IBISWorld Industry Report

Global Consumer Electronics

Manufacturing

August 2019
Competitive Landscape.....................24
Market Share Concentration..........................24
Key Success Factors..................................... 24
About This Industry............................. 3 Cost Structure Benchmarks...........................25
Basis of Competition...................................... 26
Industry Definition............................................ 3 Barriers to Entry............................................. 27
Main Activities.................................................. 3 Industry Globalization.................................... 28
Similar Industries............................................. 3
Additional Resources....................................... 3 Major Companies.............................. 29
Operating Conditions........................ 34
Industry at a Glance............................ 7
Capital Intensity............................................. 34
Executive Summary......................................... 7 Technology & Systems.................................. 34
Revenue Volatility.......................................... 34
Industry Performance.......................... 8 Regulation & Policy........................................35
Industry Assistance........................................35
Key External Drivers........................................ 8
Current Performance....................................... 9 Key Statistics.....................................37
Industry Outlook................................ 13 Industry Data................................................. 37
Annual Change.............................................. 38
Industry Life Cycle......................................... 15 Key Ratios..................................................... 39

Products & Markets........................... 17

Supply Chain................................................. 17
Products and Services................................... 17
Demand Determinants................................... 19
Major Markets................................................ 21
International Trade.........................................22
Business Locations........................................ 23

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About This Industry

Industry Definition

This industry manufactures electronic audio and video equipment for consumer end use,
including home entertainment systems, public address and musical instrument amplifications
as well as mobile devices such as cellular phones and tablets. Examples of products include
TVs, stereo equipment, speaker systems, consumer video cameras, jukeboxes and video
game consoles. However, while mobile devices are included in this industry, computer
hardware is not.

Major Players
Hon Hai Precision Industry Co. Ltd. Samsung Electronics Co Ltd

Main Activities
The primary activities of this industry are:

Mobile music player manufacturing DVD player manufacturing

Home theater audio and video equipment Loudspeaker manufacturing
manufacturing
Microphone manufacturing Public address system and equipment
manufacturing
Radio receiving set manufacturing TV set manufacturing
Cellular phone and mobile device manufacturing Video camera manufacturing

Similar Industries

Global Household Cooking & Appliance Manufacturing

Manufacturers of a range of products including kitchen, bathroom and laundry appliances.

Global Computer Hardware Manufacturing

Manufacturers of computers and computer peripherals.

Global Semiconductor & Electronic Parts Manufacturing

Manufacturers of components used in electronic and electrical products.

Global Automobile Engine & Parts Manufacturing

Companies in this industry manufacture and rebuild motor vehicle engines and engine parts.

Additional Resources

http://www.census.gov
US Census Bureau

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http://ec.europa.eu/eurostat
Eurostat

http://www.jeita.or.jp
Japan Electronics and Information Technology Industries Association

http://www.cta.tech
Consumer Technology Association

http://www.avixa.org
AVIXA

Industry Jargon
CATHODE RAY TUBE (CRT)
A TV or computer screen that works by moving an electron beam back and forth across the
back of the screen.

CD
A disc of plastic polycarbonate with a diameter of 12 centimeters that contains digital
information, typically music, encoded onto a metallic surface.

DVD
A type of disc with similar physical dimensions to a CD. However, the pits in a DVD are much
smaller and closer together than on CDs; it is general used for movies.

LIQUID CRYSTAL DISPLAY (LCD)

A type of display that uses liquid crystals; these screens are always flat and use electrical
currents to change individual pixels on the screen.

MP3 PLAYER
An electronic device for playing digital audio files in the MP3 format.

OFFSHORE
The relocation of a company's business process, such as manufacturing or accounting, from
one country to another, whether the work is outsourced or stays within the company.

OUTSOURCE
To procure goods or services under contract with an outside supplier.

PLASMA TV
A TV display technology in which each pixel on the screen is illuminated by a tiny bit of
plasma (charged gas).

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ULTRA HIGH-DEFINITION TV (UHDTV)

A digital TV display format in which the horizontal screen resolution is on the order of 4000
pixels (4K UHD) or 8000 pixels (8K UHD).

Glossary
BARRIERS TO ENTRY
High barriers to entry mean that new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with that
spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital
intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is
$0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of
labor.

CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation
using the current year (i.e. year published) as the base year. This removes the impact of
changes in the purchasing power of the dollar, leaving only the "real" growth or decline in
industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US
Bureau of Economic Analysis’ implicit GDP price deflator.

EMPLOYMENT
The number of permanent, part-time, temporary and seasonal employees, working
proprietors, partners, managers and executives within the industry.

ENTERPRISE
A division that is separately managed and keeps management accounts. Each enterprise
consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment is a single
physical location where business is conducted or where services or industrial operations are
performed. Multiple establishments under common control make up an enterprise.

EXPORTS
Total value of industry goods and services sold to customers outside the country of origin.

IMPORTS
Total value of industry goods and services brought into a buyer's country from another
country.

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INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry.

INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on
production; all other operating income from outside the firm (such as commission income,
repair and service income, and rent, leasing and hiring income); and capital work done by
rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets
are excluded.

INDUSTRY VALUE ADDED (IVA)

The market value of goods and services produced by the industry minus the cost of goods
and services used in production. IVA is also described as the industry's contribution to GDP,
or profit plus wages and depreciation.

LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld determines an
industry's life cycle by considering its growth rate (measured by IVA) compared with GDP; the
growth rate of the number of establishments; the amount of change the industry's products
are undergoing; the rate of technological change; and the level of customer acceptance of
industry products and services.

NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as nonemployers. These are
mostly set up by self-employed individuals.

PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s
profitability. It is calculated as revenue minus expenses, excluding interest and tax.

VOLATILITY
The level of volatility is determined by averaging the absolute change in revenue in each of
the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to
±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES
The gross total wages and salaries of all employees in the industry. The cost of benefits is also
included in this figure.

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Industry at a Glance
Executive Summary

Over the five years to 2018, the Global Consumer Electronics Manufacturing industry is
expected to grow at an annualized rate of 1.1% to $1.3 trillion, including a 2.7% increase in
2018 alone. The past five years have been characterized by growth in emerging markets and
the introduction of new products, leading more people to buy consumer electronics.
Innovative products, falling prices, growing household incomes and rising consumer
sentiment have supported demand for consumer electronics. Still, many industry products
have approached market saturation, leading to price competition and downward pressure on
profit margins throughout the industry. Meanwhile, consumers have been spending much of
their increasing disposable income on mobile devices, further forcing industry operators to
lower prices to compete.

Incumbent manufacturers experience both ongoing opportunities and threats from

advancements in technology. Industry players continue to innovate and introduce high-
margin products into the market. Innovation, however, brings fresh forms of competition.
Mobile devices have pushed their way into every space, including the one generally reserved
for consumer electronics. Some mobile apps can replace devices such as digital cameras and
car electronics. TV manufacturers are expected to endure new forms of competition as an
increasing number of powerful companies attempt to enter consumers' living rooms. As the
number of internet connections rises, laptops and streaming capabilities are creating new
external competition for the industry. Apple has launched its own brand of TVs while Amazon
continues to unveil new products, such as its Fire TV device. However, increasing use of
mobile internet connections and the internet has also created opportunities for the industry
by providing room for new audio products such as wireless audio devices that have spurred
growth in the audio category.

Industry revenue is expected to increase an annualized 2.7% to $1.5 trillion over the five years
to 2023, aided by similar projected patterns. Growing demand in emerging economies, rising
incomes and a relatively low level of market penetration for many consumer electronic
products is expected to bolster industry performance. The future of the industry will
ultimately hinge on trends in technological advancement and whether industry products
stand to take advantage of such trends by way of new capabilities and features, or rather be
overtaken by computing alternatives.

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Industry Performance
Key External Drivers

Global consumer sentiment index

As consumer sentiment and spending recover from worldwide recessions, an increase in

demand for industry products is expected as more people spend money on high-value
consumer electronics and discretionary products such as TVs, cameras and other electronics.
Recent economic slowdowns in China, Japan and the European Union may temper consumer
sentiment, despite increasing disposable income. The consumer sentiment index is expected
to decrease in 2018.

Global internet usage

The number of broadband connections worldwide, or high-speed internet connections, has

had a major impact on the number of TVs sold, given the rise of online streaming services.
Now many viewers in developed economies can access TV shows through additional devices
such as computers, tablets and mobile phones. Global internet usage is expected to increase
in 2018, representing a potential opportunity for the industry.

