Live From CES: CTA’s Koenig Lays Out Global Challenges for CE Market

Steve Koenig, senior director, market research, CTA, laid out some of the challenges facing the consumer-electronics industry around the globe, and they are myriad: the rise of populism politically could impact discretionary spending, the strong dollar is impacting revenues, retail prices are leveling off, and growth is flat in such categories as smartphones, TVs, tablets, and laptops — to name just a few.

CTA’s Steve Koenig says emerging markets are important in a global marketplace that has seen sales volumes flatten.

“The global story is starting to see unit volumes level off, and discretionary spending is having an impact on the revenue outlook,” he said, adding that the total consumer-electronics marketplace is down from $950 billion to $929 billion.

One of the bright spots, however, is emerging markets. When looking at such markets, Koenig sees three levels of development. The first level is simply developing enough internet connectivity because consumers simply want to get connected. In those markets, a lot of the first-time buyers still visit retail stores because online shopping is restricted by limited Internet access. Typifying such markets are Indonesia and the Philippines.

After internet access becomes widely deployed, the next step in the evolution is using those services for communication and information exchange. The technology is still rather basic, but utility and productivity increase. Markets like Malaysia and Vietnam are squarely in that position.

The third and final step is attained when utility and productivity have reached a level where consumers can turn their attention to entertainment and enjoyment.

Smartphones, for example, account for 47% of global tech spending and continue to grow in popularity in emerging markets, where citizens with the least are embracing the technology that delivers the most.

“Their technology budgets are less than they are in developed markets, so consumers choose wisely when using discretionary dollars,” Koenig pointed out. “And if they have to choose one technology. it will be a smartphone.”

When tablets are included in the revenues, the percentage of spending for both smartphones and tablets rises to 63% of the overall market. But tablets are trending lower, squeezed by both laptops (which are becoming lighter) and smartphones (which are becoming bigger).

“One question is whether smartphones are also making personal computers unnecessary in emerging markets,” Koenig added.

Global volumes, meanwhile, are expected to tick up slightly with 4K/UHD sales expected to see a steep jump from 53 million units last year to 82 million next year.

“OLED is also starting to make its value felt in the market,” said  Koenig, “but that will be a next-decade story.”

On a market-by-market basis, Koenig said, Latin America (and South America) has been hit hard economically, and tech spending has trailed off. North America is still doing fairly well with stable volumes and revenues. Western Europe has flattened out with smartphone sales stable but other categories weakening. But streaming video is adding new life to living-room entertainment.

“More protectionist strategies in Europe could provide headwinds,” said Koenig, “but the consumer marketplace is pretty healthy, and there is still a strong appetite for tech.”

Central and Eastern Europe are expected to be down a billion dollars (from $41 billion to $40 billion) as discretionary spending and unit-volume sales slow. But it is a market that holds some promise because consumers are starting to upgrade and are buying up with long-dormant replacement cycles quickening.

In Asia, the emerging markets of China and India are expected to see revenues drop from $286 billion to $280 billion. China, for example, is now a mature market, where technology is integrated into daily life, and has made the transition to being driven primarily as a purchase to increase entertainment/enjoyment.

“India is the new China; its GDP is expected to grow 7.5% through 2020, and smartphones dominate the landscape,” said Koenig. One interesting note is that the smartphone market is at the edges, dominated by either budget phones or high-performance models.