SinoCES Highlights Industry Opportunities, Challenges

By Steve Smith -- TWICE, 7/10/2008

Qingdao, China — International SinoCES opened today highlighting new technologies, discussing industry growth worldwide and dealing with industry challenges such as green issues and higher costs of doing business worldwide.

CEA’s Gary Shapiro during his keynote address at SinoCES on Thursday.

Those were just some of the issues facing the estimated 70,000 attendees and 300 exhibitors who are expected to visit the show this week, which is a partnership between the China Electronic Chamber of Commerce and the Consumer Electronics Association (CEA), producer of International CES.

CEA announced that, in a study it did with GfK Group of Germany, worldwide revenue for consumer electronics will hit $700 billion by 2009, a $42 billion gain over last year with emerging countries like China, Brazil, Russia and India leading the way.

By 2009 China will account for nearly 15 percent of global CE revenue, trailing North America with 22 percent and Western Europe with a 16 percent share. CEA president/CEO Gary Shapiro, who is heading the group’s SinoCES delegation, said, “The CE growth of China is mirrored by the growth of SinoCES.”

Mobility is the largest CE category worldwide in unit sales and revenue. The study said mobile products will top 1.5 billion units in 2008, topped by portable navigation devices (GPS) with revenue growth of 20 percent, laptops up 15 percent and mobile phones/smartphones up 14 percent. As CEA’s Shapiro noted, “Our future is defined by technology ... CE spans and is changing our world.”

The growth of the Chinese market, in consumer purchasing power and as a worldwide manufacturer is staggering. In a presentation to the CEA SinoCES Delegation on Wednesday Darrel Ching, commercial officer of the U.S. Embassy in Beijing, said that China’s CE market in 2007 was $63.2 billion, an increase of 13.08 percent over 2006, and that a McKinsey & Company report said China’s CE market will increase by more than 12 percent annual and will reach $125 billion by 2010.

Opening ceremonies for SinoCES on Thursday morning in Qingdao. For more photos from China click here.

Those bullish estimates were echoed in a variety of ways by officials from China’s Ministry of Commerce, the China Electronic Chamber of Commerce and the Qingdao Municipal People’s Republic in a variety of speeches at SinoCES and meetings with the CEA delegation during the show.

But the prospect of growth is the easiest of challenges facing the CE industry both in China and worldwide. Higher commodity costs for raw materials and energy, as well as the challenges of being more environmentally friendly as an industry, are two main concerns.

In a press conference on Thursday, Shapiro addressed the issue of higher energy and manufacturing costs, both here in China and worldwide, by saying, “This is an interesting time in history. Usually in a downturn of the business cycle sales go down as well as [business] costs. But as the economy has gone down the price of oil and raw materials have gone up.”

Shapiro added, “In my 25 year career in this industry I’ve never heard of a price increase in consumer electronics. Prices always go down and quality goes up.” Based on current raw material trends continue some manufacturers may attempt to raise prices and the industry will soon find out of any attempted price increases may stick, he noted

Concerning those challenges that Chinese CE factories will face, with higher salary costs mandated by the state along with these raw material hikes, Shapiro said that it affects China and other major CE manufacturing countries worldwide. “Higher oil prices have substantially increased costs of tanker transportation and ground transportation and when you include higher costs for various raw material increases for copper and other metals, it will be a challenge for all.”

What is also a challenge for the industry worldwide is the effort by the CE industry to be more environmentally conscious. When asked how the industry should be judged two years from now in its efforts, Shapiro said, “The main categories are the efficient use of energy and the product lifecycle.”

Shapiro remarked that the “rapid increase in energy costs have put more a focus on the energy we use” and that energy efficiency for individual products will be more top of mind in the next two years. “Worldwide and in the U.S. we should agree on energy usage standards” on individual products “to give consumers a reasonable purchasing choice,” he said. The complex problem involves the variety of CE technology involved.

As for product lifecycles Shapiro noted, “That means how a product is recycled and how a product is made.” Shapiro reiterated previous CEA positions that in the U.S. the industry wants a national standard on recycling vs. having to attempt to live up to individual local and state rules.