Global number of mobile telephone subscriptions

The global number of mobile telephone subscriptions tracks data subscriptions for internet-
enabled telecommunications devices. Since the industry's primary product segment is
telephones and mobile devices, the number of mobile subscriptions is a significant indicator
of industry performance. When the number of subscriptions rises, industry revenue should
also rise in turn. In 2018, the number of mobile telephone subscriptions is expected to
increase.

Global per capita income

Emerging economies have a relatively low penetration of high-technology electronics.

Therefore, an increase in per capita disposable income can generate strong sales growth for
consumer electronic devices. Per capita disposable income is expected to increase in 2018.

GDP of the BRIC nations

The level of economic activity and capital investment expenditure influences demand for
electronics and electronic components. As incomes continue to rise in emerging and newly
industrialized nations, such as Brazil, Russia, China and India (known as the BRIC nations),
these countries are increasing their demand for consumer electronics. GDP growth of BRIC
nations is expected to increase in 2018.

Technological change for the Global Entertainment sector

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An increase in technological change for the global entertainment sector will increase industry
demand as consumer electronics manufacturers develop and sell new products.
Technological change for the global entertainment sector is expected to increase in 2018.
However, some technological changes cause consumer electronics to converge into
multipurpose devices, posing a potential threat to some single-purpose industry products.

Current Performance

Operators in the Global Consumer Electronics Manufacturing industry create electronic audio
and video equipment for consumer use, which includes telecommunications, entertainment
systems, public address and musical instrument amplifications, among others. The influx of
new technologies continuously provides the industry with challenges to incumbents and new
opportunities for entrants. TVs contribute a significant amount of revenue to the industry and
have recently experienced structural challenges. Product saturation in mature markets and
computing product alternatives have slowed demand, as well as price decreases over several
years. Operators that have successfully introduced new products, such as internet-enabled
TVs, have been able to withstand these challenges.

Nevertheless, technological advances in the industry's primary product segment, telephones

and mobile devices, continue to spur industry growth. Smartphones and other internet-
enabled devices are the backbone of a modern digital economy and have facilitated a
paradigm shift in consumer electronics, evidenced by the rise in the Internet of Things (IoT),
which connects all types of consumer electronics with the internet in some capacity. Indeed,
this growing connectivity has been a boon to industry operators that have followed this trend
and developed products that reimagine entertainment and leisure.

Outside of these product trends, favorable economic conditions worldwide have been a
major catalyst for industry expansion. Global consumer spending and per capita income are
projected to rise an annualized 2.8% and 2.0% respectively during the current period
according to IBISWorld estimates, which should bolster industry performance. However, due
to a decline in the price of most electronic inputs, industry expansion has been subdued.
IBISWorld expects the price of semiconductors and electronic components to decrease at an
annualized rate of 1.4% during the current period, which gets passed down to consumers due
to intense price-based competition among industry operators worldwide. As a result of these
countervailing trends, industry revenue is expected to grow at an annualized rate of 1.1% to
$1.3 trillion over the five years to 2018. Revenue is expected to increase 2.7% in 2018 alone
amid rising consumer spending and new product development.

Ultimately, the industry's shift from analog to digital technologies has resulted in the
functionality of consumer electronics products becoming increasingly concentrated on
semiconductors and other key components, which have become readily available to new
entrants. This trend has led to a change in strategy for many major players, with some

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companies moving toward a production outsourcing model, while others have retained and
consolidated a vertically integrated strategy (to retain first-mover advantages and protect
intellectual property) or a mixed strategy (such as outsourcing production of low-end
products).

Product trends

During the current period, different products have experienced varied demand. Demand for
TVs has depended on the type of TV. For example, shipments of smart TVs have been rising,
further benefiting TV sales and taking advantage of the increasing use of the internet, which
has historically threatened TV demand. According to Samsung, one of the largest industry
manufacturers, there is a shift toward large-size and high-resolution screens. Accordingly, the
market share of major manufacturers with high-quality products and brand power is
increasing.

In addition, advances in smartphone and tablet technology and design, as well as the
development of telecommunications infrastructure worldwide, have been the primary
facilitators of increased demand in the industry's primary product segment. In 2014,
according to GSMA estimates, the total number of mobile data subscriptions surpassed the
global population, and this number has increased since then. IBISWorld expects the total
number of mobile telephone subscriptions to rise an annualized 3.5% while global internet
usage is projected to increase 13.1% during the current period, lending evidence to the
growing connectivity of the global economy. These trends are a boon to industry operations,
instigating demand for smartphones and other internet-enabled devices which command
high price points.

Other products, such as audio technology and automotive electronics products have also
grown strongly during the period. Demand for audio technology, such as headphones and
speakers, has grown due to the introduction of new products, rising use of smartphones and
increased internet connections. While computers pose a potential threat to TVs, companies
can cross sell audio systems to provide consumers with a better audio experience with their
computers and TVs. Additionally, wireless devices that enable consumers to access products
such as speakers via their phones have further benefited the audio segment.

Manufacturers that sell to the motor vehicle market have benefited from unprecedented
consumer demand for information, internet connectivity and entertainment in cars, with
automotive manufacturers and aftermarket vendors installing a greater range of these
products. Global automotive sales are expected to increase in 2018. This sales growth is
expected to increase manufacturing activities of in-car audio and visual multimedia
components and infotainment systems.

Regional demand and production trends

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There has been strong economic growth and rising household wealth in emerging
economies, including China and India. Evidencing this trend, IBISWorld expects the GDP of
Brazil, Russia, India and China to increase at an annualized rate of 5.4% during the current
period, suggesting an influx of economic activity. Due to low penetration rates and falling
prices, coupled with an expanding telecommunications infrastructure, consumer electronics
sales have grown significantly in many emerging economies.

Growth in demand for consumer electronics products in developed economies has also been
strong during much of the five-year period to 2018, albeit hampered to some extent by weak
consumer sentiment and rising product penetration rates recently. The introduction of new
consumer electronics products in some countries, including digital TV and radio
broadcasting, has promoted demand.

Outside of regional demand trends, patterns in global production and the increasingly
complex web of the consumer electronics supply chain have dictated industry trends during
the current period. Offshoring production facilities have dramatically changed the industry's
capacity and cost structure, as large international consumer electronics operators have
moved their production abroad entirely or have relied on contract manufacturers. Indeed, the
industry's largest player, Foxconn Technology Group, is a contract manufacturer. Contract
manufacturers do not need to employ researchers to develop and design products and
largely rely on a large quantity of workers to mass manufacture consumer goods such as
Apple's iPhone or Samsung's Galaxy tablets. Accordingly, employment is expected to jump an
annualized 2.8% to reach 15.1 million people during the five-year period, vastly outpacing
industry revenue growth.

Plus, continued infrastructure developments in emerging economies and advancements in

online communications have facilitated the transfer of Western production facilities overseas.
The availability of low-cost labor also enables manufacturers to sell their products at
discounted prices. However, this availability has increased price competition among the
industry's major players and put slight downward pressure on the average industry profit
margin. Consequently, to protect profitability, many industry operators have resorted to
consolidation strategies to expand production and achieve economies of scale. This is
evidenced by the disparity between the anticipated increase in enterprises compared with
establishment growth. The number of industry enterprises is expected to grow at an
annualized rate of only 0.9% to reach 3,039 companies compared with a 1.4% annualized
expansion in the number of establishments, which suggests that more production facilities
are opening but are operating under the auspices of fewer companies.

Production capacity

Some brand owners and contract manufacturers have moved production to countries with
lower labor costs, such as those in Asia. For example, in 2015, Toshiba announced that it

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would stop making TVs in North America and license its brand to a Taiwan-based contract
manufacturer. Manufacturing plants in low-cost countries, chiefly in the form of contract
manufacturing companies, account for a significant portion of revenue for the Global
Consumer Electronics Manufacturing industry. Some large contract manufacturers add more
value by designing, providing distribution and servicing products supplied to brand owners
that are then rebadged. All in all, IBISWorld estimates that China is the largest single
producer of consumer electronics, with industry leader Foxconn's primary factory located in
Shenzen, Guangdong. China also houses a rising middle class, which places operators close
to a large downstream customer base.

In developed economies, manufacturing activity is constrained by high cost structures due to

high wages, thin supply chains and a lack of economies of scale, as well as relatively high
penetration rates for many products in their home markets compared with penetration rates
in developing economies. Hardware manufacturing in developed economies tends to focus
more on low-volume, high-margin specialized products. Many of the world's major consumer
electronics brand owners have focused less on internal production and more on research and
development, sales and marketing. Overall, this shift toward globalized production has
increased the level of international trade in this industry at an annualized rate of 1.3% during
the five-year period to reach an estimated $507.5 billion in 2018, outpacing industry revenue
growth.

