Consumer electronics

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Market analysis

The consumer electronics industry showed a slight decline in the second quarter of 2015 with mixed results posted by the companies under study (Apple, Canon, Philips, Sony, [Toshiba*]). Two of the four companies reported sequential gains but three of the four saw year-over-year declines. Apple posted year-over-year growth due to good performance across several segments. Sony saw both sequential and year-over-year declines in Q2 2015 due to poor performance across multiple segments and impact of the strengthening US dollar.

Despite the mixed results, US consumer sentiment remained positive. The Consumer Electronics Association Index of Consumer Expectations (ICE), which measures US consumer expectations about the broader economy, increased 2.0 points from May to reach 175.7 in June. This is the highest ICE value recorded for the month of June since the Consumer Electronics Association Index began tracking in 2007, surpassing 174.7 recorded in June 2009.1

US consumer attitudes toward technology spending also improved during the quarter, partly due to enthusiasm around the smart watch category. The Consumer Electronics Association Index of Consumer Technology Expectations (ICTE), which measures consumer expectations about technology spending, climbed 1.2 points from May to reach 87.8 in June.1

Following slow economic growth in the first half of 2015, the global consumer electronics industry is now expected to reach US$285bn in 2015, a slight revision from US$286bn expected previously. In terms of wholesale revenue, the industry is expected to reach US$222.7bn in 2015, rising 2.4% over US$217.6bn in 2014.1

Apple posted Q2 2015 revenue of US$49.6bn, an impressive 32.5% year-on-year growth over US$37.4bn in Q2 2014. Growth was fueled by strong demand for iPhone 6, iPhone 6 Plus and updated Mac portables, along with the launch of the new MacBook and Apple Watch. On a segment basis, iPhone sales were up 59%, Other Products sales (which includes Apple Watch, Apple TV, Beats Electronics and iPod among others) were up 49% and Mac sales were up 9%. The Services segment also grew by 12% during the quarter. This strong growth was partially offset by a 23% decline in iPad sales.

Philips’ revenue in Q2 2015 reached US$6.6bn, a year-on-year decline of 8.5% against US$7.2bn in Q2 2014 but a sequential growth of 9.7% against US$6.0bn in Q1 2015. However, in terms of its reporting currency (EUR), revenue grew 20.2% year over year and 11.9% quarter over quarter. The increase in quarter-over-quarter revenue was mainly due to higher sales volumes. On a year-over-year basis, the Healthcare segment grew by 29%, Consumer Lifestyle grew by 16% and Lighting grew by 14%, while the Innovation, Group & Services segment declined by 4%. Strong growth was observed in North America (29%) as well as other mature geographies (24%) and in growth geographies (22%). In contrast, Western Europe grew by only 5%. Philips’ net income of US$303.0mn in Q2 2015 decreased 8.6%  year over year against US$331.6mn in Q2 2014 but increased 168.5% sequentially against US$112.8mn in Q1 2015. The high sequential jump in net income was due to 9.7% higher revenues, a 15.6% higher gross margin and an 8.2% reduction in operating expenses.

Sony’s revenue in Q2 2015 reached US$14.8bn, a year-over-year decline of 17.3% over the US$17.9bn in Q2 2014 and a sequential decline of 8.2% over US$16.1bn in Q1 2015. In terms of its local currency (JPY), revenue was flat year over year, but sequentially declined by 6.7%. The slowdown was mainly due to a decrease in the Mobile Communications segment, reflecting a significant decrease in smartphone unit sales. Home Entertainment & Sound segment also saw decline, reflecting a decrease in unit sales of mid-range LCD televisions. However, the Devices segment saw strong sales reflecting the performance of image sensors. Sony’s net income of US$676.0mn in Q2 2015 grew 155.1% year over year against US$265.0mn in Q2 2014 and sequentially took a turnaround from the US$890.0mn loss in Q1 2015. Growth in net income was due to lower operating expenses and a one-time US$416.4mn net gain on sale of securities investments.


*Toshiba has declared an indefinite delay in earnings release due to an impending investigation of accounting policies.

1Consumer Electronics Association, Jul  2015