Czech Republic Consumer Electronics Report Q3 2014
Headline Expenditure Projections
Computer hardware sales: USD1.595bn in 2013 to USD1.595bn in 2014, down 0.1%. The market will perform better than in 2013, but the shifting sales mix to low cost tablets and depreciation of the koruna will continue to be a drag on growth.
AV sales: USD1.71bn in 2013 to USD1.79bn in 2014, up 3.5%. We expect growth in 2014 to be driven by sales of smart TV sets, with traditional markets saturated.
Handset sales: USD763mn in 2013 to USD817mn 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
As the cost of handsets declined in 2012 and 2013 smartphone sales volumes boomed and accounted for a rapidly increasing share of overall handset sales. The increase in smartphone units as a share of the total has resulted in an increase in the average selling price of devices for the handset market as a whole. A key factor behind this trend is the declining price of smartphones, with East Asia-produced 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.
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 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.
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