8 billion (INR 197 billion) during 2018. These personal loans are invested in purchasing household electronics in many countries such as in the USA and in India.

Rising middle class

The rise of the middle class is likely to reach 3.2 billion people in 2030 and will constitute 66 percent of the global middle class in 2030 versus only 28 percent as recently as 2009. The growing middle class means they have a greater propensity to consume products for home appliances. Moreover, the shift in income level is reflected by owning more of goods that include electronic goods as well.

Nuclear family and single living millennial

Millennial accounts for 27 percent of the global population or about two billion people,13 emerging markets have a greater percentage of Millennial and younger generations versus established markets. About 65 percent of the population of India is under the age of 35.

These millennial groups tend to have a nuclear family that means they have to set up everything from scratch owing house to being independent. As the number of houses is increased the demand for electronics goods per house also increases.

Market Restraints

Import duty

The United States Trade Representative (USTR) has set the third list of China-origin products that will be subject to additional 10% ad valorem punitive tariffs (calculated in addition to most-favored-nation duties) implemented since September 2018 to curb intellectual property infringement. The ad valorem duty rate for the covered products on US List 3 is scheduled to further increase to 25% from January 2019.

A wide range of products are impacted by the duties including televisions, batteries, computer components, and network routers. In retaliation; Chinese authorities have also imposed tariffs on products imported from the USA worth USD 267 billion. In addition, almost 47% of all imported television in the USA is imported from China. In 2018, the USA imported roughly 50 million televisions.

Likewise, the USA is also imposing USD 50 billion- USD 60 billion of annual tariff on goods imported from China. The list contains smartphone imports along with other electronics. The data showed that 74 percent of total US smartphone shipments in 2017 came from China amounting to 130 million units. Revenues from Chinese imported smartphones also make up 86 percent of total smartphone revenues in the US.

Similarly, the Indian government has raised the limit for import electronic goods from USD 28.64 to USD 716.10. It implies that there will be a reduction in the purchase of electronic goods by outbound Indian tourists abroad. To further support the argument, it is estimated that India will account for nearly 50 million outbound tourists by 2020.

EU has also removed China from special treatment of ‘non-market’ category that will result in imposing tariff rates similar to that of the non-most favored nation’.

Industry Challenges

New Product Innovation Challenge

In this rapidly evolving technological era, most of the electronics devices have a very short life cycle. No other industry experiences such short momentum than the electronics market. No product innovation is taking place at an alarming rate in the global market. Meeting up with the market demand in a very short period of time is a vulnerable phenomenon for electronics goods producers since the existing products available in the market becomes absolute with the introduction of new products.

Taking an example of the introduction of 5G wireless service first introduced by Verizon in the American market in 2019, there is the only one device called Moto Z3 launched by Motorola that supports 5G service. As the expansion of 5G wireless services rolls out worldwide, the leading smartphone manufacturers need to replace all of its 4G enabling devices that users are using in the market with the 5G enabled new devices.

This will become a tough challenge for manufacturers to have Research and Development and introduce such devices in the market within the short span of time. The same case applies to TV production. Each time the new technology is introduced for TV like that of upgrading from 4K resolution to 8K resolution, all the players in the market need to update with the technology ensuring their products meet the competitive quality.

Technology Trends

Wearable devices, virtual and augmented reality, 4K televisions, smart homes, 3D printers, drones, communication robot are just some of the emerging technologies seen in the consumer electronics segment.

Everything from watches to light bulbs, refrigerators, and even crock pots are now capable of wirelessly communicating with users via the internet. Nearly 6.4 billion devices are connected to form IoT and market value of such devices is estimated to reach USD 1.7 trillion in 2020.

TV Resolution trend changes every 6 years

Before 2003, consumers had the only choice to purchase HD TV with an average screen size of 20 inches and the HD TV penetration was only 20%. The HD TV penetration reached a peak in 2006 with screen size ranging from 25-30 inches. Then, in 2006, FHD TV was introduced in the market with an average screen size of 15-20 inches that held just 7% penetration in the introductory year.

However, the penetration rate mounted recording more than 50% during 2010-2013 with the TV screen size gradually increasing to 30-40 inches. Thereafter, in 2013, the 4K technology was introduced that revolutionised the way TV was used to watch. The screen size was above 40 inches and penetration rate mounted 50% in 2018. Currently, the 8K resolution has been come up in the market and is likely to capture market after 2024.