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Industry Outlook
Innovation is a double-edged sword in the competitive Global Consumer Electronics
Manufacturing industry. Innovation can help drive total industry sales, but it can also lead to
greater competition. The increase in competition and the decline in overall prices for industry
products are conflicting trends, contributing to only moderate growth compared with
historical trends. Still, the industry is expected to expand more rapidly than the previous five-
year period amid anticipated accelerations in global consumer spending and per capita
income, which are projected to grow an annualized 3.8% and 2.7%, respectively. Industry
revenue is expected to grow at an annualized rate of 2.7% to $1.5 trillion over the five years
to 2023. Another salient indicator of industry expansion is the forecast 5.7% annualized
increase in GDP of Brazil, Russia, India and China, which form the cornerstone of global
consumer electronics production.

Many major players in the industry are focusing more on fast-growing markets, where
incomes are growing quickly and product penetration is low. Relatively strong economic
growth in emerging economies, including those located in Asia, South America and Eastern
Europe, are expected to instigate demand for consumer electronics in these countries.
Increasing household wealth in many emerging markets will make electronic goods more
affordable to a larger section of the population. These factors, coupled with falling product
prices, mean that consumer electronics sales can be expected to grow at a strong rate in
many emerging markets. Companies are continuously producing budget-priced, tiered
pricing models and region-specific products to address these markets.

Trends in consumer shopping behavior will indelibly affect marketing and distribution
strategies as well. During the past decade, e-commerce has increased in relevance, which has
provided for easy price comparisons and product reviews, and retailers have become bigger
in some countries by stoking demand online. In this environment, brand names may become
even more important in winning sales, just like many consumers are loyal to Apple products.
Some manufacturers are expected to develop strategic alliances with retailers and e-
commerce platforms such as Amazon and Alibaba to promote sales. Alliances may also form
among smaller industry companies as they seek new branding ideas or strategies to compete
with larger operators. Furthermore, increases in data-driven analysis, chiefly predictive
analytics, is expected to bolster sales as companies capitalize on advances in consumer data
use by producing targeted marketing campaigns.

A shift in technology

Applications in home computing, the internet and consumer electronics are coming together.
Home networking technology and advances in the Internet of Things (IoT) is already enabling
computer, audio and video devices to integrate. A similar convergence is occurring in the
automotive market, where electronic equipment is converging into integrated systems, and

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consumer electronics, such as portable digital audio and video players, can integrate with
automotive audio and video equipment.

Global demand for TVs has fluctuated over the past few years. Manufacturers are expected to
concentrate more on introducing new attractive higher-value products to bolster demand
and keep consumers in developed economies from cutting the cord and resorting to
streaming services. Demand for smart TVs that enable consumers to view on-demand
streaming services as well as regular TV will increase as more consumers gain internet access.
Additionally, demand for 4K and 5K TVs, as well as other products currently in development,
is expected to continue to drastically rise due to their low product saturation. Likewise, the
smartphone and mobile device markets are influenced by similar factors, which should serve
as a boon for industry operations in these product segments.

Digital technology has resulted in intense price erosion for consumer electronics products,
with complicated functionality becoming concentrated in semiconductors and other key
devices that can be mass-produced. Miniaturization from the circuit design stage is
permitting lower component counts, which can result in a considerable reduction in material
costs. In addition, manufacturing process reforms reduce costs. Increases in economies of
scale will also reduce costs, with joint-venturing activity boosting scale. Lower costs will be
largely passed on to consumers, which will likely stimulate demand.

Rapidly changing technology and marketplaces will necessitate more creativity and product
development, coupled with shorter life cycles, promoting demand but ensuring a high level
of risk for industry players. There is always the risk of a competitor introducing
groundbreaking technology, which will continue to motivate research and development
(R&D) spending by brand owners and, to a lesser extent, original design manufacturers.
Increased R&D expenditures are expected to cause wages to increase at an annualized rate of
4.6% to $176.9 billion over the five years to 2023, primarily fueled by companies hiring
engineers to develop new technologies. However, employment levels are expected to rise
more rapidly in comparison, suggesting a small decrease in the average wage of industry
employees, which is primarily attributed to the increasing prevalence of contract
manufacturers.

Manufacturing trends

The Global Consumer Electronics Manufacturing industry is becoming increasingly globalized,

with 38.0% of global revenue expected to come from internationally traded items in 2023.
This fact has emerged because of the historical trend of brand owners outsourcing
manufacturing to low-cost countries such as China and contract manufacturers across the
globe. Indeed, the industry's largest player, Foxconn Technology Group, is a contract
manufacturer with most of its operations in China. This trend is not expected to reverse in the
outlook period. As a result, the number of companies operating in the industry is expected to
increase at an annualized rate of 2.0% to 3,348 enterprises, with most of this expansion taking

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the form of contract manufacturing companies. Large contract manufacturers can efficiently
manage production and supply chain processes. By using contract manufacturers, consumer
brands can focus more on R&D, sales and marketing, which may reduce the time to market.
Due to the increasingly global supply chain of industry goods, exports are consequently
expected to increase at an annualized rate of 3.1% to $591.2 billion over the five years to
2023.

However, increasing trends toward outsourcing and locating production capacity in low-cost
countries is not projected to become universal. Some manufacturers are expected to
maintain and consolidate a vertically integrated strategy (to retain first-mover advantages
and protect intellectual property) or a mixed strategy, such as by outsourcing production of
low-end products and inputs. Suppliers in some product markets will seek to offer faster and
more flexible service for customers, which may result in manufacturing capacity being located
closer to the customer. The average wage in China is expected to increase slowly over the
next five years, pushing some companies to search for alternative places with lower labor
costs where they can relocate their facilities. To boost profit margins, manufacturers are
expected to build volumes to drive economies of scale, stretch out productivity and
purchasing gains in production processes and supply chains and sometimes move
production to low-cost jurisdictions.

Industry Life Cycle

This industry is Mature

The Global Consumer Electronics Manufacturing industry is in the mature phase of its life
cycle, characterized by slow growth, market acceptance and industry consolidation. While the

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industry is advancing technologically, the industry is considered mature due to several

conflicting trends. There is strong growth in sales volumes as technological innovations have
brought new products, enhanced existing products and reduced production costs. These new
products promote replacement demand and sometimes open new markets. New and
enhanced products have also helped the industry dampen product and market saturation
while boosting profit. Growing sales have, in turn, helped lower unit costs, which have been
passed on to customers in the form of lower selling prices, further driving demand.
Nevertheless, consumers in both developed and emerging economies have been slow to
replace some consumer electronics, causing manufacturers to further lower their prices and
cut into profitability.

A shift of production to low-cost countries has also contributed to the lower selling prices to
consumers, lower profitability and high rates of offshoring and outsourcing to contract
manufacturers. While falling prices promote growth in demand volumes, they can also act to
dampen growth in industry revenue and profit. Over the 10 years to 2023, industry value
added, which measures the industry's contribution to the overall economy, is forecast to
increase at an annualized rate of 3.1%. Comparatively, world GDP is expected to expand at an
annualized rate of 3.4% during the same period. IVA growth that is parallel to GDP
projections is further indication of an industry in maturity.

Life Cycle Reasons

IVA is anticipated to increase parallel to GDP over the 10 years to 2023

New products are frequently released

Profit remained fairly stable during the period

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Products & Markets

Supply Chain
KEY BUYING INDUSTRIES

F4311-GL Global Wholesale Trade

Manufacturers of consumer electronics can supply distributors in this industry.

F4511-GL Global Department Stores and General Merchandise Stores

Manufacturers of consumer electronics can supply retailers from this industry directly.

Z01 Global Consumers

The end users of consumer electronics are businesses and consumers.

KEY SELLING INDUSTRIES

C1951-GL Global Plastic Product & Packaging Manufacturing

This industry supplies enclosures and packaging.

C2524-GL Global Semiconductor & Electronic Parts Manufacturing

This industry supplies electronic components.

Products and Services

Chart Info

Telephones and mobile devices

Smartphones have become the standard telecommunications apparatus throughout the

globe. Accordingly, their share of industry revenue, alongside internet-enabled mobile

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devices such as tablets, is expected to reach 54.2% in 2018. Technological advances and
lowering product prices have spurred demand for internet-enabled devices. Moreover, a
growing global infrastructure for wired and wireless telecommunications (see IBISWorld
report I5111-GL for the Global Wireless Telecommunications Carriers industry) has boosted
the efficacy of products in this segment. As of 2014, according to GSMA estimates, the
number of mobile subscriptions surpassed the global population, demonstrating the extent
of mobile device proliferation. IBISWorld expects the number of mobile subscriptions
worldwide to continue growing, bolstering the share of revenue derived from this product
segment.

