Consumer Electronics

The major Asian consumer electronics companies have now reported their numbers for the first quarter, and industry data for most of the major areas are available. The results, as expected, are not good, with very few growth areas in dollar terms.

Canon's (CAJ - Analyst Report) revenue was down 32% year over year (Y/Y). Sony's (SNE - Analyst Report) revenue declined by 22% and Panasonic (PC - Analyst Report) was down by 14.5% The weak US dollar had a significant impact on results since the US is the largest revenue block in the world (China consumes more units, but prices are much lower). The average US household spent $1,229 on consumer electronics in 2008, a drop of 12.5% from 2007. All consumer electronics companies had a significant decline in gross margins.

The cellular phone market is stagnant, except for smartphones. This is a positive for Apple (AAPL - Analyst Report), which does not sell low-end phones. Compact digital cameras are down (bad for Panasonic) but high end digital SLRs are a good and growing market for Canon. However, Canon was impacted by the poor market for laser printers, as was Hewlett-Packard (HPQ - Analyst Report).

The TV market was mixed. The trend has been for an increase in screen size, but this has not occurred over the past 6 months. Plasma sets are in a secular decline as the LCD sets become cheaper and have improving performance. Large screen LCDs are now selling in greater volumes than plasma sets. This is bad for Panasonic, which is closing some plasma plants. Consumers are moving from expensive brands, like the Bravia from Sony, to cheaper brands.

In fact, Sony lost its second place in LCD to LGE (Samsung is number one) and Vizio was the number one in the US (in units). The large screen TV marker was up in units Y/Y in the first part of 2009, but with the downgrades from High-End products to lower-priced sets, dollars are down Y/Y worldwide.

OPPORTUNITIES

GPS devices showed good growth, as significant price declines and new features made the attractive purchases.

WEAKNESSES

The June quarter is not expected to show any growth from March quarter levels, which will make it a weak quarter. Most companies are reducing headcounts and deferring capital expenditures. The third quarter should show seasonal strength, but we do not expect a full recovery in 2009.