Dual camera smartphones

The Chinese market is obsessed with dual camera featured smartphones. The Chinese brands are very aggressive on Dual camera smartphones. In fact, there has been a 30% increase in the number of dual camera phones shipped from 2016 to 2018. In 2018, more than 160 million such phones have been shipped from China. Oppo, Vivo, and Huawei are the leader in shipping such phones.

Regulatory Trends

The Government of India has launched the National Policy on Electronics (NPE) which aim to reach a turnover of USD 400 billion attracting investment of USD 100 billion to promote ‘Make in India’ campaign while creating 28 million new employment opportunity.

FCC Part 15 (Intentional Radiators) in the USA comply with any such intentional radiator, a device that is intended to emit radio energy. This scope includes any WiFi and Bluetooth Enabled device.

Another compliance in the USA includes an Underwriter Laboratories that frame safety standards for electronics and components. While UL compliance is not required by law, most retailers will not buy products that are not UL certified. UL compliance among Chinese manufacturers is very rare in most industries.

The Low Voltage Directive (LVD) in Europe applies to electronics, and components, with an input, or output, ranging between 50 to 1000 volts AC, and 75 to 1500 volts DC.

As such, the Low Voltage Directive is not applicable to most handheld devices but does cover, for example, phone and laptop chargers. Similarly, the EMC Directive in Europe ensures that electrical equipment doesn’t interfere with other electronics, and signals, in its proximity.

While the EMC Directive is applicable to a wide range of products, certification may not be mandatory for certain smaller devices, which are very unlikely to interfere with other electronics.

The RoHS directive applicable in most of the region including but not limited to Europe and China restricts the amounts of certain substances in electronics, including lead, cadmium and mercury.

Market Size and Forecast

Indian consumer electronics

Consumer electronics market in India reached USD 34.32 billion in 2018. It is expected to increase at a 9 percent CAGR to reach USD 48.37 billion in 2022.

India is one of the largest growing electronics markets in the world and further expected to grow at a burgeoning rate of 41 percent CAGR during 2017-2020. The television industry in India is the largest sub-segment generating revenue of USD 10.19 billion in 2017 and is projected to reach USD 13.31 billion by 2020.

With a sales volume of more than USD 111.37 billion in 2018, the market for television equipment accounted for around three-quarters of consumer electronics turnover globally and grew by more than 5%.

Consumer electronics in South Korea

South Korea consumer electronics industry is set to reach USD 15.3 billion by 2024, growing at a CAGR of 7.6% over the forecast period (2017-2025).

Japan’s consumer electronics

Japan consumer electronics industry is set to reach USD 38.6 billion by 2024, growing at a CAGR of 4.6% over the forecast period. Under visual and audio products, television segment accounted for the largest market share of 41.2% in 2018 in Japan and nearly 70% of households in Japan are expected to have a smart TV by 2020. Television is closely followed by refrigerators market share, growing at a CAGR of 4.8% over the forecast period.

Mexican consumer electronics

Mexico’s top export destinations for electronics are Canada, China, Germany, and Japan. 44% of the industry’s total exports to China are Electronics parts, totaling USD 4.8 billion USD in 2016. Electronics parts and machinery was the largest industry exporting products from Mexico to Canada in 2016.

That same year, 35% of the goods exported to Canada were built with or had some form of, electronic device. The top exported electronic products were computers at a USD 23.4 billion value, telephones at a USD19.3 billion value, and video displays at a USD13.6 billion value.

Export was 29% of Mexico’s exports to Germany and produced many of the electrical components for automotive parts manufacturing. Overall, the top products exported from Mexico to Germany in 2016 were, computers totaling USD 376 million, telephones totaling USD245 million, and electrical control boards totaling USD 178 million.

Consumer electronics market in China

The total value of consumer electronics was recorded USD 21.08 billion in 2018, a reduction of 6.8 percent from the previous year. In the Chinese consumer electronics market, home computing devices like PCs will suffer from a declining growth rate of 2-5% during 2019-2021.

However, portable devices, home audio, and video, and personal appliances will witness a positive growth rate of 2-25%. Consumer robotics is the highest growing segment of more than 20% growth rate.

Market Outlook

Growing at a CAGR of 4.5%, the market for consumer electronics reached USD 149 billion in 2018 and is projected to cross USD 189.6 billion by 2022. The portable devices segment is growing at a CAGR of 36.4 percent while Home Audio and Video devices are growing at a CAGR of 12.6%.