Visual products

Although overall TV demand has been falling over the past couple of years, TVs make up the
second-largest product segment in the industry and are expected to account for 15.4% of
industry revenue alone. The high price of these products compared with other industry
products has helped keep them in the top spot over the period; however, this segment has
decreased as a percentage of overall revenue due to varied demand. In some regions, overall
demand has faltered, partly due to the high demand early in the period that, according to
The NPD Group, pulled in demand from future years. Overall, TV sales have decreased during
the period due to lower prices and reduced shipments; however, certain product segments
experienced varied demand. For example, in 2015, 4K TV sales grew 173.0% while HDTV sales
dropped 4.0%. Additionally, liquid crystal display (LCD) TV sales have also increased over the
period. The cost of high-definition LCD TVs has decreased significantly over the past five
years, making them more accessible to a wider demographic. Also included in this segment is
video recording equipment, cameras and image playback products. Other products include
image recording and playback products such as digital video recorders and DVD players.
Growing demand for Blu-ray disc format players and recorders (at the expense of the DVD
format) and growing demand for HDTVs have promoted growth in image recording and
playback products. This segment also includes digital cameras. All of these devices are facing
external threats from smartphones and tablets, which are increasingly provisioned with
cameras and video playing capabilities. Niche technology, such as GoPro's high-speed digital
camera, can help manufacturers boost sales in this category.

Audio products

Headphones and microphones make up 7.0% of industry revenue in 2018. Headphones have
been growing in significance as more technologically advanced listening devices are boosting
the potential of headphones' capabilities. Moreover, as headphones become iconic aspects of
celebrity fashion, it is expected to further bolster sales of headphones. Microphones have
been separated from the recording equipment segment since it comprises such a large
amount of industry revenue on its own. Audio technology also includes speakers, hi-fi
systems and audio cables. Unlike the TV market, which has suffered from rising use of PCs,
tablets and cell phones, the audio device market has flourished. Rather than replacing audio

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devices, these new technologies often complement audio devices. For example, smartphones
can be used in conjunction with wireless audio devices like speakers.

Recording equipment includes soundboards, mixers and any other products meant to record
sound. Some of these products can be extremely expensive at the professional level while
amateur products comprise a smaller portion of industry revenue. Technological advances
have been a boon for industry operators, with high quality products that can command high
price points. All in all, this segment is expected to generate 19.4% of industry revenue in
2018. Radio sales, while diminishing in significance, represent a small 3.1% of industry
revenue.

Other

All other products comprise the remaining 2.9% of industry revenue. Some prominent
examples of major product groups will be discussed below.

Automotive audio and electronics products including car navigation devices and car audio
equipment such as GPS systems and aftermarket entertainment systems. Manufacturers of
car audio and video equipment are facing high demand as well as heavy external
competition. Although demand for information and rear-seat entertainment systems is high,
competition from smartphones with navigation tools and laptops and tablets with online
streaming are and will continue to create competition for the industry. Overall, IBISWorld
expect this segment to rise as a percentage of industry revenue as emerging markets adopt
these technologies due to their increased convenience.

Video game consoles are also significant. while gaming on computers is increasingly popular
worldwide, console gamers are also a substantial consumer base. Constant innovation and
backward compatibility in some gaming systems make them attractive options compared
with more costly gaming computers. Moreover, video game consoles are much better for
playing multiplayer games on one TV or monitor, although the online gaming experience is
largely synonymous across computer and console gaming.

Demand Determinants

The major determinants of demand for consumer electronics products include advances in
technology, the extent of downward movements in selling prices for comparable products,
movements in household incomes (which tend to grow over time), government regulation
(such as the cessation of analog TV transmissions), government subsidies, and the rate of
new household formation (which can promote sales of some types of equipment, such as
TVs).

The development and subsequent release of new consumer electronics products, which may
replace existing products, often simultaneously generates new and replacement demand.
However, the release of new products may affect demand for products that incorporate older

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technologies or designs. For example, the introduction of Blu-ray disc players and recorders
have negatively affected sales of DVD players and recorders, which previously adversely
influenced sales of CD players and VCRs. Flat-panel TVs have already effectively replaced
cathode ray tube (CRT) TVs in most major markets. Product lifecycles are becoming much
shorter as new technology replaces older versions. Consequently, maintaining a technological
edge will be key to driving demand.

Innovations and trends in electronic components, software, the internet and broadcasting
technologies can affect demand for audio and video equipment. Miniaturization of, and other
advances in, electronic components has enabled new consumer electronics products to
emerge. The growing utility and power of smartphones and other internet-enabled devices
has bolstered demand for these product segments. Governments have already mandated a
transition from analog to digital TV broadcasting, promoting demand for HDTVs.

Consumers typically respond to falling prices for consumer electronics products by buying
more of these products (including high-end products) and the levels of purchases of a
particular product can accelerate once a particular price-point is broken. Prices for consumer
electronics products are falling partly due to a transition from analog to digital;
commoditization of components; expanding production capacity and advances in materials,
manufacturing and supply chain techniques. However, some smartphone manufacturers have
also incorporated a tiered retail model with luxury goods alongside more affordable options,
which is the exception to this trend.

Moreover, as household disposable incomes increase, individuals become willing to spend

more on consumer durables such as consumer electronics products. IBISWorld expects
advanced countries like the United States to account for a disproportionate share of sales of
high-end products (relative to their share of the global population), due to high per capita
household incomes. However, emerging countries have the potential to be key areas of
growth. Plus, consumer tastes, preferences and demographic factors, such as age, all affect
demand for consumer electronics products. According to Consumer Electronics Association,
younger adults tend to spend more on consumer electronics than older adults do.

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Major Markets

Retailers

Retailers, such as mass merchandisers like Walmart and specialty retailers like the Apple
Store, are estimated to account for 51.4% of revenue in 2018. Products sold to retailers
include stereo systems for the home and automobiles, mobile devices and TVs, among
others. Sales to the consumer market have been supported by the introduction of new and
enhanced products, falling selling prices and growing household incomes. Since the products
produced by industry operators are often viewed as discretionary items that are not essential,
as household income rises, demand for industry products also increases. However, due to
rising demand from manufacturers and wholesalers, IBISWorld estimates that this category
has decreased as a percentage of industry revenue in comparison.

Wholesalers

Consumer electronics products are primarily sold to wholesalers. Wholesalers typically sell
products to businesses, such as retailers or manufacturers, and are estimated to account for
30.5% of total revenue. Despite manufacturers selling their products directly to retailers,
IBISWorld expects wholesalers to have increased their percentage of industry revenue.
Importantly, the increasingly complex global supply chain for consumer electronics has
facilitated the increase in distributors' significance in industry operations. Moreover, as
consumer brands gain a worldwide client base, distributors are the single most effective
means of penetrating new markets.

Manufactures and dealers

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Industry operators can also sell their products directly to manufacturers, such as automobile,
boat and airplane manufacturers and dealerships. In 2018, this segment is expected to
account for the remaining 18.1% of revenue. Products sold to this segment are used as inputs
into other items such as cars or airplanes. The motor vehicle market has experienced
increasing consumer demand for information and entertainment systems in automobiles due
to their ease of use and potential to increase safety of vehicles. Additionally, industry
products, such as interactive consoles in seats on airplanes, are used by airplane
manufactures as well. Industry operators may choose to sell their products directly to this
segment or sell their products to wholesalers, which in turn sell to downstream
manufacturers and dealers. Rising demand for interactive information systems is expected to
increase this categories percentage of industry revenue.

International Trade

Exports in this industry are High and Steady

Imports in this industry are High and Steady

Industry trade is significant for the Global Consumer Electronics Manufacturing industry.
Trade accounts for an estimated 38.0% of revenue in 2018. During the period, industry trade
increased at an annualized rate of 1.3% to $507.5 billion, outpacing industry revenue growth
in general. Industry trade increased slightly as a percentage of revenue over the current
period because of increased consumer spending and the growing globalization of the
industry's supply chain.

China produces the most industry products for trade due to manufacturers' proximity to
downstream markets. Trade flows between countries have been promoted by the move of
production capacity from countries where manufacturing costs are high, to countries where
manufacturing costs are low. This trend, along with China's low wage and regulatory costs,
have promoted China as a producer of industry products. Some consumer electronics brand
owners that are located in advanced (high-cost) countries have shifted their own production
capacity to low-cost countries or have outsourced production to other manufacturers in low-
cost countries. This trend among brand owners means that intra-company trade represents a
significant proportion of trade flow. Still, these trade figures also take finished products into
consideration, which can skew the overall perspective of manufacturing exports. The most
prominent example would be the export of a completed iPhone, which can be based in either
China or the United States even though no actual production is undertaken in the United
States.

