Low Prices Prevent True Recovery of Consumer Electronics Market, Says iSuppli

Jul 8, 2009 15:32 Nikkei Electronics Asia

Although the global consumer electronics market returned to sequential revenue growth in Q2, the industry this year will not achieve an annual expansion that would signal a true recovery, according to iSuppli Corp.

The research firm data shows that global consumer electronics equipment revenue rose to US$71.1 billion in Q2, up 4.2% from US$68.3 billion in Q1. This represents a major improvement from Q1, when revenue fell by 25.8% compared to Q4 2008. While consumer electronics revenue typically declines on a sequential basis in the first quarter following the fourth-quarter holiday selling season, this represented a particularly sharp decline.

"Following the dismal first quarter, conditions are starting to improve in the consumer electronics business," said Sheri Greenspan, senior analyst, consumer electronics, for iSuppli. "Revenue will continue increasing on a sequential basis in the third and fourth quarters, rising by 12.5% and 10.2%. While this growth is encouraging, 2009 will still be a down year for the industry."

iSuppli predicts global consumer electronics equipment revenue will decline to US$307.6 billion in 2009, down 8.2% from US$335.2 billion in 2008, due to the impact of the worldwide economic downturn as well as sharply declining prices for key products.

These factors caused revenue to decline by 10% in Q1 compared to the same period in 2008 and by 11.3% in Q2. Revenue will decline by 8% and 4.2% in Q3 and Q4, respectively, on an annual basis.

"With the recession having eaten into consumers' disposable incomes, the consumer electronics industry has responded by cutting prices on popular products," Greenspan said. "In diverse areas from digital still cameras, to video game consoles to LCD TVs, manufacturers are offering price cuts to help move product."

To a degree, this appears to be working, with aggregate consumer electronics product unit shipments set to rise sequentially by 5%, 16.1% and 14.1% in the second, third and fourth quarters. However, following a 29.9% plunge in Q1, these sequential increases won¡Çt be enough to prevent a 4.8% decline for all of 2009.

As the economy continues to recover, overall consumer electronics product revenue in 2010 will rise 2% to reach US$313.7 billion, iSuppli predicts.

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