electronics

CEA: '09 Growth Improbable; Few Bright Spots

Wall of tvs While the country may be in a recession, and consumer spending will likely remain soft for much of the coming year, the picture will not be overly bleak in the consumer electronics segment, with sales down only slightly from 2008, according to the Consumer Electronics Association.

In its semi-annual sales forecast, the CEA expects consumer electronics revenues to decline by 0.6% in 2009 to about $171 billion from 2008's $172 billion. "Consumer demand for technology is strong, but price deflation and maturing digital markets are impacting the total market opportunity," according to the report.

Although the forecast warns that category revenue growth is "improbable" in 2009 and that the sector--while it has shown resilience in the past--is not immune to market forces, there could well be some bright spots in the coming year.

One such spot will be digital display televisions. In 2008, DTV shipments increased 24%, and revenue for the segment--even with falling prices--increased 7% in 2008, according to the CEA. This year, as the United States continues its transition to digital broadcast television, growth for digital display televisions will continue, and the segment will represent 15% of total industry sales in 2009, according to the CEA.

In addition, the sales of Blu-Ray DVD players will also increase in 2009. As the industry settled on Blu-Ray as the standard for high-definition DVDs, sales will increase to about $1.2 billion in 2009, according to the CEA. "Over the next few years, double-digit price declines will foster similar growth rates for Blu-Ray player units," according to the report.

Meanwhile, smartphones (such as iPhones and BlackBerrys) will continue to become "must have" electronic devices. In 2008, sales for such devices grew to $12 billion, accounting for nearly half of the revenues in the overall handset market. For 2009, smartphones will account for about 60% of handset revenues, according to the CEA.

Other areas that are expected to show gains include video games (particularly software), GPS navigation systems and accessories such as headphones, cases and video game controllers, according to the CEA.

These growth categories, however, will come at the expense of other "maturing" segments such as MP3 players and digital cameras, according to the CEA. "Once darlings of the industry, shipment revenues of digital cameras and MP3 players are constricting as household penetration for these devices peaks and convergence erodes sales," according to the report.

Overall, the CEA expects the economy to struggle for the first half of 2009--and likely beyond--as unemployment and credit concerns are expected to weigh on consumers for much of the year.

"Given the trepidation of consumers, it is somewhat surprising consumer technology purchases--many of which are highly discretionary--held up as well as they did in 2008," according to the CEA report. "While we expect the economic environment over the next six months to impact annual technology industry growth; the effect is muted given the level of economic deterioration we have had thus far and further expect to have in 2009."

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