By Moody's Investors Service | 2013-1-21 | NEWSPAPER EDITION
WE maintain our negative outlook for the Asian consumer electronics industry because of weak demand and structural challenges. Weak economic recovery will continue to weigh on sales. Sales of consumer electronics products will remain negative or flat in Europe, the US and Japan, which comprise approximately 50 percent of total global sales.
Japanese companies will be more affected than their South Korean peers because they are more concentrated in these mature, slow growth markets.
In China, which accounts for about 15 percent of global sales, monthly sales growth of about 10 percent to15 percent on a year-on-year basis will probably continue until the end of May 2013, thanks to the introduction of a new year-long subsidy program in June 2012 for the purchase of energy-efficient consumer electronics products.
However, we expect that sales growth will slow to a single-digit percentage level when the program ends, also considering our expectation that the more modest pace of GDP growth in 2012 will continue in 2013. The single-digit growth will continue over the medium term, given the country's economic growth and relatively low penetration rate of consumer electronics products.
Demand for digital audio-visual products stays weak while fierce competition continues. Revenues from major products such as flat panel display TVs will not grow because of increased penetration and continued price declines. The growing presence of Chinese manufacturers will intensify competition, further weakening the position of Japanese manufacturers which are struggling with high cost structures and a lack of product differentiation.
Smartphones buck the overall trend. Samsung Electronics Co Ltd will maintain its leading market position and earnings growth in smartphones because it has a proven track record of launching products ahead of its competitors and is the market leader in devices used in smartphones.
However, Samsung's increasing reliance on booming sales of smartphones and key devices could be a longer-term challenge. Rapid technological changes and fierce competition could dramatically change the landscape in the future, although we do not expect such a change in the coming 12 to 18 months.
The article is part of a Moody's Investors Service report written by analysts Annalisa Di Chiara, Yoshio Takahashi, and Roxane Tsang in Hong Kong, and Richard Bittenbender in Tokyo. The opinions are their own.