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Business Locations

Factors affecting the location of industry companies include the cost of production; proximity
to complimentary industries (e.g. semiconductor and electronics component manufacturing);
and historical factors, such as where major players have established their headquarters and
where they have links with countries that are major sources of demand.

Developed countries, which account for the majority of global demand for consumer
electronics, increasingly rely on imports to meet local demand. Often, the value of these
imports far exceeds the value of their total industry revenue. Although many major brand
owners are headquartered in developed countries, most of these companies have established
manufacturing capacity in low-cost countries or have outsourced production to companies
located in low-cost countries. This means that intracompany trade represents a significant
proportion of developed countries' imports of consumer electronics. The largest consumer
electronics companies in the world are located in Japan and South Korea, and these
companies have established plants in countries where labor costs are lower.

North Asia has been a significant beneficiary of outsourcing activity from the developed
world. This region currently accounts for an estimated 40.0% of total industry production.
Low-cost countries in the region, mainly China, are power houses of production for many
manufacturers. South East Asia is the second-largest origin of production capacity, with
21.7% of industry products manufactured in the region. Europe also plays a large role in
manufacturing industry-relevant goods. Although the individual countries in Europe only
produce a small amount of revenue, the large number of countries that make up the
European region boost its share of industry establishments to an estimated 14.0%.

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Competitive Landscape
Market Share Concentration

Concentration in this industry is Low

The top six companies in this industry are expected to account for less than 25.0% of industry
revenue in 2018, indicating a low level of market share concentration.

Industry concentration has been steady over the past five years due to countervailing trends.
On one hand, technological advancement has permitted an influx of new entrants into the
market, each offering affordable alternatives to the major brands. Conversely, the
proliferation of contract manufacturing has made entrance easier while also limiting market
share concentration since the major consumer electronics manufacturers outsource so much
of their production capabilities. Still, over the past five years, market share concentration has
increased slowly as smaller and contract manufacturers seek to expand their global presence.

Key Success Factors

IBISWorld identifies 250 Key Success Factors for a business. The most important for this
industry are:

Having contacts in key markets: Access to distributors and retailers is important as these
are the main sales channels for consumer electronics manufacturers.

Access to the latest available and most efficient technology and techniques: Access to
technological developments, through R&D and the development of strategic alliances, is
important for driving sales.

Establishment of brand names: Brand strength is an important basis of competition in the

industry.

Establishment of export markets: A focus on export markets can increase capacity

utilization, increase scale economies, reduce reliance on the domestic market (which may be
small) and reduce volatility in revenue.

Access to highly skilled workforce: Industry operators in this industry develop, produce and
supply complex components that are usually incorporated in complex end products.
Production of these components often requires complex production technologies and highly
skilled staff.

Undertaking technical research and development: The level of expenditure on, and quality
of, R&D within a company can be important as product life cycles tend to be short and
competition tends to be fierce.

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Cost Structure Benchmarks

Profit

This industry's net profit margin, measured as earnings before interest and tax, is estimated
to reach 6.9% in 2018, down marginally from 7.0% in 2013. Profit margins have remained
relatively steady over the past five years, mainly due to consistent revenue growth,
overcapacity, pressure on unit selling prices, restructuring charges. and the ubiquity of
contract manufacturers that generally have lower profit margins than original equipment
manufacturers. Accordingly, profit margins can vary significantly among companies and can
depend on the strength and competitive position of a company's products.

Purchases

As a percentage of revenue, the cost of materials is generally higher for contract

manufacturers than for brand owners' manufacturing operations due in part to contract
manufacturers receiving lower unit selling prices compared with brand owners, which add
more value to the product. Additionally, manufacturers with greater scale are likely to be in a
better position to negotiate with suppliers on price and may also be in a better position to
reduce unit transport costs.

Consumer electronics manufacturers use a wide variety of semiconductors, electromechanical

components and assemblies and raw materials, such as plastic resins and sheet metal.
Although there have been significant declines in the price of electronic components, the
resulting lower costs are generally passed on to customers in the form of lower prices.
Overall, purchase costs are estimated to account for 57.0% of revenue.

Labor

Labor costs represent a lower percentage of revenue for contract manufacturers than for
brand owners, partly due to average selling prices being lower. In addition, contract
manufacturers are likely to locate their production facilities in low-cost countries; labor costs
are lower for manufacturers in low-labor cost countries than for manufacturers in
economically developed countries. Overall labor costs have risen as a percentage of revenue
over the five years to 2018 from 9.5% in 2013 to 10.6% in 2018 despite the standardization of
components, improved supply chain management, the introduction of automation and the
transfer of production capacity from high-wage countries to low-wage countries. However,
due to the increasing complexity of the industry and constantly improving technology,
companies are obligated to employ well-educated and costly personnel to keep up with
technological trends, which is the primary catalyst for rising wage expenditures.

Other

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Other costs include depreciation (5.1% of revenue), rent and utilities (4.8%) and other costs
such as marketing, administration, warranty and distribution costs. Vertically integrated
companies in the TV market can have relatively high depreciation expenses due to the short
lifespan of some plants (such as panel manufacturing). Provision for warranties can be high
and is normally calculated based on the term of the warranty, sales volumes and past
experience of the levels of repairs or replacements.

Shifts in demand for consumer electronics can cause companies to incur abnormal expenses.
For example, product recalls and intellectual property rights litigation are among some of the
more substantial influencers of cost structure variations.

Basis of Competition

Competition in this industry is High and the trend is Steady

The Global Consumer Electronics Manufacturing industry competes on the basis of price,
brand recognition, innovation and international competition. Price is a major competitive
factor in the industry, as manufacturing and products innovations combined with low labor
costs, can often push down the cost of manufacture. Competition for market share is fierce

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among a large number of global players in video and audio markets and greater sales
volumes are key in driving down unit costs of production, due to the availability of
economies of scale and scope. The cost of production can vary by location due to variations
in the cost of labor and material inputs, exchange rates and the accessibility to cooperative
partners. Industry operators seek low-cost inputs and low-cost labor to keep their prices
competitive, often outsources and offshoring manufacturing activities to developing
economies while keeping research and development activities in developed economies.

Brand names can also be a competitive factor and can provide signals to consumers about
the perceived quality of a product. Established market players offer a wide range of products
and have gained greater market presence and product acceptance. Brand strength and
breadth of product lines can enable companies to extract higher prices. Most of the world's
largest consumer electronics companies have been shifting their focus to provide leading-
edge, stylish products that can be sold at a premium. Advertising can promote the attributes
of a product and perceptions of product quality, as well as promoting and building brand
awareness. In this way, digital advertising and a social media presence have also been crucial
in driving support for a brand. In addition, companies can gain sales and a competitive
advantage through effective and extensive distribution networks. Maximizing sales often
requires a strong network of distributors and dealers.

Product research and development (R&D) activities can improve existing products and enable
the introduction of new innovative products. Due to changes in customer demand, short
product life cycles and fierce competition in this industry, companies must regularly improve
existing products and successfully develop and introduce new products to remain or become
relevant to customers.

Barriers to Entry

Barriers to entry in this industry are High and Steady

This Global Consumer Electronics Manufacturing industry is estimated to have high barriers
to entry, the most significant of which include access to the latest technology and intellectual
property, the availability of capital, access to skilled employees and the dominance of existing
players with brand name recognition. Having access to the latest electronic technology can
be essential given that technological changes occur frequently in this industry. The
competitive nature of this industry can require significant investment in research and
development (R&D), which is more comfortably defrayed over a larger revenue base.
Additionally, industry participants often patent new technologies, which can create further
barriers.

Large incumbents benefit from economies of scale, which can lower unit costs of production
and put the operators in good positions to negotiate with suppliers of raw materials and
other inputs. Other benefits include high funds for sales, marketing, distribution and R&D. It

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can also be difficult for new players to attract highly skilled and talented employees due to
limited supply and competition from existing players for quality staff. The high level of
technologies embedded in products and production systems, along with the rapid change in
these technologies, often requires skilled staff in the areas of R&D, product development,
production and sales. Some large consumer electronics companies manufacture components
themselves or through joint ventures. This can provide competitive advantages by securing
supplies and providing first mover and technological opportunities.

