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Consumers Still Buying Consumer Electronics in a Down Economy

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Recession, Lower Price Points Present Revenue Challenges for Industry, CEA Forecast Finds

Consumers continue to buy technology products to improve their lives, although the consumer electronics (CE) industry will see overall shipment revenues decline in 2009, according to new data released today by the Consumer Electronics Association (CEA). The semi-annual U.S. Consumer Electronics Sales and Forecast shows that industry revenues will contract to $165 billion in 2009 but grow slightly in 2010.

The consumer electronics industry will see shipment revenues fall 7.7 percent, to $165 billion this year, the first decline since 2001. While consumer demand for CE products remains high, several market forces are contributing to lower revenues, including lower consumer spending, price declines and compositional shifts in key product categories. As consumer confidence rebuilds, industry revenues will grow, albeit at a pace of less than one percent in 2010. CEA’s forecast projects industry revenues will bottom out by the second half of 2009, although many risk factors remain causing industry growth to remain muted.

The CE industry continues to hold up favorably compared with other industries. Most recessions are marked by steep declines in durable goods purchases as individuals defer discretionary purchases that can be pushed into the future. Despite the worst recession since the Great Depression, CE spending as a percentage of all durable goods is as high as it has been in 50 years. Vehicle sales are down 40 percent since the recession began in the fourth quarter of 2007, according to Autodata Corporation, and existing home sales are down 34 percent from their peak in August 2005, according to the National Association of Realtors.

“The CE industry is not impervious to the economic downturn but remains resilient compared to other industries,” said CEA President and CEO Gary Shapiro. “Through innovation and global access to consumers and open markets, technology companies will restore economic growth and prosperity. American consumers continue to purchase CE products despite cutting back in many areas, showing that consumer electronics are vital to everyday life in this country.”

Digital displays continue to be the primary revenue driver for the industry, comprising 15 percent of overall industry sales. Unit shipments of displays remain robust, projected to be up eight percent in 2009. LCDs remain the display of choice for consumers with unit volumes jumping 24 percent. Lower price points and an increase in consumer demand for mid-size displays are reducing revenue. TV display shipment revenues are expected to drop six percent this year to $24 billion.

One year after emerging as the next-generation DVD format of choice, Blu-ray players are poised for growth in 2009. Unit shipments of Blu-ray players will jump 112 percent this year, reaching nearly six million. Even as prices drop, revenues are expected to top one billion dollars, an increase of 48 percent over 2008.

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Continued innovation in the smartphone category is leading to high consumer demand and increased shipment revenues. Smartphone shipment revenues will increase almost three percent in 2009, to nearly $14 billion, despite declines in average unit prices. Smartphones will account for one in four total handset sales this year as consumers continue to seek devices capable of Internet access, navigation and media playback while on the go.

CEA’s updated sales and forecast also shows netbook momentum is building within the PC category. Unit shipments are forecasted to nearly double in 2009, rising 85 percent, to eight and a half million units. Even as more consumers opt for lower-priced netbooks, the category will reach $3.4 billion in revenue in 2009.

“Consumers continue to buy CE products at high rates, showing that CE is a must-have even during the darkest of economic times,” said Steve Koenig, CEA director of industry analysis. “Notably, consumers are buying CE products that fit today’s budget, like mid-sized displays, netbooks and private label products. Some categories, such as digital cameras, Mp3 players and video game consoles, have reached maturation as most American homes now include such devices.”

U.S. Consumer Electronics Sales and Forecasts 2005-2010 (July 2009) is published twice a year, in January and July. It was designed and formulated by CEA, the most comprehensive source of sales data, forecasts, consumer research and historical trends for the consumer electronics industry. Please cite any information to the Consumer Electronics Association (CEA). The complete report is available free to CEA member companies. Non-members may purchase the study for $2,000 exclusively at mycea.CE.org.

About CEA:
The Consumer Electronics Association (CEA) is the preeminent trade association promoting growth in the $165 billion U.S. consumer electronics industry. More than 2,000 companies enjoy the benefits of CEA membership, including legislative advocacy, market research, technical training and education, industry promotion and the fostering of business and strategic relationships. CEA also sponsors and manages the International CES — Where Entertainment, Technology and Business Converge. All profits from CES are reinvested into CEA’s industry services.

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