Chile Consumer Electronics Report Q2 2014
The consumer electronics market in Chile is one of the most lucrative in Latin America due to high incomes and developed retail and distribution networks, despite being limited by the small size of its population. Sales of consumer electronics devices such as tablets and smartphones are the largest contributors to market growth, with lower cost Android devices deepening the market. Meanwhile the economic environment remains supportive with banks willing to extend credit and the unemployment rate remains low. However, there is a downside risk to our positive outlook, with a significant slowdown in external demand potentially disrupting household spending. Despite this our core view of growth remains bullish based on the fundamentals of low household penetration of many digital devices, plus their growing affordability, which should keep the consumer electronics market on an upward trajectory.
Headline Expenditure Projections
Computer sales: US$1.7bn in 2013 to US$1.8bn in 2014, +6% in US dollar terms. Unit growth is being driven by the boom in tablet sales. However, competition from low-cost tablets, as sales shift away from relatively expensive notebooks, has limited increases in market value.
AV sales: US$1.2bn in 2013 to US$1.2bn in 2014, +3.5% in US dollar terms. Flat-panel TV sets expected to provide the most dynamic area of growth, with prices of Smart TVs, meaning they are still out of reach for the majority of Chileans.
Handset sales: US$702mn in 2013 to US$784mn in 2014, +17% in US dollar terms. Smartphones sales growth makes the handset market the most dynamic segment of the consumer electronics market.
Key Trends & Developments
The smartphone market is the most dynamic segment of the consumer electronics market, with rapidly increasing volumes driving value growth of the handset market as a whole. Chilean smartphone penetration is now at about 19%, as telcos prepare to launch a new generation of LTE devices. Key to this trend has been the increasing availability of mid-range devices running Google's Android OS. Android has grown to become the dominant smartphone operating system in Chile, ahead of Apple's iOS and Microsoft's Windows Phone. Samsung has been the vendor to capitalise most on this trend, but competition from LG and Chinese vendors such as Huawei, ZTE and Lenovo is expected to increase over the short- to medium term.
Another area of rapid growth is the tablet market, in which BMI forecasts a CAGR of 8.1% 2014-2018, with total tablet volumes reaching 3.1mn in 2018. The growth of the tablet market has been underpinned by the same trend as in the smartphone market, with competition among Android vendors deepening the market. Unlike developed markets where household PC penetration is as high as 90%, in Chile we believe there is still scope for growth in notebook sales, despite some cannibalisation by tablets. Looking to the medium term, there is potential for hybrids/convertibles running full Windows to fill a gap in the market by offering first-time buyers the functionality of notebooks, as well as the ease of content consumption offered by tablets. However there will need to be further price declines before hybrids gain significant traction in Chile.