Finally, the industry's capital intensity may serve as a disincentive for new companies to enter
the industry as capital investment can be risky due to the introduction of new product
technologies. Larger operators have more funds to invest in new technologies. Purchasers of
consumer electronics often focus on purchasing from well-known companies with strong
brand names and proven track records, making them better able to attract loyal and repeat
customers.

Nonetheless, contract manufacturing offers a viable method of industry participation. While

capital investments remain high, contract manufacturers can offer their services without
having to undertake significant R&D activity, thereby lessening their wage costs. Moreover,
as the global supply chain for consumer electronics gets increasingly globalized, evidenced
by the hundreds of suppliers in various countries that produce the Apple iPhone, contract
manufacturing services are increasingly popular. particularly in niches such as sub-assemblies,
screen development or lighting.

Industry Globalization

Globalization in this industry is High and the trend is Increasing

The Global Consumer Electronics Manufacturing industry has a high level of globalization, as
indicated by the level of international trade major players engage in. Most major consumer
electronics brand owners have significant overseas-based operations (including
manufacturing operations) as well as retail networks. Additionally, many brand owners
outsource at least part of their production requirements to companies in countries with low
labor and manufacturing costs. Some of the largest contract manufacturers of consumer
electronics have production facilities that are located outside the country of their head office
and often produce goods for multinational companies that dominate the industry.

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Major Companies

Hon Hai Precision Industry Co. Ltd.

Market Share: 8.30%
Brand Names: Bravia, Walkman

Hon Hai Precision Industry Co. Ltd., which trades as its more common moniker Foxconn
Technology Group (Foxconn), is a multinational contract manufacturer of electronics.
Headquartered in New Taipei, Taiwan, the company was founded in 1974 and employs more
than 1.0 million employees. Originally an electrical components manufacturer, Foxconn is
currently the world's largest contract manufacturer of electronics and is one of the largest
employers worldwide, resulting in its dominance in the global industry. Foxconn
manufactures major consumer electronics products from major companies including Apple,
Nintendo, Blackberry, Cisco, Alphabet, Intel, Microsoft, Toshiba, Xiaomi and Sony
Corporation, among others. The company is most well-known for its role in the production of
Apple's iPhone. In addition to contract manufacturing, the company expanded into product
development and sales support activities in 2000 through the creation of its subsidiary FIH
Mobile, although these operations are not considered relevant to the industry.

Foxconn has more than 30 manufacturing plants worldwide, with a special emphasis on the
East Asia region. Indeed, 12 of these factories are in China alone, with Foxconn's largest
factory in Shenzen. Other prominent factories are located in Malaysia, Japan, Vietnam and
South Korea. Foxconn's South American presence is centralized in Brazil while its European
locations are in Hungary, the Czech Republic and Slovakia. In the Middle East, the company
has a location in Turkey. In North America, Foxconn operates four manufacturing facilities in
Mexico and has announced the construction of a US facility in late 2017.

Financial performance

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Over the five years to 2018, Foxconn's industry-relevant revenue is projected to grow at an
annualized rate of 4.5% to reach $110.4 billion. Importantly, the company grew strongly in
2017, catalyzed in part by the acquisition of Microsoft Mobile's phone business, which
included a manufacturing facility in Vietnam. Meanwhile, since Foxconn's largest customer is
Apple, the company overall grew 8.0% that year from peak iPhone production, incorporating
automation machinery more fluidly into its production process to bolster increased volume.
Moreover, since the company reports its financial performance in New Taiwan dollars, the
value of the currency served to boost performance that year as well, compounding these
other positive factors. The estimated 14.4% jump in 2017 more than offset a 4.2% decline in
industry-relevant revenue the previous year. Furthermore, alongside increased automation
and growing economies of scale, profit margins improved as well, rising from 2.8% in 2013 to
an estimated 3.9% in 2018.

Hon Hai Precision Industry Co. Ltd. (industry-relevant operations) - financial

performance*
Year Operating
Revenue Growth Growth
Profit
2014 93,724.5 N/C 3,185.4 N/C
2015 94,098.5 0.4 3,448.7 8.3
2016 87,916.7 -6.6 3,528.6 2.3
2017 105,638.9 20.2 4,104.4 16.3
2018 115,371.8 9.2 3,710.4 -9.6
2019 120,573.6 4.5 3,761.5 1.4
*Estimates (Figures are converted from TWD to USD)
SOURCE : Annual Report and IBISWorld

Samsung Electronics Co. Ltd.

Market Share: 6.50%

Samsung Electronics Company Ltd. (Samsung) is a South Korean company with a production
network spanning South Korea and China, as well as ancillary sites in India, the United States,
Southeast Asia, Eastern Europe and South America. The company's operations are split
among several different businesses, including consumer electronics, information technology
and mobile communications and device solutions. In the consumer electronics segment, the
company produces a variety of products including TVs, monitors, printers, air conditioners,
refrigerators, washing machines and medical devices. In 2016, the company experienced a
decline in the TV market, mainly due to the expiration of a trade agreement with the Mexican
government. At the same time, the company saw an increase in demand for high-resolution
and large-size TVs, marking a shift in consumer preference.

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Although the company's revenue generation has been on the decline, it has maintained its
dominant market position by producing consistently popular consumer goods. Alongside its
sizable TV operations in the consumer electronics segment, Samsung operates in the global
industry through its information technology and mobile communications segment. This
segment includes the production of mobile phones, communication systems and computers,
of which only the computers are not considered relevant to the industry. Widely popular
Samsung phones, primarily under the Galaxy banner, have contributed to the company's
dominance worldwide. While Samsung smartphones and tablets are constantly under threat
of competition, particularly from Apple's product line, its lower price point and versatility
through Android software has made it a consumer staple worldwide.

Financial performance

Over the five years to fiscal 2018 (year-end December 31), Samsung's industry-relevant
revenue is expected to decline at an annualized rate of 4.1% to $87.0 billion. This decline was
primarily facilitated by the decrease in price of many consumer electronics and was further
compounded by the valuation of the Korean Won, since Samsung reports its financial
information in KRW. Furthermore, while the information technology and mobile
communications segment was relatively stagnant during the current period, the company's
consumer electronics segment declined profoundly by nearly 10.0% between 2013 and 2017.
At the same time, profit margins have been declining as well, but this decline in operating
income was more apparent in the information technology and mobile communications
segment compared with the consumer electronics segment, which also experienced declining
operating income during the same period.

Samsung Electronics Co. Ltd. (industry-relevant operations) - financial

performance*
Year Operating
Revenue Growth Growth
Profit
2014 94,323.5 N/C 9,833.2 N/C
2015 81,527.1 -13.6 6,581.6 -33.1
2016 76,838.3 -5.8 7,482.7 13.7
2017 82,635.2 7.5 7,772.2 3.9
2018 80,115.9 -3.0 7,080.9 -8.9
2019 76,982.7 -3.9 7,156.3 1.1
*Estimates (Figures are converted from KRW to USD)
SOURCE : Annual Report and IBISWorld

Huawei Technologies Co., Ltd.

Market Share:3.60%

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Huawei Technologies Co. Ltd. (Huawei) is a Chinese multinational telecommunications

equipment and services company that is most well-known for its line of Mate smartphones
(previously Ascend). Headquartered in Guangdong, China, the company was founded in 1987
and employs nearly 200,000 people. Huawei has been one of the leading smartphone
manufacturers in the world, surpassing Apple in 2017 to become the second-largest
manufacturer by volume. The company has expanded strongly during the past decade due to
numerous partnerships with prominent telecommunications companies such as Vodafone,
Motorola, T-Mobile, Cox Communications and Bell Canada, among others. Huawei offers
various telecommunications networks and engineering services for these networks alongside
its devices division, which produces its industry-relevant smartphones and tablets. The
company is segmented into its carrier business, enterprise business, consumer business and
other, of which the consumer segment is considered relevant to the industry. With a majority
of revenue derived from China followed by Europe, the Middle East and Africa, these two
regions comprise the bulk of the company's revenue, with these two areas representing
nearly 80.0% of the total. IBISWorld expects industry-relevant revenue to reach $47.9 billion
in 2018, representing a 3.6% market share.

