At CES, a Mixed Report Card for Tech Industry Growth
Sales are slowing, but things are looking up.
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This article has been updated with new projections for the U.S. market.
January 6, 2015
The 2015 Consumer Electronics Show opens this week in Las Vegas against a subdued backdrop of slowing sales.
The industry grew just 1 percent to a forecasted $1.024 trillion for 2014, according to the Consumer Electronics Association (CEA), the group that assembles the annual trade show. Part of that can be attributed to falling prices for smartphones, tablets, and TVs.
But the good news is that revenue from developing markets—Central and Eastern Europe, Latin America, emerging Asia-Pacific (including China and India), and the Middle East and Africa—are picking up steam.
“It’s these developing sectors that are really starting to overtake the mature markets,” said Steve Koenig, CEA’s director of Industry Analysis. Koenig predicts that in 2015 developing markets will for the first time exceed tech revenues from mature ones.
What technologies are driving spending growth?
Koenig’s market research presentation, State of the Global CE Industry, was dominated by smartphones, which remain the tech industry’s spending driver—$374 billion in revenue for 2014. Although the smartphone’s phenomenal growth of the past few years is tapering in mature markets, the devices still have lots of traction in the developing markets, with unit growth of 75 percent forecast for 2015 (versus 25 percent elsewhere).
Plummeting price tags will fuel a lot of those sales.
“There’s a flood of low cost handsets coming into the marketplace,” explained Koenig. With average costs dropping below $300 in 2015, established smartphone leaders are starting to feel the pressure from companies like Xiaomi that are building increasingly sophisticated products.
Koenig added, “These domestic Chinese brands have global aspirations, with plans to enter the U.S. market and Western Europe.”
Although the number of units sold is projected to rise 19 percent globally, lower costs mean actual smartphone revenue is only expected to rise 9 percent.
Tablet sales tell a similar story. While unit sales are easing somewhat in North America and other mature markets, they’re still rising in developing areas. But again, Koenig notes that actual revenue will likely decline 8 percent in 2015 as lower cost models enter the market.
On the other hand, TVs are showing modest growth. There were 247 million units sold in 2014, up 1 percent from the previous year, and projections indicate a 2 percent increase in 2015. The rise of 4K Ultra HD is firmly established: With 9.3 million units sold in 2014, CEA is projecting a rise of nearly 250 percent for 4K units next year.
Larger screens are also driving growth. While screen sizes averaged 32 inches in 2007, the forecast for 2015 is for 40-inch screens, globally.
“4K TV is a huge narrative at CES this year,” said Koenig. “You’ll be seeing a lot of big screens. Sixty is the new fifty, as they say.”
CEA predicts rosier future for U.S. market
On Tuesday, the CEA followed up with additional data stating that U.S. revenues for consumer electronics are projected to grow 3 percent in 2015, to a record $223.2 billion. The forecast was announced in opening remarks at CES by CEA President and CEO Gary Shapiro, and is based on data compiled by CEA. The consensus forecast reflects U.S. factory sales to dealers and covers more than 100 products.
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