Analysis: Challenging times for CE market
August 30, 2022
After a strong 2020 driven by the pandemic stay-at-home, the global market for consumer electronics faced a slow-down in 2021 that continued in the first half of 2022, according to research firm GfK. 2022 year saw an 8 per cent drop compared to the same period in 2021, standing at a total of $39 billion.
The industry is pinning its hopes on the fourth quarter, as experience has shown that major events such as the football World Cup boost TV sales. Looking at the full year, GfK expects overall sales to decline in 2022.
The start of 2022 has been difficult for the global consumer electronics market for numerous factors. The impact of the war in Ukraine and runaway inflation caused consumer sentiment to plummet across the board. In addition, in spring 2022 there were lockdowns in the largest sales market China, which further impacted sales.
“The football World Cup in the fourth quarter could offer an opportunity to compensate for the weak first half of the year,” suggests Jan Lorbach, GfK expert on consumer electronics.” Experience has shown that major events such as this increase demand, particularly for TVs. However, given the poor consumer sentiment, we expect this effect will not be big enough to keep sales in the consumer electronics market from declining during 2022 overall.”
From January to June 2022, the TV market recorded a 6 per cent decrease in total sales to $31 billion, compared to the same period of the previous year. Almost all display sizes experienced this decline. Only the very large display sizes continue to show an upward trend, with sales of TVs with screen sizes over 75 inches increasing by 21 per cent compared with the first half of 2021.
Certain niche products were also able to close the first half of 2022 on a positive note, such as devices with GPU synchronisation for a better gaming experience (plus 18 per cent growth), or with improved sound systems such as Dolby Atmos/DTS:X (plus 54 per cent). The new mini-LED screens launched in 2021 remain a niche product with a growing, but still small, sales share of 4.8 per cent.
This downturn in product demand has already led to falling prices in some cases – despite inflation and increased expenses within the supply chain. By way of illustration, the average cost of a TV was around $566 in June 2021 but dropped to $502 by June 2022.
This is particularly visible in mid-range segments that have not seen any significant innovation upgrades or addition of premium features. In June 2022, for example, the price for a 55-inch LCD screen was 11 per cent lower than in June 2021. One reason for this is that retailers are increasingly reacting to falling demand by reducing prices: in January to June 2022, the proportion of TVs sold at a discount of 10 per cent or more stood at 27 per cent. In the same period of 2021, it was only 14 per cent – although the European Football Championship was taking place at that time, which would have boosted demand.
This downturn in product demand has already led to falling prices in some cases – despite inflation and increased expenses within the supply chain. By way of illustration, the average cost of a TV was around $566 in June 2021 but dropped to $502 by June 2022. This is particularly visible in mid-range segments that have not seen any significant innovation upgrades or addition of premium features. In June 2022, for example, the price for a 55-inch LCD screen was 11 per cent lower than in June 2021. One reason for this is that retailers are increasingly reacting to falling demand by reducing prices: in January to June 2022, the proportion of TVs sold at a discount of 10 per cent or more stood at 27 per cent. In the same period of 2021, it was only 14 per cent – although the European Football Championship was taking place at that time, which would have boosted demand.
In contrast, peripheral devices equipped with premium features such as soundbars with Dolby Atmos/DTS:X functionality continued to grow. Their sales worldwide increased by 43 per cent to $461 million in the first half of 2022. However, this strong growth could not counteract the 7 per cent decline in overall soundbar sales.
In the audio sector, sales have remained well above the pre-pandemic level of 2019, but did not reach the record figures seen in 2021. Looking at the period from January to June 2022, sales in the home audio sector, which includes stationary and portable radios as well as traditional loudspeakers, tuners, amplifiers and receivers, fell by 9 per cent to $2.2 billion. The portable audio devices segment, which includes products such as headphones, mobile headsets or Bluetooth speakers, also suffered, with a sales decline of 9 per cent, to $8.7 billion.
Thanks to the increase in home offices, True Wireless Headsets were last year’s winners and are one of the few product groups which have maintained their sales volume level this year (minus 0.5 per cent). Nevertheless, global sales value fell by 7 per cent to $4.7 billion compared to the previous year. This overall decline was heavily driven by the Chinese market, which fell 20 per cent due to lockdowns and overshadowed the positive growth in sales seen in Western Europe (plus 4 per cent).
“Between falling demand and average prices, premium products continue to be the areas of interest for retailers and manufacturers,” advises Lorbach. “As budgets become tighter, there is a shift in consumer electronics demand toward consumers with above-average incomes. Accordingly, we expect that devices with premium functions will achieve long-term growth.”