Sony Corporation
Market Share:2.30%

Japan-based Sony Corporation (Sony) develops, designs, manufactures and sells various
kinds of electronic equipment, instruments and devices for consumer, professional and
industrial markets. Primarily manufacturing in Asia, Sony also hires third-party contract
manufacturers for certain products. Sony reports its revenue under the following segments:
mobile communications, games and networking services, imaging products and solutions,
home entertainment and sound, pictures, music, financial services and others. The company's
home entertainment and sound segment sells TVs, including LCD TVs, and audio and video
products, including home audio, Blu-ray disc players and recorders and memory-based
portable audio devices. Also relevant to the industry, the company's games and networking
services segment produces the Sony PlayStation hardware and the imaging products and
solutions include camera production. In 2012, Sony acquired Ericsson's 50.0% equity interest
in Sony Ericsson, making it a wholly owned subsidiary of Sony, and renamed it Sony Mobile
Communications. Sales from Sony Mobile Communications are also included in industry
revenue and the acquisition marks the continued convergence between the company's
mobile phone business and its consumer electronic business as the company seeks to
improve its portfolio of network-capable devices such as TVs. In 2018, IBISWorld expects
Sony to generate $31.1 billion in industry-relevant sales, which represents a decline from
2013 due to decreasing prices of consumer electronics, increasing competition from other
companies and a significant decrease in LCD TV unit sales.

LG Electronics Inc.
Market Share:2.10%

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LG Electronics Inc. (LGE), a South Korean company, designs and manufactures consumer
electronics, mobile communications and home appliances. LGE is composed of five business
units: home entertainment, mobile communications, home appliance and air solution, vehicle
components and LG Innotek Co. Ltd, of which the home entertainment and mobile
communications segments are considered relevant to the industry. The company's greatest
industry-relevant successes include flat-panel TVs and mobile devices. LGE's home
entertainment segment, which accounted for slightly more than 30.0% of revenue in 2017,
manufactures and supplies liquid crystal display and plasma TVs, home theater systems, Blu-
ray disc players, audio systems, projectors, PCs and optical storage. LGE's vehicle components
company produces high-quality in-car infotainment systems. Over the five years to 2018, the
company experienced declining sales for its home entertainment products. In 2014, the
company discontinued its plasma display panel TV operations to focus on other types of TVs
such as organic light-emitting diode (OLED) TVs. In 2017, the company's LG E7 OLED 4k Ultra
HD TV was crowned "2017 King of TV" at the Annual CE Week TV Shootout competition. The
competition is an annual event that demonstrates flagship TVs from leading manufacturers
against one another to identify the best. The company also unveiled the world's first 65-inch
class OLED Wallpaper Hotel TV, which combines hotel TV technology with the sleek design
and image quality of the competition winning TV. The mobile communications segment is
much smaller in comparison, but is primarily geared toward the production and sale of
smartphones and mobile devices such as tablets. Mobile communications revenue has
fluctuated wildly, ultimately representing a small decline when comparing 2013 to 2017
(latest data available). In 2018, IBISWorld expects the company's industry-relevant revenue to
grow to $27.7 billion.

Pegatron Corporation
Market Share:1.10%

Based in Taipei, Taiwan, Pegatron Corporation is a contract manufacturer of myriad

electronics products, primarily within the computing, communications and consumer
electronics areas. Pegatron also produces its own computer peripherals and components,
although these products are not considered within the realm of industry operations and are
therefore omitted from estimates for this industry. The company partners with several
consumer brands, most notably Apple. As a contract manufacturer, Pegatron is dependent on
other companies that research and develop new products, despite having its own design and
engineering capabilities. The company's two primary subsidiaries include Unihan Corporation,
which was part of the restructuring of ASUSTek Computer in 2007, when Pegatron acquired
it, and ASRock, which is a manufacturer of motherboards and personal computers. Pegatron
is currently one of the largest contract manufacturers in the world and is expected to
generate an estimated $14.7 billion in industry-relevant revenue in 2018.

Provided to: University of Western Ontario (2130358746) | 12 November 2019

August 2019 Global Consumer Electronics Manufacturing
34

Operating Conditions
Capital Intensity

The level of capital intensity is High

The Global Consumer Electronics Manufacturing industry is characterized by a substantial

requisite capital investment as industry operators continuously automate their production
processes. IBISWorld estimates that for every dollar spent on wages, $0.48 is spent on capital
investments, indicating a shift in the labor intensiveness of manufacturing industry products.
The rate of technological change within the industry is high and increasing, therefore
significant investment in capital is expected to continue. Although significant labor
investments must be made for research and development (R&D) and innovation in the
industry, most manufacturing activities take place in low labor cost countries. This is further
compounded by the omnipresence of contract manufacturers which often offer lower wage
costs through automation, often in regions that already have relatively low wage costs.

Technology & Systems

The level of technology change is High

A high level indicates that there are fast-paced technology changes compared to the overall
economy.

A medium level indicates that there are moderately-paced technology changes compared to
the overall economy.

A low level indicates that technology is stable compared to the overall economy.

Revenue Volatility

The level of volatility is Medium

Over the past five years, revenue patterns indicated a moderate level of volatility. Sales
volumes are affected by economic conditions, the penetration rate of existing products, the
rate of acceptance of new products and unit selling prices. Selling prices are also volatile and
can fall rapidly. The level of technological innovation in this industry influences the rate of
new product introductions as well as manufacturing costs. Nonetheless, volatility in revenue
can be softened due to the industry's nature of supplying a wide range of products, new
products and products into new emerging markets. Most products are also produced across
several price points, diversifying influencing factors that could affect revenue volatility. All in
all, revenue is expected to fluctuate 3.9% annually during the current period, connoting a
moderate level of volatility.

Provided to: University of Western Ontario (2130358746) | 12 November 2019

August 2019 Global Consumer Electronics Manufacturing
35

Regulation & Policy

The level of regulation is Medium and the trend is Increasing

The industry is not highly regulated, though manufacturers and suppliers can be subject to
regulation by various government agencies, particularly for producers that export their
goods. Regulations vary by country but tend to focus on intellectual property rights (e.g.
patent laws), product safety, labeling, consumer protection, waste disposal (including of
hazardous waste), energy consumption and the environment. In many countries, consumer
product safety laws can enable government agencies to promulgate standards, ban certain
consumer goods and issue product recalls.

An exemplar of these regulatory strategies is the European Commission's Waste Electrical and
Electronic Equipment (WEEE) Directive, which aims to minimize the impact of electrical and
electronic goods on the environment by increasing the reuse and recycling of these goods,
reducing the amount going to landfill. The directive seeks to achieve this by making
producers responsible for financing the collection, treatment and recovery of goods and by
obliging distributors to enable customers to return their waste equipment free of charge.
Individual European Commission member countries have passed laws implementing the
WEEE Directive. Likewise, the European Commission's Restriction of Hazardous Substances is
a directive that went into effect in July 2006. This directive restricts the use of six hazardous
materials, such as lead and mercury, in the manufacture of various types of electronics and
electronics equipment. The 2016 standards sets limits for 10 materials.

Moreover, many countries have rules and regulations pertaining to internet-enabled devices
such as smartphones and mobile tablets which industry operators produce. These rules are
primarily concerned with consumer privacy and data collection. These rules vary by country
but most often take the form of a standard set of terms and conditions a consumer must
agree to prior to the purchase and use of a mobile device. Still, most of these agreements are
based on the software in use and do not necessarily affect all manufacturers that use other
software for their products such as Samsung, which produces smartphones that operate
using Alphabet Inc.'s Android operating system.

There are numerous bodies involved in setting consumer electronics standards and platforms
outside of government, including the Institute of Electrical and Electronic Engineers, the
Consumer Electronics Association, the DVD Forum and the Digital Video Broadcasting
Project. Many companies obtain certification by the International Standards Organization to
the requirements of ISO 9001. This includes the design, manufacture and service of consumer
electronics products.

Industry Assistance

The level of industry assistance is Medium and the trend is Steady

Provided to: University of Western Ontario (2130358746) | 12 November 2019

August 2019 Global Consumer Electronics Manufacturing
36

Import tariffs for consumer electronics vary by country, but tend to be low in most advanced
countries due to their ubiquity and widespread dependency on items such as cellular and
smart phones. In many countries, governments promote local electronics manufacturers
through direct and indirect support, such as favored treatment in government procurement
and access to technologies developed in state research and development (R&D) institutions.
However, since most consumer electronics manufacturing is centralizing in East Asia, these
initiatives are not always feasible without a substantial manufacturing sector in the country.

Some countries, like Malaysia, offer a wide range of incentives to encourage foreign
investment in manufacturing activities. Incentives can include tariff-related incentives
(including free trade zones), income tax "holidays," investment tax allowances and building
allowances. Many countries in Asia have introduced free trade zones. Similarly, the Brazilian
government created the Manaus Free Trade Zone in 1967 and is approved until 2023. The
zone provides tax exemptions for imported products used for consumption, re-exportation or
trade inside the zone, exemptions for exports, reduced corporate taxes and other incentives.

