Czech Republic Consumer Electronics Report Q2 2014
The consumer electronics market in the Czech Republic experienced a dip in growth in recent years as a result of market saturation in some key product categories, as well as challenging economic conditions. Nonetheless, it remains one of the most lucrative in Central and Eastern Europe as a result of relatively high income levels and the strength of supporting infrastructure such as data networks. Sales of smartphones, tablets and smart TVs all offer vendors opportunities for strong unit and value growth in 2014. However, there is downside risk, with the weakening of the koruna pushing up prices of imported products and acting as a drag on growth.
Headline Expenditure Projections
Computer hardware sales: US$1.723bn in 2013 to US$1.722bn in 2014, down 0.1%. Sales of tablets are growing rapidly, but this will be offset by the slowdown in desktop and notebook shipments. The depreciation of the koruna will be an exacerbating factor.
AV sales: US$1.71bn in 2013 to US$1.79bn in 2014, up 4.6%. We expect growth in 2014 to be driven by sales of smart TV sets.
Handset sales: US$763mn in 2013 to US$817mn in 2014, up 7.1%. Mobile penetration is high, meaning flat volumes overall, but smartphone penetration is rising rapidly, pushing up the average selling price of devices and driving market value growth.
Key Trends And Developments
The PC market is evolving as a result of macroeconomic trends. In December 2013 Chain Expert Electronics reported that since 2012 there had been a bifurcation of the market, with a decline in sales for mid-range devices, but strong sales at the premium and low-end, due to the squeeze on the middle class. Meanwhile, in November 2013 it was reported that the weakening of the koruna following the intervention of the Czech National Bank was affecting prices in the PC market in the run up to Christmas. Vendors including Hewlett-Packard and ASUS said they expected currency depreciation to be reflected in higher prices for imported products, as low margins on hardware do not allow for absorption of additional cost.
The handset market is the most dynamic segment of the consumer electronics market. Smartphone sales account for an increasing share of overall handset sales, and are estimated at 60% of sales in 2013. The popularity of smartphones has resulted in an increase in the average selling price of devices in the overall handset market. A key factor behind this trend is the declining price of smartphones, with East Asiaproduced mid-range smartphones running Android particularly important drivers. Google's partner vendors have been the prime beneficiaries of the shift to smartphones, but the Czech Republic has been a successful market for Windows Phone, using Nokia's brand strength in the market. This could make a dent in Android's market share and create a viable third ecosystem in the mobile market.