Boston, MA -- (ReleaseWire) -- 05/01/2014 -- Hong Kong is home to a vibrant consumer electronics market due to high incomes and strong demand for the latest products among local consumers. However, spending growth on consumer electronics devices slowed in 2012 and 2013 due to a combination of a weaker economic environment, price erosion and high penetration of devices in key markets. While growth rates will necessarily underperform emerging markets in APAC due to high penetration, short replacement cycles in key product categories such as smartphones and tablets will ensure spending growth remains positive over the medium term. There is, however, downside risk to this outlook from a hard-landing in China, or from the negative wealth effect of any cooling in property prices that would hit consumer confidence.
Headline Expenditure Projections
Computer Hardware Sales: US$1.78bn in 2013 to US$1.86bn in 2014, up 4.4%. Tablet demand is driving unit sales, but with price erosion due to competition from Android vendors increases in market value are failing to keep pace.
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AV Sales: US$1.33bn in 2013 to US$1.4bn in 2014, up 4.8%. After a contraction in 2013 due to digital camera and mp3 unit cannibalisation by smartphones, as well as price erosion in the TV market, we expect a return to growth in 2014 as the camera and mp3 markets stabilise and emerging OLED and 4K TV sets trigger upgrades.
Handset Sales: US$2.44bn in 2013 to US$2.63bn in 2014, up 7.8% as upgrades and replacement of highend smartphones drive sales growth.
Key Trends & Developments
- The smartphone market in Hong Kong is one of the most mature in the region, and globally. As such it has passed through the period of rapidly increasing volumes, but the market nonetheless remains lucrative for vendors due to the short replacement cycles in Hong Kong. There is, however, a shift under way in the market, which could challenge the market leader Samsung, as well as Apple. Mainland Chinese vendors such as Huawei, Lenovo and Xiaomi are undertaking international expansion strategies, with Hong Kong an early market in their plans. The initial signs are they could capture share and intensify the dynamic of price erosion. For instance, in December 2013 Xiaomi held its first flash sale in Hong Kong, selling 10,000 budget Hongmi smartphones in 36 seconds, with each handset retailing around US$130.
- The AV market contracted in 2013, but we believe vendor promotions of new technologies such as 3D, Ultra-HD (4K and OLED) and internet-enabled TV should drive demand higher. To maintain or increase sales volumes, vendors will focus on product innovation, with drivers including improved display quality and wider screens, as well as design and features such as wireless technology.
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