The sales volume of televisions totaled more than USD 111.66 billion in 2018 accounting for around three-quarters of consumer electronics turnover globally. The growth of this segment will further be driven largely due to high-end devices with a screen size of at least 50 inches.

Distribution Chain Analysis

The global consumer electronics manufacturing industry is segmented in two primary ways – first along the electronics value chain and second along with the end-user segments.

As seen in the figure, raw materials for electronics devices are procured from inbound suppliers. These raw materials are either sent to contract manufacturers who produce produces for private label branding or manufactured in -house production facility.

Then, the finished products are transported either by owned logistics system or by outsourcing the transportation part to the third party for delivery to distributors.

The distributors then deliver these finished products to the retailer. Retailers purchase electronics devices such as smartphones and PCs from retailers. Retailers ofter perform post-purchase service, provide spare parts while few brands have their own service center for repairing the defective devices.

Sales, marketing, and after-sales service are the competitive factors to retain B2B customers.

Competitive Landscape

The global consumer electronics market is highly fragmented in nature with the presence of many evolving and existing producers. Key players are heavily investing in research and development to introduce advanced versions of existing products along with mergers and acquisitions.

Major players in the consumer electronics market comprise Samsung Electronics, Apple, Huawei, LG Electronics, General Electric, Sony Corporation, Xiaomi, Bose, AB Electrolux, Philips, Canon, Haier, Nikon, Sennheiser, and GoPro.

The industry is currently witnessing rising competition owing to the presence of a number of regional as well as international players. However, the strong eminence of the well-recognized players is making it difficult for new players to enter the marketplace.

India, Korea, Vietnam, and Indonesia are the emerging markets for positive change in smartphone growth. China accounts for more than 30% of the world’s smartphone consumption. Globally, the top five smartphone companies account for 69% of the market share. Samsung, Apple, Huawei, Oppo, and Xiaomi represent the global top 5 smartphone brands.

The USA saw a growing year for PCs consumption where demand is driven from notebook PCs in the enterprises. The Asian market for PCs was stagnated expect in Japan where demand grew from switching to Windows 10. Lenovo held 24% global share followed by HP, which acquired a 22.8% share in worldwide PCs market.

Samsung has been maintaining over 20% market share in global TVs production. Similarly, LG is the second largest TV manufacturer in the world accounting for a market share of about 12%. Likewise, Sony holds 8% share in the worldwide TVs manufacturing market.

Competitive Factors

The competitive factors that companies face vary depending on the nature of the business. For example, television manufacturers compete on the basis of various factors including price and function, while smartphone makers compete for superior functionality such as camera feature, memory storage, and for PCs makers that compete for design and speed.

Competition on price in the electronics businesses can lead to lower margins when costs do not fall at a proportional rate. Moreover, companies having strong competitive advantage, it is possible that its competitors’ technological capabilities will accelerate such that the first-mover would be unable to maintain its advantageous market position.

Digital camera producers face increasingly intense pricing pressure from competitors, retailer consolidation, new sales/distribution channels and shorter product cycles in a variety of consumer product categories.

To remain competitive and stimulate customer demand, companies invest in research and development to achieve product and service innovations and successfully manage frequent introductions of such new products and services.

Rapid changes in market trends, consumer preferences and constantly evolving technological advances in hardware performance, software features and functionality compel brands to innovate their products offering. Laptop brands face aggressive product and price competition from new entrants and existing competitors.

Key Market Players

Lenovo

Lenovo is one of the listed Fortune 500 company valued USD 45 billion. It manufactures one the world’s widest portfolio of connected products, including smartphones (Motorola) tablets, PCs (Thinkpad, Yoga), and workstations as well as AR VR devices and smart home solutions. North Americas accounted for 31 percent of Lenovo’s total revenue in 2018 while Latin America recorded a market share of 17.4 percent in the same year.

Similarly, Asia-Pacific accounted for 16 percent of Lenovo’s total revenue in 2018. Likewise, Europe, the Middle East, and Africa combined held 28 percent share in 2018. The company generated USD 45.35 billion in revenue in 2018 and stands at the market capitalization of USD 10.05 billion as of January 2019.

Sony Corporation

Sony Corporation is a Japanese electronics manufacturing corporation established in 1946 as Tokyo Tsushin Kogyo Kabushiki Kaisha, a joint stock company (Kabushiki Kaisha) under Japanese law. In 1958, it changed its name to Sony Kabushiki Kaisha (“Sony Corporation” in English).

