LAS VEGAS – Worldwide spending on consumer electronics will continue to slow in 2016 due to a variety of factors including China’s economic slowdown says researchers from the Consumer Technology Association (CTA).
Global sales of tech products fell by 8% in 2015 to $969 billion, according to research conducted jointly by the CTA and GfK, an international market research firm. Both the CTA and GfK forecast that sales will fall a further 2% in 2016 to $950 billion.
"We're seeing flat demand," said Steve Koenig, senior director of market research for CTA at a press event on Monday ahead of the annual International CES (Consumer Electronics Show).
Koenig explained that a number of factors are negatively impacting the technology market and include the strong U.S. dollar’s impact on exports, the slowing Chinese economy, and a slow transition from mature technologies that is lowering margins for manufacturers.
While CTA forecasts overall industry growth in 2016, the strong household penetration of mature categories, such as tablets, televisions, PCs and laptops, and continued industry innovation are declining or slowing growth and placing pressure on margins for some manufacturers and retailers. For example, despite a projected 65% increase in revenue for Ultra High-Definition TVs in 2016, CTA expects revenue for the overall TV market to not increase this year.
A total of just three products – smartphones, tablets and mobile PCs – account for 58% of worldwide spending on consumer electronics, according to CTA and GfK. But they forecast the number of tablets sold this year will fall 8% as the market reaches maturation. As recently as 2014 the annual unit sales increase for smartphones was 23%, but that growth fell to 7% in 2015 and will only reach 8% in 2016. And average sales price for smartphones is expected to drop by 7% in 2016 after dropping 2% in 2015.
"It's the new normal that we're going to have to get used to single-digit growth," said Koenig. He however believes the emergence of newer categories, continuing innovation and improving economic conditions provide additional cause for industry optimism.
"It's the new normal that we're going to have to get used to single-digit growth.” – Steve Koenig, CTA
One group of products that's heading in an opposite direction is the Internet of Things (IoT) connectivity that is transforming core consumer tech categories and will help lead the U.S. consumer technology industry to a record-setting $287 billion in retail revenues ($224 billion wholesale) in 2016, says the CTA. The catalysts for industry growth are newer innovations such as wearables, virtual reality and drones.
“2016 will be another great year for consumers. As more products become connected, we’ll be able to manage our lives in ways that weren’t possible even just a few years ago,” said Gary Shapiro, president and CEO, CTA. “The exponential growth of the IoT and the lightning-fast speed of innovation are key reasons we’ll see such strong growth across so many tech categories.”
In video, smart TVs are projected to sell 27 million units in 2016, a 13% increase over 2015, and streaming media players will sell 15.8 million units (5% increase).
CTA also expects the smart home technology category (including smart thermostats, smart smoke and CO2 detectors, IP/Wi-Fi cameras, smart locks, smart home systems, and smart switches, dimmers and outlets) to reach 8.9 million units sold in 2016 (a 21% increase), with $1.2 billion in revenue.
As mentioned, wearables will also see strong growth led by the popularity of fitness activity trackers and smart watches, unit sales among all wearables in 2016 are forecast to reach 38.4 million units. Fitness activity tracker volumes will hit 17.4 million units in 2016 (up 12% from 2015 with revenues reaching $1.3 billion). Smart watches are expected to increase 28% to 13.6 million units, earning $3.7 billion in revenue, an increase of 22%.
After significant growth and wide adoption over the past five years, tablet sales will continue to decline in 2016. CTA projects unit sales to reach 60 million this year, a 9% decrease from 2015. Revenues are expected to hit $18 billion, down 12%.
LCD TV shipments jumped 10% to top 39 million units in 2015, but sales in 2016 will level off. CTA projects revenues will reach $19 billion for all TV sets and displays in 2016, on par with 2015, as volumes drop 1% to just under 40 million units. 2016 however will be a strong year for 4K Ultra High-Definition (UHD) TV with shipments of 4K UHD displays projected to reach 13 million units (an 83% increase). CTA expects revenue from 4K UHD displays in 2016 to top $10 billion, a 65% increase.
CTA also expects the Virtual Reality (VR) market to dominate sales in 2016 with unit sales to increase by 500% over last year, to reach 1.2 million units sold. Total revenues are projected to reach $540 million, a 440% increase. Drone sales are forecast to more than double, nearing $953 million in 2016 to reach one million units.
“We are at a time when new tech categories can come out of seemingly nowhere and lead to disruption in the blink of an eye,” says Shawn DuBravac, the CTA’s chief economist. “Digitization is rapidly changing the landscape of our daily lives, and consumers are clearly choosing to infuse tech in all facets of their lives. As economic fundamentals improve – a strengthened labor market, solid consumer spending, lower energy prices – the tech industry’s bottom line will continue to surpass record unit and revenue levels in 2016.”
Reporter John Bugailiskis is at the Consumer Electronics Show in Las Vegas covering the massive event for Cartt.ca readers. Please return to read his coverage over the course of the week.
