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Consumer electronics thrive amid gloomy economy

Posted: 29 Aug 2008     Print Version  Bookmark and Share

Keywords:consumer electronics  Digital TV  video game consoles  high definition 

Amid today's unpredictable economy and soaring fuel costs, consumers appear to be staying closer to home. While tighter budgets may be affecting the travel and tourism businesses, consumers continue to purchase electronics for the home and personal use, as many families are likely more inclined to take "staycations" instead of vacations.

"This is music to the ears of consumer-electronics vendors, which are eyeing a goldmine of opportunity to push their products to families and those looking to stay at home," said Sheri Greenspan, iSuppli Corp. senior analyst, consumer electronics.

"Thanks to falling prices, a U.S. government mandate for broadcasters to switch to digital and retailer incentives, the Digital TV (DTV) market is booming."

Gaming is also thriving, with record sales for software titles and accessories driving a renewed interest among consumers for video-game consoles. Video game consoles are also experiencing an uptick in OEM factory average selling prices-one of the few segments of the consumer-electronics business seeing this trend.

DTV plugs in

Although many consumers may not understand what high definition (HD) really is from a technical perspective, they definitely know that they want it. DTV factory shipments are expected to grow to 25.27 crore (252.7 million) units by 2012, rising at a compound annual growth rate (CAGR) of 16.5 per cent from 117.7 million units in 2007.

Although the Summer Olympic Games' impact on television sales fell short of expectations this year, worldwide DTV shipments of this year will rise by 18.1 per cent to reach 138.97 million units, up from 11.77 crore (117.7) million units in 2007.

The figure below presents iSuppli's unit OEM factory shipment forecast for global DTV—including LCD-TVs, Plasma Display Panel-Televisions (PDP-TVs), Rear Projection Televisions (RPTVs) and Digital CRT-TVs—for the period of 2007 through 2012.

OEM factory shipment forecast for global DTV

Factors that are encouraging the switch to DTV include:

- Declining prices for flat-panel TVs across the board

- Analogue TV broadcast shut-off occurring in the U.S. in 2009 and later in the rest of the world

- Better picture quality

- More HD content becoming available in the form of Blu-ray DVD and HD video on demand

- Flat-panel form factor, which is more appealing and generates more interest among consumers

- Excitement about having the "in" thing in their living room

On the semiconductor side, iSuppli forecasts that the DTV segment will nearly double by 2012 to reach Rs.61,716.18 crore ($14.4 billion) in revenue, managing a CAGR of 11.4 per cent from Rs.36,001.11 crore ($8.4 billion) in 2007. Logic application-specific ICs will represent the largest share of these DTV semiconductors, rising to Rs.19,286.31 crore ($4.5 billion) in 2012, up from Rs12,857.54 ($3 billion) in 2007.

Game face

The video game console market continues to boom despite the economic slowdown in the United States and worldwide. Game-console OEM factory revenue grew by an impressive 85 per cent from 2006 to 2007. In the first quarter of 2008, revenue grew 19 per cent compared to the first quarter of 2007. iSuppli expects video game console factory shipments to increase to 6.15 crore (61.5 million) units by 2012, rising at a CAGR of 4.8 per cent from 4.87 crore (48.7 million) units in 2007.

The Sony PlayStation 3, Nintendo Wii and Microsoft Xbox 360 are experiencing a growth spurt due to enhanced software line-ups with blockbuster title releases such as Metal Gear Solid 4, Grand Theft Auto IV and the Wii Fit, to name a few. Another trend for the Xbox 360 and PS3 is upgrading the storage, as the PS3 and Xbox increase their hard disc drives to capacities of 80GB and 120GB respectively.

iSuppli anticipates additional revision launches offering increased disc space late this fall, driving PS3 demand this holiday season and resulting in price reductions for previous models.

The Wii continues to dominate the gaming console market with its mass-market appeal, motion-censored controllers, low price and innovative titles. The console has proved the allure of game consoles not just for children, but for the whole family, as illustrated by the Wii Fit upon its release targeting the casual gamer.

Going forward, the PlayStation 3's Blu-ray player is likely to help propel its sales. Sony will do more to increase the adoption of the PS3 by introducing creative marketing strategies, such as bundling software, online services and accessories in order to maintain pricing and to boost adoption by new users.

Meanwhile, Microsoft slashed the price of its Xbox 360 by Rs.2,142.92 ($50) earlier this year in order to help stimulate growth and to stave off any advance from the PS3.

All these moves are likely to have a huge impact on the video-game market over the next few years. However, when the next generation of consoles hit the market in the late 2010 to 2011 time frame, the competitive cards will be reshuffled again for Nintendo, Microsoft and Sony.

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