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Bright prospects for consumer
electronics
BEIJING -
Chinese consumers feel increasingly confident
about the economy's long-term growth prospects
with gross domestic product (GDP) averaging 8%
annual growth in recent years. Among other
effects, rising household incomes have resulted in
rapid growth for the consumer electronics
industry.
Given the low levels of
ownership of home video and audio products
compared with more developed countries, and the
fact that digital technologies accelerate product
innovation, China's consumer electronics market is
expected to grow by 48.5% in constant value terms
by 2008, with an average annual increase of 8.2%.
Broadly speaking, two critical macro
factors will underpin the expansion of the
consumer electronics market:
1. Consumers'
increasing purchasing power will be sustained by
the country's strong economic growth. The
consensus among economists is that China's annual
GDP growth rate will remain around 8% until 2008.
Furthermore, it is expected that the government
will continue with its policy of boosting domestic
consumption through a private home ownership
program in urban areas, and easier access to
personal credit, while increasing household
incomes. All of these factors will translate into
solid demand for household products, including
consumer electronics.
2. A new cycle of
consumer electronics consumption is in the offing.
The first consumption cycle began when China first
opened up its market in the early 1980s, according
to some academics, and lasted about 10 years.
During that period most urban families bought
their first colour TV, hi-fi system, and
VCR/VCD/DVD unit. Yet most of their purchases are
fast approaching the stage of upgrading, and
renewed demand is approaching as a result. A new
generation of consumers is also coming of age.
They are the result of the government's one-child
policy introduced more than two decades ago.
Between 2004 and 2008, around 80 million of these
young consumers will start work, get married, and
start their own families. Although the number of
newlyweds will be smaller than in previous
decades, unlike previous generations, this new
generation will have a greater disposable income,
and be more open to new technology and high-value
products, which will be introduced rapidly in
coming years.
According to a forecast by
Euromonitor International, a leading independent
provider of strategic market research, the
consumer electronics market in China will exhibit
the following characteristics between 2005 and
2008:
Environmental concern
Energy conservation is likely to become an
increasingly strong selling point in the next
couple of years. Due to poor energy infrastructure
planning, southern and eastern China have been
badly hit by electricity shortages, and many areas
have been hit by power cuts. In fact, power
supplies took a turn for the worse in 2004 and
this situation is not expected to improve until
late 2005 at the earliest. Given this situation,
consumer demand should increase for more
energy-efficient consumer electronics.
Convergence
Large screen
flat-panel cathode-ray tube (CRT) TVs will
continue to provide the majority of TV sales.
Smaller TVs, with screens at or below 29 inches,
will retreat from urban areas and mainly be sold
in rural areas at lower prices. In the meantime,
projection, liquid crystal display (LCD) and
plasma display panel (PDP) TVs will expand at the
expense of CRT-based TVs.
The
interchangeability of technology between consumer
electronics and information technology (IT)
products has paved the way for large players in
the IT/PC industry to move into the manufacturing
of LCD and PDP TVs. Leading brands such as
Motorola, Dell, Lenovo and Founder have either
already joined or plan to take part in the
production of LCD and PDP TVs.
It is still
too early to assess the full impact of the entry
of IT companies into TV manufacturing. The
commonly held view among TV manufacturers surveyed
for this study is that the average prices of
LCD/PDP TV units will fall at a faster rate. As
with any other high-tech and high-value item, a
decline in prices will be the primary driver of
the growth in sales of projection, LCD and PDP
TVs.
Digital TV
Digital TVs, in
the strict sense, will not register any notable
sales before 2008. According to the blueprint of
the State Administration of Radio, Film and
Television (SARFT), commercial DTV broadcasting
will first be launched around 2005 in major
cities, most probably through set-top box signal
conversion.
The 2008 Beijing Olympics will
be broadcast digitally nationwide. The process of
transitioning to digital will only be completed by
2010, by which time digital TVs will have replaced
analogue TVs in most homes. And there will be
increased interest in consumers switching to large
screen CRT, projection, PDP and LCD TVs, to enjoy
better visual and audio quality, as the current
broadcasting system is upgraded to a digital
system.
Home audio products
The
demand for home theater systems will still be
closely related to the sale of color TVs and
videodisk units. But the low existing ownership
base will allow for the stronger growth of home
theater systems, which are estimated to see annual
average growth of more than 15% in terms of
constant value over the forecast period.
Digital products, including new-generation
videodisk players (hard drive DVD players),
digital cameras, digital camcorders and MP3
players (or next-generation digital audio
players), will outperform all other sectors to
2008. Consumption of those digital products is
related to the penetration of household computers
and printers, and the expansion of Internet
accessibility.
Products such as
black-and-white TVs, VCRs, analogue camcorders and
cassette tape-based audio devices are on the way
out. It is almost certain that all of these
products will become negligible or even
non-existent by the end of 2008.
In-car
products
The demand for in-car audio
products will ride the strong growth of private
car sales in China, which is aiming for the
complete removal of import quotas on automobiles
by 2005. Though many of these new cars will come
equipped with sophisticated sound systems, the
growth in the consumer automobile market still
stands to benefit the after-sales market as well.
Established Japanese manufacturers have
started to adjust their production and marketing
strategies, including product development and
brand positioning, to directly cater to
after-sales demands. Domestic car electronics
companies previously engaged in original equipment
manufacturing for overseas markets will see their
domestic volume shares expand in coming years due
to their indigenous advantages in terms of cost
control and capital investment savings. But as
Chinese car buyers become increasingly fond of
more expensive models, their appetite for in-car
audio products will increase, and foreign brands'
prestige image and product and technology
innovations will all come into play.
(Asia
Pulse/XIC) |
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