Hungary Consumer Electronics Report Q3 2014
Headline Expenditure Projections
- Computer Hardware Sales: USD1.21bn in 2013 to USD1.11bn in 2014, a decrease of 7.9%. Competition from low-cost Android tablets is putting downward pressure on prices across the market and limiting increases in market value, while the decline in notebook volumes and currency weakness will exacerbate the demand squeeze.
- AV Sales: USD472mn in 2013 to USD485mn in 2014, +2.9% in US dollar terms. Penetration of digital TV is driving demand for flat-screen TV sets as consumers upgrade to take advantage of new services.
- Handset Sales: USD633mn in 2013 to USD662mn in 2014, +4.6% in US dollar terms. The declining price of smartphones, particularly in the Android ecosystem, is sustaining sales growth. Operator subsidies are also helping to support market growth despite the constraints on Hungarian consumers.
Key Trends And Developments
The Hungarian handset market has been reshaped by the declining price of smartphones, a dynamic derived from vendor competition within the Android ecosystem. This has driven smartphone penetration to almost 40% by the end of 2013, with vendors including Samsung Electronics seeing strong growth as consumers migrate from 2G/featurephones to smartphones. However, Android vendors faced increased competition in Hungary as Microsoft's Windows Phone has gained traction. In January 2014 Microsoft stated that it was the number two mobile OS in 14 markets including Hungary. The company stated it doubled sales worldwide over the Christmas period year-on-year. Nokia's Lumia range played a significant part in Windows' popularity with Huawei's Windows smartphones also credited among others. Looking ahead, with Microsoft announcing sharp OS licensing costs for low-cost devices, we expect Android vendors to face heightened competition and pressure on prices.
Hungary is an important regional centre for production and distribution of consumer electronics products. However, the production industry has not been immune from the challenging economic in Hungary and across the wider region. As a result, in April 2014 Samsung announced the closure of its second largest production facility in Hungary. The factory in God produces screens for plasma televisions and mobile telephones. At its peak the factory employed 2,000 staff, with annual earnings of HUF100mn, but the closure will see the final 800 staff let go. BMI believes further facilities could come under pressure with stagnant demand across much of the region and lower labour costs in other regions.
The Hungarian consumer electronics market has operated in a challenging economic environment for several years, stymieing spending growth as consumers have faced a continued squeeze. Although several macroeconomic indicators are forecast to move back to positive territory, a depreciation of the forint against the US dollar will mean trading conditions remain challenging. Despite the ongoing drag on growth, we believe the Hungarian market retains the potential for medium term growth. The Hungarian consumer electronics market still has considerable latent growth potential, and pent-up demand after deferred purchases 2008-2013. Home computer penetration remains low compared with peer group countries while internet penetration is also relatively low as a percentage of households. Meanwhile, in the handset market, consumers are increasingly becoming data-centric, offering scope for smartphone adoption as vendors offer low-cost devices.
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