The world has gone mobile mad and gadget crazy as prices fall
As the iPhone storms America, the Masai clutch their first handsets
From boxes of flat-screen TVs stacked up outside back street electronics shops in Mumbai to the incongruous sight of a Masai tribesmen in Tanzania clutching a mobile-phone, evidence is everywhere that the desire to own consumer electronics devices has gone global.
While American consumers line up outside stores to snap up the latest must-have gadget, such as an Apple iPhone, school children in remote regions of China are getting their hands on their first computer.
The global consumer electronics market is expected to balloon to $618.6bn (£301.5bn) - equivalent to the GDP of the Netherlands or $100 for each person on the planet - this year, according to new research. The growth of the market - forecast to be 12.5% this year - is being driven by sales of flat-screen TVs, laptop computers and mobile phones.
The GfK Group, the world's fifth largest market research firm, has taken sales data from more than 140,000 outlets worldwide to compile a picture of a booming global consumer electronics market. It predicts that the market will grow further, to $667.5bn, in 2008 with 63% of the market accounted for by flat screen TVs, laptops and mobile phones.
Early adopters
"Some years ago instead of speaking about flat screen TVs we would have been talking about widescreen cabinet TVs, a few years ago it would have been the desktop PC and not the laptop TV that was selling," said Antony Rode, business manager for digital convergence at GfK. "Mobile phones have always been popular, but behind the three big categories there are many other products such as external hard drives, digital photo frames, Global Positioning System devices, games consoles, all fuelling the growth in the market."
There will, always be early adopters of new technology with the disposable income to splash out on a new iPod or to upgrade to a better TV. But increasingly, the global consumer electronics market is being driven by those in the early adopters' wake, people who can take advantage of the fact that as technology gets older its earlier iterations become cheaper to produce and cheaper to buy.
Also, the declining price of technology means that while the number of gadgets shipped is on the increase, the growth in total sales - in cash terms - is on the wane. The consumer electronics market grew 16.3% last year, is expected to grow 12.5% this year and forecast to grow 8.2% in 2008.
"We have price erosion in every category," said GfK's Mr Rode. "And when you see price cuts in every category, despite continued growth in volumes, the sum total of expenditure will decline."
The bold forecasts for the consumer electronics market also disguise some regional variations. While the total consumer electronics market is equivalent to $100 for every person on Earth the actual distribution of spending is far less even, with average annual per household spending standing at $1,264 in the US and $1,028 in western Europe this year. Chinese households will spend ten times less.
Upgrading
America is expected to remain the world's biggest consumer in the electronics market next year with China in second place and Japan in third. Growth among the three is dramatically different, with China's spending growing fastest as the sheer size of the population means many more people will be buying their first device next year. Japan, meanwhile, is expected to record its first decline in annual consumer electronics spending next year as arguably the world's oldest consumer electronics market shows all the hallmarks of a mature market.
What the Japanese consumer is buying is very different from what the Chinese consumer wants. The Chinese market is dominated by mobile phones as many consumers get their hands on their first handset, while the Japanese market is dominated by people upgrading to plasma and LCD TVs.
Nowhere is the general trend towards declining prices boosting sales more obvious than in the mobile or portable device market. GfK estimates that more than 1.6bn portable devices, from mobile phones to digital music players will be sold next year. Portable devices have become big sellers in developed markets as music has gone digital and Apple's iPod has revolutionised the market - more than 10m were sold in the last three months alone.
But it is mobile phones that make up the lion's share of the portable device market. An estimated 3 billion people have a mobile phone and more than a billion more phones are expected to be sold this year alone. Further growth is forecast for 2008, especially from markets such as China and India.
China has gone from an also-ran at the start of the decade to become the world's largest mobile phone market with over half a billion users. Growth in India - where Vodafone recently spent $11.1bn buying control of the country's fourth largest operator - is outstripping that in China. In parts of the developing world such as Africa, mobile phones have given millions of people their first access to communications because many regions lack even fixed lines.
Cheaper prices are not only boosting sales in the less developed world. In richer countries devices such as LCD TVs are within reach of much of the population. UK retailers are looking forward to another "technology Christmas".
Gizmos fly off the shelves
It seems a paradox. Consumers everywhere are feeling the pinch from higher interest rates, paying more to fill their car with petrol, finding it harder to winkle an above-inflation pay rise out of their bosses, yet computers, music systems, TVs, mobile phones and every other gizmo imaginable are walking out of the stores. But in truth it's not a paradox at all.
Why? Because all the factors listed above are being outweighed by the precipitous drop in the cost of consumer electronics, which are almost a quarter cheaper than they were at the start of 2005.
The inflation figures produced by the Office for National Statistics each month helpfully break down the overall cost of living into component parts, and these show that a piece of audio-visual equipment bought for £100 in 1987 would cost the consumer just £15 today. Over the same period, the cost of living has doubled.
A second reason for demand to keep rising is that the falls in prices stimulated by technological advance and globalisation show no sign of easing off. Audio-visual equipment prices are one sixth cheaper now than a year ago.
A third and final piece of good news for consumers is that at the same time prices have been falling, quality has been rising. Computers are faster, flat-screen TVs offer better picture quality, mobile phones are smaller and offer a wider range of services. Manufacturers try to prevent profit margins from being eroded by putting premium prices on the latest bit of kit in the hope that everyone will rush out and buy that latest must-have toy.
The evidence, though, is that most consumers are too canny (or cash-strapped) to do so, and are instead prepared to wait a few months for prices to fall.
