Electronic Design

Structural Changes Confront Consumer Electronics Industry

The consumer electronics industry is undergoing fundamental changes that will bring major alterations to the market, its products, and the identity of the firms that compete in this space.

Consumer electronics (CE) over the past few years has become a bastion of growth and profitability in the troubled high-tech industry. In 2002, consumers snapped up video game consoles, DVD players, and digital still cameras, helping worldwide CE factory revenue to rise to $217 billion, up 3% from $210 billion in 2001. In comparison, overall electronic equipment revenues declined by 3.4% in 2002.

Those same products will be popular in 2003, iSuppli predicts. Their prices will be lower, though, restraining overall CE equipment revenue growth.

With prices declining, iSuppli projects global CE sales will rise to $225 billion in 2003, up 4.1% from 2002. This represents scant growth for CE products, which have enjoyed about an 8% annual growth during the last 10 to 15 years.

However, annual growth rates for the next few years are expected to vary from 4% to 6%. The figure presents iSuppli's forecast for CE equipment and semiconductors.

In this environment of slower growth, the CE industry is undergoing major changes. Japanese vendors that traditionally dominated the CE segment are facing increasingly stiff competition from Taiwanese, Korean, and Chinese OEMs.

The entrance of electronics manufacturing services (EMS) and original design manufacturing (ODM) companies into the CE space is altering the supply chain logistics of the market dramatically. Meanwhile, the advent of the Internet and broadband has shifted the value of CE products from hardware to software.

With the shift from hardware to software, the emphasis of branding in the CE market may switch from product to content. This will be particularly evident in products that receive their content from outside sources, such as digital set-top boxes.

While growth may have slowed in the CE market, the pace of change in the structure of the industry is accelerating.

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