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© lavitreiu-dreamstime.com Analysis | March 11, 2014

Consumer electronics market in China tumbles

China’s consumer electronics market declined in 2013 as demand for products like televisions and digital still cameras decelerated, compelling the country’s manufacturers to devise new strategies for growth.
Combined unit shipments for the chief products comprising the overall Chinese consumer electronics industry fell last year to 710.2 million units, down a steep 9 percent from 781.0 million in 2012.

“Last year was the third straight year of declining shipments and the second consecutive year of revenue contraction for the Chinese consumer electronics space,” said Horse Liu, principal analyst for the connected home at IHS. “The cessation of government subsidies for consumer electronics products played a major role in the annual decline.”

But while shipments will continue to decelerate during the next few years, revenue will continue to be strong. This is because of surging shipments in white goods such as air conditioners and refrigerators. The vigorous white-goods market, in turn, will make up for distressed device segments like digital still cameras and portable media players.

Total shipments for the major device categories this year will amount to a projected 674.2 million units. Meanwhile, revenue is forecast to reach $104.8 billion, up from $99.0 billion last year and $98.1 billion in 2012.

These findings can be found in the report, “China Consumer Electronics Market Changes Strategies,” from the Consumer Electronics service of IHS.

China makers adjust strategies

The market for traditional consumer electronics products is maturing in China, much as it is throughout the world. And with the government continuing to push for urbanization and progress coming to the countryside, Chinese OEMs are retooling their growth strategies to keep up with the changing dynamics of domestic demand.

For several years the country’s consumer electronics market had relied on subsidies from Beijing to help stimulate demand, encouraging the populace to buy new appliances like televisions. Those subsidies, which ended in May 2013, were primarily targeted at the rural and low-end markets—also the focus of production among Chinese OEMs.

Today, makers are adopting a new approach, aggressively developing high-end products to appeal instead to urban consumers with the purchasing power to buoy the domestic consumer electronics industry.

“Chinese manufacturers are investing more resources on high-end products carrying expensive prices in order to push up sales revenue, but they must also be careful to adjust production capacity to reduce the risks of overproduction,” Liu observed.

Among Chinese OEMs, export-oriented players faced distinct challenges in 2013. An appreciating Chinese currency drove production costs higher, and caution from international buyers led to smaller purchase orders that dented domestic profitability.

Winners are few, losers plenty

The consumer electronics segments in China that enjoyed shipment gains last year compared to 2012 included liquid-crystal display televisions (LCD TVs), air conditioners, microwave ovens and refrigerators. These markets, along with washing machines, will continue to perform well in 2014.

Against this circle of winners was a small group of underperforming segments, plus a larger group of markets that have bled red for many years now.

In the first category were segments like set-top boxes, which slipped 9 percent in shipments to approximately 135 million units.

These soft segments, however, are forecast to recover in shipments this year as manufacturers improve their products and upsell new features to consumers. For instance, Chinese set-top-box manufacturers will succeed in locating new export markets, IHS believes.

A second category of trailing segments last year consisted of devices that have been losing steam for years. These included DVD players, portable music players and digital still cameras. For such devices their peak year of shipments lay long in the past, and no end to their decline is in sight.

Shipments of digital still cameras in China by 2017, for example, will have lost 75 percent of their volume compared to 2009; while personal media players during the same period will be down a debilitating 92 percent.

Dedicated devices on the whole have lost market share to multipurpose equipment like mobile handsets, which have co-opted their functions and are now preferred by consumers for versatility and popular appeal.
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