The world's love of smartphones and tablets has seen revenue from the market overtake that of consumer electronics

Gadget market overtakes consumer electronics

Smartphone and tablet revenue will exceed that of the entire consumer electronics market this year for the first time.

Worldwide original equipment manufacturer (OEM) factory revenue for media and PC tablets and for 3G/4G mobile phones – a category dominated by smartphones – will amount to $354.3bn (£218.9bn) in 2013, according to the Application Market Forecast Tool from business information firm IHS.

This will be 3 per cent more than the $344.4bn for OEM factory revenue for the consumer electronics (CE) market, a broad category including hundreds of products from televisions, to audio equipment, cameras and camcorders, video game consoles and home appliances.

The market has historically dwarfed the tablet and smartphone segment, with CE 30 per cent larger just last year.

"Consumer demand for smartphones and tablets has been flourishing in the past few years while sales growth for CE products has languished in the doldrums,” said Randy Lawson, senior principal analyst for semiconductors at IHS.

“The fact that these two product categories are on their own able to generate more OEM factory revenue than the entire CE market illustrates the overwhelming popularity of smartphones and tablets. Meanwhile, the CE market has gone flat, with many of the major product types experiencing either low growth or declines in revenue during the past six years.”

OEM factory revenue in the smartphone and tablet market has expanded by a factor of nearly nine from $41.2bn in 2007. Revenue this year will rise by a robust 31 per cent, but the fast pace of growth is slowing with revenue in 2014 predicted to increase by only 18 per cent to reach $418.6bn.

But with CE factory revenue declining in 2014, smartphones and tablets will expand their revenue lead dramatically, rising to a 22.2 per cent advantage compared to the entire consumer electronics market. This gap will continue to widen and will reach nearly 35 per cent in 2017.

“Consumers simply are finding more value in the versatility and usefulness of smartphones and tablets, which now serve as the go-to devices for everything from phone calls, to photography, to navigation, to media playback, to fitness tracking,” said Lawson.

“Because of this, smart mobile platforms are displacing sales of CE products such as digital still cameras, camcorders, GPS and media players.”

Consumer electronics OEM factory revenue has been flat during the past few years, growing by slightly less than 1 per cent from 2007 to 2013.

Of the 20 distinct CE product segments tracked by IHS, 14 will suffer a decline in their compound annual growth rates (CAGR) from 2007 through 2013.

Some large product segments like LCD TVs are seeing growth in their revenue during that period. Even so, the CAGR for LCD TVs will be less than 10 per cent, representing a major slowdown from the 83 per cent rise seen during the previous six-year period from 2001 through 2007 – the era of the global flat-panel TV replacement wave.

With LCD TV revenue starting to decline in 2014, the overall CE market is set for a long-term contraction as well. By the end of 2017, CE OEM factory revenue is expected to slide to $327bn, down 5 per cent from the total in 2013.

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