Larry Elliott
Richard Wray
Saturday October 27, 2007
Guardian Unlimited
© Guardian News and Media Limited 2007
As the iPhone storms America, the Masai clutch their first handsets
From boxes of flat-screen TVs stacked up outside back street electronics shops in Mumbai to the incongruous sight of a Masai tribesmen in Tanzania clutching a mobile-phone, evidence is everywhere that the desire to own consumer electronics devices has gone global.
While American consumers line up outside stores to snap up the latest must-have gadget, such as an Apple iPhone, school children in remote regions of China are getting their hands on their first computer.
The global consumer electronics market is expected to balloon to $618.6bn (£301.5bn) - equivalent to the GDP of the Netherlands or $100 for each person on the planet - this year, according to new research. The growth of the market - forecast to be 12.5% this year - is being driven by sales of flat-screen TVs, laptop computers and mobile phones.
The GfK Group, the world's fifth largest market research firm, has taken sales data from more than 140,000 outlets worldwide to compile a picture of a booming global consumer electronics market. It predicts that the market will grow further, to $667.5bn, in 2008 with 63% of the market accounted for by flat screen TVs, laptops and mobile phones.
Early adopters
"Some years ago instead of speaking about flat screen TVs we would have been talking about widescreen cabinet TVs, a few years ago it would have been the desktop PC and not the laptop TV that was selling," said Antony Rode, business manager for digital convergence at GfK. "Mobile phones have always been popular, but behind the three big categories there are many other products such as external hard drives, digital photo frames, Global Positioning System devices, games consoles, all fuelling the growth in the market."
There will, always be early adopters of new technology with the disposable income to splash out on a new iPod or to upgrade to a better TV. But increasingly, the global consumer electronics market is being driven by those in the early adopters' wake, people who can take advantage of the fact that as technology gets older its earlier iterations become cheaper to produce and cheaper to buy.
Also, the declining price of technology means that while the number of gadgets shipped is on the increase, the growth in total sales - in cash terms - is on the wane. The consumer electronics market grew 16.3% last year, is expected to grow 12.5% this year and forecast to grow 8.2% in 2008.
"We have price erosion in every category," said GfK's Mr Rode. "And when you see price cuts in every category, despite continued growth in volumes, the sum total of expenditure will decline."
The bold forecasts for the consumer electronics market also disguise some regional variations. While the total consumer electronics market is equivalent to $100 for every person on Earth the actual distribution of spending is far less even, with average annual per household spending standing at $1,264 in the US and $1,028 in western Europe this year. Chinese households will spend ten times less.
Upgrading
America is expected to remain the world's biggest consumer in the electronics market next year with China in second place and Japan in third. Growth among the three is dramatically different, with China's spending growing fastest as the sheer size of the population means many more people will be buying their first device next year. Japan, meanwhile, is expected to record its first decline in annual consumer electronics spending next year as arguably the world's oldest consumer electronics market shows all the hallmarks of a mature market.
What the Japanese consumer is buying is very different from what the Chinese consumer wants. The Chinese market is dominated by mobile phones as many consumers get their hands on their first handset, while the Japanese market is dominated by people upgrading to plasma and LCD TVs.
Nowhere is the general trend towards declining prices boosting sales more obvious than in the mobile or portable device market. GfK estimates that more than 1.6bn portable devices, from mobile phones to digital music players will be sold next year. Portable devices have become big sellers in developed markets as music has gone digital and Apple's iPod has revolutionised the market - more than 10m were sold in the last three months alone.
But it is mobile phones that make up the lion's share of the portable device market. An estimated 3 billion people have a mobile phone and more than a billion more phones are expected to be sold this year alone. Further growth is forecast for 2008, especially from markets such as China and India.
China has gone from an also-ran at the start of the decade to become the world's largest mobile phone market with over half a billion users. Growth in India - where Vodafone recently spent $11.1bn buying control of the country's fourth largest operator - is outstripping that in China. In parts of the developing world such as Africa, mobile phones have given millions of people their first access to communications because many regions lack even fixed lines.
Cheaper prices are not only boosting sales in the less developed world. In richer countries devices such as LCD TVs are within reach of much of the population. UK retailers are looking forward to another "technology Christmas".
Gizmos fly off the shelves
It seems a paradox. Consumers everywhere are feeling the pinch from higher interest rates, paying more to fill their car with petrol, finding it harder to winkle an above-inflation pay rise out of their bosses, yet computers, music systems, TVs, mobile phones and every other gizmo imaginable are walking out of the stores. But in truth it's not a paradox at all.
Why? Because all the factors listed above are being outweighed by the precipitous drop in the cost of consumer electronics, which are almost a quarter cheaper than they were at the start of 2005.
The inflation figures produced by the Office for National Statistics each month helpfully break down the overall cost of living into component parts, and these show that a piece of audio-visual equipment bought for £100 in 1987 would cost the consumer just £15 today. Over the same period, the cost of living has doubled.
A second reason for demand to keep rising is that the falls in prices stimulated by technological advance and globalisation show no sign of easing off. Audio-visual equipment prices are one sixth cheaper now than a year ago.
A third and final piece of good news for consumers is that at the same time prices have been falling, quality has been rising. Computers are faster, flat-screen TVs offer better picture quality, mobile phones are smaller and offer a wider range of services. Manufacturers try to prevent profit margins from being eroded by putting premium prices on the latest bit of kit in the hope that everyone will rush out and buy that latest must-have toy.
The evidence, though, is that most consumers are too canny (or cash-strapped) to do so, and are instead prepared to wait a few months for prices to fall.
Larry Elliott
Richard Wray
Saturday October 27, 2007
Guardian Unlimited
© Guardian News and Media Limited 2007
