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Industry Outlook:
Is the White-Hot Consumer Electronics Market Poised to Cool?
By
John MacWilliams, Bishop & Associates Inc.
 Driven
by strong demand in digital audio, video, and information products,
consumer equipment sales have grown to $135 billion in the United States
and over $300 billion globally. This includes consumer electronics, home
appliances, and other consumer products, which have increasing
electronic content. Recent developments have been significant, including
new applications and growth in emerging markets.
Interestingly, this market, which long ago lost its luster for many
manufacturers as it moved “offshore,” is now a rising star. For some, it
is a challenge to survive, while for others, it provides a foundation of
high-volume production. In addition, not all consumer electronics (CE)
connector products are commodities. In many cases, they require
significant design and manufacturing capabilities.
United States and Worldwide Consumer Electrical - Electronics Industry
2002-2011
Consumer industry segments
are being transformed by a number of powerful forces:
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Digital convergence and
its attendant technical challenges.
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New products and
applications, including growth in high-end luxury goods.
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Product miniaturization,
mobility, and wireless technology.
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Crossbreeding with other
segments, such as computers, telecom, and networking.
-
Outsourcing and
globalization of manufacturing.
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Emergence of People’s
Republic of China (PRC) as a key driving force in the assembly of
consumer electronic goods.
Convergence
This means the convergence of digital silicon technology (and
firmware) with consumer products has resulted in the development of many
new products and features that would never have been possible with
traditional analog circuitry. Examples include PDAs, smart phones, HDTV,
satellite radio, and MP3 players such as the iPod.
New Products
The list of new products is staggering, and it increases
daily.
Miniaturization
Much of the growth in CE is in handheld devices, enabled
through years of perfecting small form factor packaging and
system-in-package techniques.
Crossbreeding with Other Industries
Convergence spawned wireless LANs, smart phones, GPS
technology, and digital cameras and printers. Large segments of areas
formerly considered computer/peripheral and telecom are now classified
as consumer electronics.
Global Manufacturing
Outsourcing and the emergence of China as a manufacturing
powerhouse has accelerated the development of low-cost production for a
wide range of products. This has helped increase demand for CE products.
There is a significant industry consolidation—but at the same time,
numerous startups continue to appear in high growth areas.
Global Demand
Western democracies are still the largest markets,
particularly for upscale consumer products such as high-tech
electronics. But other areas are beginning to grow at a rapid pace, and
do most of the manufacturing, e.g. China, India, and Eastern Europe.
Note the global growth rate is 6.1 percent vs. 4.8 percent in North
America during the 10-year period from 2004-2014. Unit volume
percentages are higher.
Connector Usage
Connector usages have always been high-volume/low-cost and
Asia-centric. There are some new opportunities to get designed in at
U.S. companies, but most of this is through Asian ODMs. There are many
new high-volume applications emanating from Japan, Taiwan, South Korea,
and China.
Competitive Environment:
Traditionally, CE was dominated by players with household
names: Sony, Panasonic, Casio, Sharp, Canon, Maytag, Whirlpool, and
others, with Japan leading the pack in CE. Home appliances were always
regional. As the playing field changed, so has competition, which has
increased in the past few years. The traditional players are still big.
Newer outfits, like Samsung and LG, have made major inroads. Forays by
HP, Dell, Kodak, and others have made some progress and may shift
industry market shares in the future.
-
Digital Convergence has
brought a whole new competitive dynamic, with some traditional
players struggling to adapt to a changing technical environment.
Others are making major inroads because of it. Examples include:
Samsung vs. Sony, Dell and HP (plus many others) vs. traditional TV
suppliers, RIMM vs. Motorola, etc.
-
Consumer spending held up
the market during the last business downturn. This helped attract
new players and new investment into CE technologies. Consumer
spending has also buoyed the PC market segment, which, with the
small office/home office segment, is now 35-40 percent of computer
peripherals.
-
High ticket CE and
appliance products are now common, with some selling in the
thousands of dollars.