Increasingly, many governments have also pushed environmentally conscious purchasing

initiatives. For example, the Chinese government purchases consumer electronics and other
goods not relevant to the industry at a fraction of their retail price, as long as they are
compliant with contemporary environmental standards and regulations. Likewise, The
European Union has similar policies in place for government procurement strategies. These
strategies are meant to simultaneously encourage domestic production while also catalyzing
a shift in environmentally conscious consumer goods.

Outside of government, industry operators can also seek assistance from numerous trade
organizations. For example, the Consumer Technology Association provides market research.
enterprise resources, networking opportunities and advocacy services for industry operators
worldwide. Other prominent organizations include the Consumer Electronics Association, the
European Association of Consumer Electronics Manufacturers, the Association of Electronics
Industries in Singapore and many other national and regional bodies.

Provided to: University of Western Ontario (2130358746) | 12 November 2019

August 2019 Global Consumer Electronics Manufacturing
37

Key Statistics
Industry Data
Number Global
Industry Industr Number of Domesti
of Employmen Export Import Total Consume
Turnove y Gross Establishment c
Enterprise t s s Wages r
r Product s Demand
s Spending
($
($ ($ ($ ($ billion ($ ($
billion) billion) (Units) (Units) (People) billion) billion) ) billion) trillion)

200
538.00 151.30 7264.00 2707.00 3341335.00 259.30 259.30 91.40 538.00 32.43
4

200
577.60 164.10 7284.00 2716.00 3524868.00 289.30 289.30 92.40 577.60 33.67
5

200
646.60 166.10 7367.00 2678.00 3720449.00 338.30 338.30 89.20 646.60 34.87
6

200
688.90 161.60 7722.00 2814.00 4036428.00 373.80 373.80 82.00 688.90 36.29
7

200
717.70 152.00 7880.00 2864.00 4279251.00 396.70 396.70 74.40 717.70 36.85
8

200
618.50 115.80 7902.00 2829.00 4350419.00 332.20 332.20 61.70 618.50 36.76
9

201
726.90 165.70 7851.00 2827.00 4579769.00 405.80 405.80 60.10 726.90 37.90
0

201
920.10 199.80 8090.00 2837.00 6483737.00 441.20 441.20 69.60 920.10 38.97
1

201
1150.80 210.70 8319.00 2892.00 10669123.00 447.70 447.70 99.70 1150.80 39.86
2

201
1261.70 263.80 8470.00 2913.00 13173920.00 476.90 476.90 119.90 1261.70 40.84
3

201
1326.30 299.90 8721.00 2981.00 14473438.00 491.00 491.00 131.60 1326.30 41.86
4

201
1327.60 275.20 8818.00 2981.00 15188685.00 476.40 476.40 140.70 1327.60 42.86
5

201
1279.20 284.30 8916.00 2994.00 14154566.00 472.10 472.10 132.10 1279.20 43.57
6

201
1299.60 287.50 8892.00 2982.00 14438328.00 490.00 490.00 134.80 1299.60 45.14
7

201
1334.40 301.00 9072.00 3039.00 15135086.00 507.50 507.50 141.10 1334.40 46.78
8

201
1371.20 312.90 9269.00 3101.00 15866125.00 521.70 521.70 147.80 1371.20 48.46
9

202
1407.70 324.00 9464.00 3164.00 16628793.00 539.10 539.10 154.60 1407.70 50.18
0

Provided to: University of Western Ontario (2130358746) | 12 November 2019

August 2019 Global Consumer Electronics Manufacturing
38

202
1444.10 334.80 9639.00 3217.00 17383215.00 556.30 556.30 161.40 1444.10 51.91
1

202
1483.30 346.10 9844.00 3284.00 18218901.00 573.30 573.30 168.90 1483.30 54.01
2

202
1524.80 358.80 10050.00 3348.00 19095018.00 591.20 591.20 176.90 1524.80 56.34
3

202
1568.00 371.80 10296.00 3427.00 20034901.00 609.90 609.90 185.30 1568.00 58.91
4

Annual Change
Number Global
Industry Industr Number of Total Domesti
of Employmen Export Import Consume
Turnove y Gross Establishment Wage c
Enterprise t s s r
r Product s s Demand
s Spending
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)

200
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
4

200
7.36 8.46 0.27 0.33 5.49 11.56 11.56 1.09 7.36 3.81
5

200
11.94 1.21 1.13 -1.40 5.54 16.93 16.93 -3.47 11.95 3.57
6

200
6.54 -2.71 4.81 5.07 8.49 10.49 10.49 -8.08 6.54 4.07
7

200
4.18 -5.95 2.04 1.77 6.01 6.12 6.12 -9.27 4.18 1.55
8

200
-13.83 -23.82 0.27 -1.23 1.66 -16.26 -16.26 -17.07 -13.82 -0.25
9

201
17.52 43.09 -0.65 -0.08 5.27 22.15 22.15 -2.60 17.53 3.07
0

201
26.57 20.57 3.04 0.35 41.57 8.72 8.72 15.80 26.58 2.84
1

201
25.07 5.45 2.83 1.93 64.55 1.47 1.47 43.24 25.07 2.27
2

201
9.63 25.20 1.81 0.72 23.47 6.52 6.52 20.26 9.64 2.46
3

201
5.12 13.68 2.96 2.33 9.86 2.95 2.95 9.75 5.12 2.48
4

201
0.09 -8.24 1.11 0.00 4.94 -2.98 -2.98 6.91 0.10 2.39
5

201
-3.65 3.30 1.11 0.43 -6.81 -0.91 -0.91 -6.12 -3.65 1.66
6

201
1.59 1.12 -0.27 -0.41 2.00 3.79 3.79 2.04 1.59 3.58
7

201
2.67 4.69 2.02 1.91 4.82 3.57 3.57 4.67 2.68 3.64
8

Provided to: University of Western Ontario (2130358746) | 12 November 2019

August 2019 Global Consumer Electronics Manufacturing
39

201
2.75 3.95 2.17 2.04 4.83 2.79 2.79 4.74 2.76 3.58
9

202
2.66 3.54 2.10 2.03 4.80 3.33 3.33 4.60 2.66 3.54
0

202
2.58 3.33 1.84 1.67 4.53 3.19 3.19 4.39 2.59 3.45
1

202
2.71 3.37 2.12 2.08 4.80 3.05 3.05 4.64 2.71 4.03
2

202
2.79 3.66 2.09 1.94 4.80 3.12 3.12 4.73 2.80 4.32
3

202
2.83 3.62 2.44 2.35 4.92 3.16 3.16 4.74 2.83 4.56
4

Key Ratios
IVA/ Imports/ Exports/ Revenue/ Wages/ Employees/ Wages/
Revenue Demand Revenue Employee Revenue Establishment Employee
(%) (%) (%) ($'000) (%) ($)

2004 28.12 48197.03 48.20 161.01 16.99 459.99 27354.34

2005 28.41 50086.57 50.09 163.86 16.00 483.92 26213.75

2006 25.69 52319.83 52.32 173.80 13.80 505.02 23975.60

2007 23.46 54260.42 54.26 170.67 11.90 522.72 20314.99

2008 21.18 55273.79 55.27 167.72 10.37 543.05 17386.22

2009 18.72 53710.59 53.71 142.17 9.98 550.55 14182.54

2010 22.80 55826.11 55.83 158.72 8.27 583.34 13122.93

2011 21.72 47951.31 47.95 141.91 7.56 801.45 10734.55

2012 18.31 38903.37 38.90 107.86 8.66 1282.50 9344.72

2013 20.91 37798.21 37.80 95.77 9.50 1555.36 9101.32

2014 22.61 37020.28 37.02 91.64 9.92 1659.61 9092.52

2015 20.73 35884.30 35.88 87.41 10.60 1722.46 9263.47

2016 22.22 36905.88 36.91 90.37 10.33 1587.55 9332.68

2017 22.12 37703.91 37.70 90.01 10.37 1623.74 9336.26

2018 22.56 38032.07 38.03 88.17 10.57 1668.33 9322.71

2019 22.82 38046.97 38.05 86.42 10.78 1711.74 9315.44

2020 23.02 38296.51 38.30 84.65 10.98 1757.06 9297.13

2021 23.18 38522.26 38.52 83.07 11.18 1803.43 9284.82

2022 23.33 38650.31 38.65 81.42 11.39 1850.76 9270.59

2023 23.53 38772.30 38.77 79.85 11.60 1900.00 9264.20

2024 23.71 38896.68 38.90 78.26 11.82 1945.89 9248.86

Figures are inflation adjusted 2018 US dollars

Provided to: University of Western Ontario (2130358746) | 12 November 2019

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