Consumer Electronics in Central Eastern Europe Booming

Nuremberg — Robust economic growth is expected for Central and Eastern Europe in 2007. Despite the foreseen slowdown of the Hungarian economy, which is a result of the overdue budget consolidation, the Central European new EU member countries should reach an average real GDP growth of around 4,8 %, after a 5,4 % increase in 2006.

The Consumer Electronics market in the Central Eastern Europe region reveals again an impressive revenue growth of + 13,9 % in the first half of 2007 (Euro basis). Flat panel TVs, portable MP3 Players as well as In Car Entertainment are driving most of this upswing.

TV displays

The TV market accounts for 63 % of the total Consumer Electronics hard ware sales in the region. In the first half of 2007 the sharp increases of LCD-TV and Plasma-TV sales more than compensate the ongoing erosion of the traditional CRT-TV (Cathodic Rate Tubes) and Rear Projection TV turnover.

1 Half Year 2007 vs. 1 Half Year 2006 (GfK Retail Audit)

• TV Display Total: + 5% in units, + 27 % in value
• LCD-TV: + 188 % in units, + 132 % in value
• Plasma-TV: + 61 % in units, + 18 % in value
• CRT-TV: – 25 % in units, – 34 % in value
• Rear Projection TV: – 74 % in units, – 65 % in value

The TV product mix in the CEE region lags behind the Western European average. In June 07 every second television set sold in the retail was still a traditional tube TV. This corresponds with the situation in Western Europe approximately 1½ years ago.

In value terms however almost 80 % of the TV display revenue is already generated by Flat Panel TVs. The most advanced situation can be observed GfK Marketing Services in the high profile countries Poland, Slovenia and Czechia while in Romania CRT still accounts for 45 % of the TV Display Turnover in the first semester of 2007.

In the first 6 months of 2007 the growth rates of Plasma-TV slowed down. Despite an extraordinary increase of 37 and 50 Inches Plasma screens the focus remains very much upon 42 Inch which takes around 84 % of the unit sales. The 42 Inch Plasma TV segment faces an increasing competition from LCD-TV which progressively moves into larger screen sizes.

32 Inch developed to be the most important screen size accounting for nearly half of the LCD-TV sales (units and value). The highest growth however can be observed for larger sized LCD-TVs. Approximately 2 million LCD-TV and 260 thousand Plasma-TVs will be sold in 2007 in Central Eastern Europe.

Despite a significant price erosion across all TV Display segments the inroad of Flat Panel TV leads to an increase of the average consumer spending per TV-set from 343 EURO (June 06) to 415 EURO (June 07), which represents increasing revenues for manufacturers and retailers. A further increase of the TV average price is expected stimulated by the change of the product mix towards flat panel displays and larger screen sizes.

DVD players/DVD recorders

After several years of growth the demand for DVD standalone devices is stabilising (DVD Total: – 2 % in units, – 13 % in value). Around 3,7 million DVD Players and Recorders are expected to be sold in the region this year which is 3 % less than in 2006.

9 out of 10 DVD Decks sold are still equipped with a playback function only. However, the situation differs country by country. Whereas in most countries the demand for DVD Recorders remains at a relatively low level the Recorder share in Czechia, Slovakia and Croatia is close to the Western European average. This variation may be explained by different recording habits.

While the market for the basic DVD Recorders is shrinking consumers show a growing interest in the more advanced Hard Disc Recorders which became the fastest growth segment in the DVD Video markets (+43 % in units, +15 % in value). 160 GB DVD Recorders have enjoyed a growing popularity with prices falling by 28 % compared to the previous year.

Camcorders

The demand for Camcorders again showed a positive trend with sales up by + 10 % in units and + 4 % year on year. The rapidly growing DVD and HDD Camcorders sectors more than compensate for the shrinking sales of the still dominating DVC Camcorders. The Camcorders sales are expected to reach another record level of 520 thousand units sold in 2007.

Home audio

In recent years consumer interest has been primarily focused upon the new TV and Video technologies and Portable MP3 Players. The Home Audio market has been suffering from this trend and slipped into a decline last year. This downward trend has continued in the first half year of 2007 (- 11 % in units and – 20 % in value).

Home Theatre Systems which represent the most important segment in the Hifi market, are suffering from a slow-down in consumer demand. This year GfK forecast sales of 670 thousand Home Theatre Systems.

The comparatively small market for Hifi components on the other hand experienced an unexpected growth of + 27 % in units and + 30 % in value which can be seen as an indication that the positive development of high class televisions may stimulate the demand for an adequate and advanced sound equipment in the near future.

Portable audio equipment

A much more dynamic performance is shown in the Portable Audio sector thanks to the ongoing boost of the Digital Portable Audio and Video Players (MP3 and MP4).

The popular MP3/ MP4 Portables account for around 70 % of the Portable Audio turnover. The demand in the first half of 2007 has grown by 84 % in units and 40 % in value. Particularly new MP4 Players with video playback function enjoy a growing popularity and account already for 29 % of the total MP3/ MP4 turnover vs. 6 % in the first half of 2006.

With a 95 % value share the market is dominated by Flash Memory Players which develop gradually towards larger storage capacities. An extensive range of “no names” appears on the market selling high quantities with low prices.

For this year a total market size of approximately 4,4 million MP3 Players is expected.

In-car electronics

Supported by an increasing number of registered cars the aftermarket for Car Radios is again performing well with a 21 % units and 14 % value growth. The drivers of this growth are CD Tuners with MP3 Playback function benefiting from the growing popularity and usage of MP3 recordings as well as the declining prices falling by – 8 % in the first half of 2007. A total sale volume of 980 thousand Car Radio is expected for 2007.

The relatively new market of Portable Car Navigation is dramatically increasing and may reach a record level of 450 thousand sales out in 2007.

Recording media

The total demand for Recording Media fell by – 4 % in unit terms but grew + 7 % in value, driven by DVDs and USB Memory Sticks partly compensating for the declining demand for Audio/ Video Tapes as well as recordable CDs.

Outlook 2008

Demand for Consumer Electronics in the first half of 2007 reveals that consumers are prepared to invest into innovative technologies and products that provide a real benefit. Decreasing prices will stimulate further market growth as will the penetration of the new technologies. For next year we expect a 12 % growth in value for the CE market in Central Eastern Europe.