-
Several new “blockbuster”
technologies have emerged. These include digital cameras, navigation
systems, satellite radio, MP3 music players, flash media, DVR, HDTV,
and flat panel displays.
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Globalization has
introduced new players from Taiwan, South Korea, and mainland China,
(Haier, Levono, TCL, A-Open, Lite-On, LG, Asus, i-River, etc.).
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Outsourcing has allowed
many OEMs to re-allocate resources away from manufacturing toward
product design and marketing. It has also reduced costs, which drive
volume in the price/volume elastic consumer market.
Issues on the Horizon:
There are several thorny issues to be dealt with over the
next 12-36 months:
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Growth has been
substantial. One wonders whether double-digit rates can continue,
particularly since we are in the fifth year of the current economic
expansion.
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Big box flat panel TVs
have not been selling as fast as hoped. There is also a lot of new
competition here. Many companies have jumped in, because there is an
ample supply of LCD display panels, but HDTV content is still
relatively weak, and it is likely that the analog TV deadline will
be extended. For example, digital TV is growing, but competition has
produced some over-capacity and price erosion.
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Digital-still cameras may
be peaking. Only true hobbyists need 10-12 mega pixels or can afford
the ancillary hardware. DSC pricing has gone down rapidly and one
suspects designs have been cost-reduced. What was one of the hottest
new products of the 2000s is now showing some stress.
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Some other applications,
such as mobile TV and media players, may not meet expectations,
mainly due to cost and screen size limitations. Cost of ownership
for many of these devices is not cheap, given that there are so many
choices now.
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The next big thing: HDTV
DVD recording and playback will experience delays as the market
sorts out Blu-Ray vs. HD-DVD and movies become available.
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Infrastructure costs are
huge for many of these new technologies. One example is the proposed
merger of XM radio and Sirius, because the cost of their satellite
installations is too high for two companies to survive: i.e. almost
anything is possible with technology, but can we afford it?
Manufacturers of Consumer Electronics
Product
Line, Headquarters, Manufacturing Locations
öEstimated
Business Trend
NA=North America, EU=Europe, Jp=Japan, AP=Asia-Pacific, PRC=Peoples
Republic of China, ROW=Rest of World
Source: CES Exhibitors, Hoover’s List
Top 20 Consumer Equipment Producers
(Corporate Sales 2004)
Connectors
Connectors for CE applications tend to be more “I/O” and less
“internal.” For home appliances, wire connectors, terminals and splices,
plus the newer RAST 2.5 and 5.0 standards are making headway. Digital
systems are IC-based, often with internal subsystem boards connected by
wire-to-board connectors. Fast Ethernet channel (FEC) connectors are
important in small form factor applications, where micro-miniaturization
and mated height are critical.
High volume CE applications include: USB, MiniUSB, IEEE1394, docking,
memory cards, analog and digital audio, RCA and mini jacks, component
video, HDMI, and specialized I/O connectors for gaming devices. LCD
display interconnects range from ribbon cable to FEC. Wireless
technology has begun to affect cables, first with Bluetooth, then WiFi,
and soon wireless USB (see below). This latter development is now
appearing as a “dongle,” but by 2008 will begin to be integrated into
circuitry, as WiFi and Bluetooth already have.
 John MacWilliams
Senior Consultant and Analyst, Bishop & Associates Inc.
John MacWiIliams has been in the electronics industry for over
40 years. His main
areas of experience have included: U.S. competitiveness
programs, market research studies, authored articles, field
sales and management, product marketing management, strategic
marketing, new product planning, venture development,
advertising and media relations, direct sales, manufacturers
representative, distribution sales management, and international
marketing. MacWilliams has worked with AMP, Diceon Electronics,
TRW, and IRC in marketing management positions. Prior to joining
Bishop & Associates, MacWilliams served as the group director of
marketing and new product planning for AMP.
MacWilliams graduated from Lehigh University with degrees in
business management and engineering. |