Sony is engaged in the development, design, production, manufacture, offer, and sale of various kinds of electronic equipment, instruments and devices for consumer, professional and industrial markets such as network services, game hardware and software, televisions, audio and video recorders and players, still and video cameras, mobile phones, and semiconductors.

Sony is also engaged in the production, acquisition, and distribution of motion pictures and television programming and the operation of television and digital networks. The company made USD 2.6 billion in revenue from its television production segment only in 2018. It’s market capitalization totaled USD 61.7 billion in January 2019.

Samsung Electronics

Samsung Electronics Co. Ltd. is Korea-based Company principally engaged in the manufacture and distribution of electronic products. The Company operates its business through three segments. The Consumer Electronics (CE) Segment is mainly engaged in the manufacture of color televisions (TVs), monitors, printers, air conditioners, refrigerators, laundry machines, and others.

The Information Technology & Mobile Communications (IM) Segment is mainly engaged in the manufacture of computers, handheld phones (HHPs), network systems, digital cameras, and others.

The Device Solutions (DS) Segment is mainly engaged in the manufacture of semiconductor and display parts, including dynamic random access memories (DRAMs), flashes, thin film transistor-liquid crystal displays (TFT-LCDs) and others.

Samsung Electronics’ revenue from consumer electronics stood USD 36.34 billion (KRW 42.11 trillion) in 2018. Revenue from consumer electronics represented 17.27% of the total USD 210 billion in 2018.

Apple

Apple Inc. was incorporated in1977 engaging in designing, manufacturing and marketing mobile communication and media devices, personal computers and portable digital music players.

The company’s products and services include iPhone, iPad, Mac, iPod, Apple Watch, Apple TV, a portfolio of consumer and professional software applications, iPhone OS (iOS), OS X and watchOS operating systems, iCloud, Apple Pay and a range of accessory, service and support offerings.

The Company sells and delivers digital content and applications through the iTunes Store, App Store, Mac App Store, television APP Store, iBooks Store and Apple Music (collectively Internet Services). Apple made net sales of USD 228.41 billion by selling iPhone, iPAd, Mac, and other products but excluding USD 37.19 billion of net service revenue in 2018. The combined sales unit of iPhone, iPAd, and Mac totaled 280 million in 2018.

Huawei

Huawei Technologies Co. Ltd. provides networking products and telecommunication solutions. The Company researches and develops internet access, transmission network, servers, storage, security, and other networking products. Huawei Technologies also offers business consulting, network integration, assurance, managed, learning, and global delivery services.

It generated total revenue of USD 107 billion in 2018. Of which consumer business segment holds 48.37% share. China covers 51.6% of its market while EMEA region represents 28.4% of its revenue source.

Of the total revenue, revenue generated from consumer electronics segment reached USD 55.81 billion. Within consumer electronics, game and network sub-segment constituted 29.69 % revenue source totaling USD 16.57 billion followed by home entertainment and sound sub-segment which was totaled USD 10.95 billion making up 19.63% revenue generating source.

LG is the second largest TV manufacturer in the world accounting for a market share of about 12%. The company offers a wide range of OLED TVs, UHD TVs, super UHD TVs, smart TVs and LED TVs. It has been the world’s bestselling OLED TV brand since 2013. With extensive experience in television manufacturing under its belt, LG has been a pioneer in the innovation of new technologies.

For instance, LG OLED TVs are loaded with AI ThinQ technology which integrates Natural Language Processing (NLP) to deliver intelligent voice-activated the control. LG Super UHD TVs comes with full array dimming technology which produces clear and crisp images with superb contrast by controlling backlight units individually. The company’s total revenue recorded USD 54.4 billion in 2018.

Strategic Conclusion

The worldwide consumer electronics is likely to be worth over USD 200 billion by 2024 growing at the current CAGR. The market will be driven especially by digital ecosystem, rising consumption of technological devices, particularly smartphones, affluent lifestyle towards owning home appliances. Another reason for the increasing consumption trend is that technology is getting outdated very rapidly.

The consumers are attracted to this technological phenomenon. Smartphones and televisions will draw a larger share in the consumer electronics segment. Smartphones and televisions will account for more than three-quarters of consumer electronics. Moreover, the Asia-Pacific region will create the largest demand for consumer durables in the coming years.