We project that Russian consumer electronics spending will grow by about 9% in US dollar terms in 2013, after Russian retailers such as MTS, M.video and Euroset reported another year of strong growth in sales of some consumer electronics devices in 2012. The Russian consumer electronics market is expected to increase at a double-digit compound annual growth rate over BMI's five-year forecast period, driven by the growing popularity of digital lifestyle products like digital TV sets, notebook PCs, digital cameras and portable audio devices. However, overall handset sales reported slower growth in 2012, despite strong demand for smartphones, and a similar pattern is expected in 2013. Meanwhile, PC sales were down year-on-year in Q412, following double-digit growth in Q1-3.
The planned rollout of digital TV broadcasting to 95% of Russian citizens by 2015 and investment in 3G and 4G mobile communications infrastructure will boost spending. Meanwhile, the market should receive a further boost following WTO entry, confirmed in August 2012, with import taxes of 5-15% expected to be lowered within three years.
Headline Expenditure Projections
Computer Hardware Sales: US$11.7bn in 2012 to US$12.7bn in 2013, +8% in US dollar terms. Forecast in US dollar terms unchanged despite a dip in Q412, and tablets should be a strong growth area in 2013.
AV Sales: US$8.2bn in 2012 to US$8.8bn in 2013, +7% in US dollar terms. Forecast in US dollar terms unchanged, with flat-screen TV set sales the main growth area.
Handset Sales: US$6.1bn in 2012 to US$7.0bn in 2013, +14% in US dollar terms. Forecast in US dollar terms downwardly revised, but sales of smartphones have been particularly strong and reversed a trend of declining handset prices.
Risk/Reward Rating
Russia's score is 51.9out of 100.0, down slightly from the previous quarter. However, Russia has moved down to third place in our latest Consumer Electronics Risk/Reward Ratings table from second, swapping places with the Czech Republic. Given its undoubted market growth potential, Russia is expected remain a priority market for vendors.
Key Trends And Developments
- The flat-screen TV set market still is far from saturated, particularly in remote areas. In the major cities of European Russia, rising incomes, new house builds and interest in luxury items will ensure growing demand for digital. The government has set a target for every Russian citizen to have access to at least 24 digital TV channels by 2015, with the amount of funding for digitalisation reportedly RUB76.3bn. Russia is expected to roll out digital services gradually, starting from Russia's Far East and South Siberian regions, followed eventually by all populated localities.
- In 2012, Russian retailers such as M.video and Euroset reported another half year of strong growth in sales of consumer electronics devices, with particularly strong sales of handsets. Demand for smartphone and higher end feature phones will help prevent stagnation in the handset market despite the slowing subscriber growth rate. In 2012, smartphones accounted for 30% of all handsets sold at mobile provider MTS's retail chain and as a result average handset prices increased by around 12%, even though average smartphone prices were stagnant.
- Tablets will offer a growth area, with a boost from sales in Q112 of around 1.5mn tablets. Mobile PCs remain the main PC sales driver, although most of the growth in H112 was in less expensive units priced below US$800. Household purchases of second notebooks for family use was one contributing factor behind this growth.