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Consumer technology: a trillion dollar market?

by Stuart Wilson, Tuesday 6 January 2015

This year’s International CES event in Las Vegas kicked off with the traditional analysis of global market statistics and trends. Steve Koenig, director of industry analysis at CEA claimed that global consumer technology spending hit US$1.024 trillion in 2014. While it is always nice to come up with a value for the global market size, it is also important to recognise the limitations of the data available and understand that some degree of estimation may be inevitable.

CEA do make it clear that the figures presented are a combination of its own monthly tracking and forecasting of shipments to US consumer sales channels, coupled with GfK’s retail consumer electronics sales tracking covering more than 340,000 retail stores in 80 countries. With more than 190 countries in the world, it is unclear how they are assessing the size of 100-plus countries not directly covered by GfK’s retail sellout data.

Leaving that aside for one moment, the most striking element of Koenig’s presentation was the fact that seven product categories continue to account for a vast majority of global technology spending. Dubbed the ‘Magnificent Seven’ by Koenig, it was pointed out that TVs, tablets, smartphones, mobile phones, desktops, notebooks and digital cameras account for almost 80% of global consumer technology spending in 2014.

Amazingly, 46% of consumer technology spending in 2015 is predicted to be tied up in just two categories: smartphones and tablets. The number of smartphones shipped in 2015 is expected to rise 19% to 1.5 billion units. However, 75% of smartphones will be sold in price-conscious developing markets in 2015 and that is allowing a new breed of low-cost brands to flourish and grow.

While smartphone unit sales will climb 19% in 2015, revenues are only expected to grow 9% because of increased demand for low-cost devices. The prediction is that the global average sales price (ASP) for a smartphone will drop to US$275 in 2015 and low-cost models will also start to make an impact in developed markets as well.

On the tablet side, unit sales in 2015 were expected to increase 20% year-on-year to 337 million units. Despite this unit increase, tablet revenues are predicted to fall 8% to US$61.9 billion as low-cost models and continued price erosion drive down prices. The tablet ASP was predicted to fall to US$259 in 2015.

Developing market growth has been hugely important in recent years. In 2014, developing markets contributed sales of US$497 billion, up 14% compared to 2011. In contrast, developed markets were worth US$516 billion in 2014 – down 9% from the 2011 figure.

Within the presented research, Central & Eastern Europe, Latin America, emerging APAC and Middle East & Africa were all classed as developing markets, while North America, Western Europe and developed APAC made up the developed market figures.

The ‘Magnificent Seven’ - TVs, tablets, smartphones, mobile phones, desktops, notebooks and digital cameras – also play a more prominent role in emerging markets compared to mature markets. In the Middle East & Africa and Latin America regions, these categories account for 83% of technology device spending. In contrast, in Western Europe, this figure is just 64%.

There is no getting away from the importance of these seven categories, but these are products characterised by price erosion, slim margins and rapid commoditisation. For that reason, the industry as a whole, including the channel partners that play a vital role in pushing products to consumers, need to keep looking at what’s next.

CES will be dominated by the ‘Magnificent Seven’ once again this week, but the true buzz and excitement will be elsewhere. Wearables, health and fitness technology, robotics, smart home technologies, connected devices and even drones will all garner significant attention as everyone tries hard to stay ahead of the curve.

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