expects the China consumer electronics market will grow by around 10% in 2013. We forecast headline consumer spending to grow at 10% in 2013 and 2014, which marks a downward revision from our previous forecast of 8.4% for both years. The government's rural consumer electronics subsidy programme should continue to drive flat-screen TV sets and other products and electronic vendors and retailers are expanding and adjusting strategies to take advantage of this opportunity.
Vendors will look to newer technologies such as Smart TVs, LED TV sets and 3D TV sets, to drive sales. Smartphones are estimated to account for above 40% of total handset sales in China, and this share will pass 60% by 2017. Lower prices are a major driver of demand growth in AV and smartphone segments, with average smartphone prices projected to fall below RMB1,200 within BMI's forecast period from 2013 to 2017.
Headline Expenditure Projections
Computer hardware sales:US$81.8bn in 2012 to US$91.4bn in 2013, +10% in US dollar terms. Forecast upwardly revised in US dollar terms due analyst modifications as a new generation of Windows 8 tablets and notebooks reaches the market.
AV sales: US$77.5bn in 2012 to US$84.7bn in 2013, +9% in US dollar terms. Forecast in US dollar terms unchanged, with the main driver being demand for smart, flat-screen TV sets.
Handset sales: US$42.4bn in 2012 to US$45.1bn in 2013, +9% in US dollar terms. Forecast in US dollar terms upwardly revised, with strong volume growth of smartphones.
Risk/Reward Ratings: China's score was 61 out of 100. China was in 5th place in our latest RRR table, but due to its vast market and rising penetration has the potential to rise over time.
Key Trends & Developments
- By the end of BMI's five-year forecast period, the rural PC and notebook market could account for as much as 35-40% of total China computer sales. The subsidy programme will continue to boost demand from the vast, under-penetrated rural areas. The lower-tier city and towns are expected to be the fastest growing segment of the PC market in 2013, although this has placed pressure on prices.
- After two years of robust growth in the TV market, vendors will also look to third- and fourth-tier cities and rural areas to sustain demand for TV sets, after signs of slower sales in major cities. About 58% of LCD TVs are now sold through retail channels, with sales strongest during peak holiday shopping periods. Despite a tranche of product innovations, average prices declined in 2012, meaning revenues growth failed to keep pace with shipments.
- The tastes of Chinese consumers with regards to handsets also appears to be growing more sophisticated, with China now a key engine driving the global smartphone market. China Mobile forecasts sales of smartphones could reach 100mn units by 2013, while BMI projects that sales could pass 500m units by 2017. Vendors such as Samsung expect China will be among their most important markets for smartphones.