San Mateo, Calif. – A fierce battle is brewing for consumer-electronics dollars this holiday season as two new video-game consoles join the widening mix of TVs, cameras, portable music players, computers and cellphones.
But some market watchers say the electronics industry could be running up against a season that’s more ho- hum than ho-ho.
Analysts predict revenues are slowing for several reasons: prices for a range of products, most notably flat-panel TVs, have dropped significantly; hits of previous years, such as digital cameras, are maturing; supplies of the new game systems are limited; and no other new blockbuster products seem to have emerged.
While mainstays such as TVs, Apple’s iPods and laptops will still fuel sales, there appears to be little on the horizon to trigger a repeat of the revenue growth of recent years.
A sobering forecast looms for 2007 as well. “I call it the storm before the storm,” Chris Crotty, a senior consumer-electronics analyst at market researcher iSuppli Corp., said of the holiday quarter. “There is more competition. There are more products out there, and it’s only going to get worse.”
All of that could translate to better bargains for consumers but less money for gadget makers.
After three years of rising revenue growth driven by robust sales of digital cameras, the iPod phenomenon, and faster-than-expected adoption of pricey flat-panel TVs, the Consumer Electronics Association is predicting lower growth rates beginning this year.
The industry saw U.S. revenues rise by 7 percent in 2003 and more than 10 percent in both 2004 and 2005, according to the industry trade group. This year, sales are expected to grow 9 percent, to $140 billion, then only 6.7 percent to $149.3 billion in 2007.
Worldwide electronics sales data from iSuppli, which doesn’t include computers or cellphones, also suggest growth has peaked for the industry. Revenue climbed 9 percent in 2003 to $234 billion, almost 12 percent to $261 billion in 2004, then up 13 percent to $295 billion in 2005. For 2006, iSuppli predicts only a 2.4 percent growth.
The gotta-have-it early adopters of technology helped propel the revenue boom of the past few years. But now, analysts say, electronics companies are facing a second and more challenging wave of consumers who may want the new gizmos but are willing to wait for prices to come down.
