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CEA: CE's Prospects Look Good Near Term And Beyond

7/07/2013 08:00:00 PM Eastern

NEW YORK — It’s morning for America’s CE business again.

After five punishing years of recession, devaluation and consolidation, the CE industry has begun to rebound and is poised for long-term growth.

That was the view from Shawn DuBravac, chief economist and senior research director of the Consumer Electronics Association (CEA), who kicked off the trade group’s day-long Research Summit and CE Week activities here last month with a State of the Industry Mid-Year Update.

In the short term, demand for tablets, smartphones and Generation Y audio devices remains robust, and TV sales and prices are improving as consumers trade up to larger screen sizes, DuBravac observed.

Even gaming, which has seemingly spent its fuel as a category, is expected to shift into high gear with the forthcoming releases of Microsoft’s Xbox One and Sony’s PlayStation 4 platforms.

Together that should help fuel a 2.7 percent increase in projected 2013 CE sales, to nearly $210 billion, Du- Bravac said.

But the afterburners should really kick in over the next two years as manufacturers ramp up production of new display technologies like Ultra High Definition and OLED, he indicated.

And all of this, he said, comes amid the backdrop of a recovering economy and an upswing in the TVreplenishment cycle.

“The dynamics are looking quite healthy,” he noted, pointing to low consumer debt levels, record high household net worth and falling unemployment.

Further down the road, opportunities also loom large in the wearable electronics and health and fitness segments.

But not all is smooth sailing: Pent-up consumer demand for big-ticket goods like cars and major appliances could conceivably siphon sales from CE, he cautioned. But consumers’ seemingly unquenchable thirst for connected and/or addressable devices like mobile handhelds and wireless speakers should continue to drive business.

As noted, TVs are beginning to enjoy a rebirth due to the popularity of 50-inch-plus screen sizes and the approach of a major end-of-life cycle for flat-panel displays that were purchased in the previous decade.

In addition, the new TV technologies promise to further invigorate the category, with 4K projected to comprise 5 percent of the TV market by 2016, while some 190,000 OLED units are expected to be sold in 2014, up from 20,000 this year, DuBravac estimated.

Audio is another category reborn, with dollar sales of receivers up nearly 16 percent this year, soundbars ahead 60 percent, and headphones approaching $1 billion in sales as many younger consumers choose “fashion over fidelity,” he noted.

Gaming, which may have reached its nadir in May with a 31 percent plunge in hardware and software sales, according to The NPD Group, is primed for a rebound as the new Sony and Microsoft consoles drive what is expected to be “significant growth” next year, DuBravac said.

Taking out his crystal ball, DuBravac suggested that new wearable form factors for computers and mobile devices, and growing demand for health and fitness products from an aging population, could fuel long-term CE growth. Wearables can eventually mature into a 100 million unit a year business, he noted, while the latter already boasts a 10 percent adoption rate.

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