Consumer electronics

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Market analysis

The Consumer Electronics sector showed mixed results in Q3 2015, falling by 2.4% year over year but growing by 5.5% quarter over quarter. Among the companies under study, Apple was the only company that posted year-over-year growth (+22%). This was offset by declines posted by Toshiba (-13%), Sony (-10%), Philips (-8%) and Canon (-4%).

Quarter-over-quarter growth was due to gains posted by Toshiba (+22%), Apple (+4%) and Sony (+6%), which offset the declines posted by Philips (-2%) and Canon (-3%).

These mixed results are reflective of overall consumer wariness. After a volatile stock market correction in August, consumer confidence toward the overall economy remained almost flat in September, while expectations about technology spending rose slightly. The Consumer Electronics Association Index of Consumer Expectations (ICE), which measures US consumer expectations about the broader economy, increased 0.4 points from 170.1 in August to reach 170.5 in September. Despite only marginal improvement over the previous month, this is the highest ICE value recorded for the month of September in the last three years.

In recent months, US consumer attitudes toward tech purchases have mirrored overall sentiment about the economy. The Consumer Electronics Association Index of Consumer Technology Expectations (ICTE), which measures consumer expectations about technology spending, climbed 2.1 points from 86.7 in August to reach 88.8 in September. However, year over year, the ICTE value for September remains lower compared to 90.2 in 2014.1

Apple posted impressive 22% year-over-year growth in the third quarter with revenue of US$51.5 billion compared to US$42.1 billion in Q3 2014. This growth was fueled by record third-quarter sales of the iPhone, as well as all-time records for Mac sales and revenue from services. Segmentwise, iPhone sales were up 36% year over year and 3% quarter over quarter. Other Products (which include Apple Watch, Apple TV, Beats Electronics and iPod, among others) sales were up 61% year over year and 15% quarter over quarter, and Mac sales were up 4% year over year and 14% quarter over quarter. Revenue from services grew by 10% year over year and 1% quarter over quarter.

This strong growth was partially offset by iPad sales, which declined by 20% year over year and 6% quarter over quarter. Geographically, Greater China saw a huge year-over-year growth of 99%, although sequentially it declined by 5%.

Following an inquiry from the Securities and Exchange Surveillance Commission (SESC) of Japan, an Independent Investigation Committee in May 2015 initiated an investigation of Toshiba’s percentage-of-completion method, operating expenses in Visual Products business, valuation of inventory in Semiconductor business and parts transactions in the PC business. The committee found that certain members of top management, business unit heads and executive officials were involved in inappropriate accounting treatments. Overall, the company overstated its earnings by US$1.3 billion over a period of seven years (FY2009-FY2014). Since the investigation, Toshiba has initiated a restructuring plan, under which it will scale down its semiconductor businesses and exit packaged LED business.2, 3 In November 2015, it sold its image-sensor business to Sony.4 It has also sued five former executives seeking damages totaling US$2.4 million.5

Toshiba has restated its financials for FY2009-FY2014 and also released Q1, Q2 and Q3 earnings of FY2015 which were pending due to the investigation. For Q3 2015, the company posted an operating loss of US$662.8 million amid falling sales. However, net income for the period was US$413.0 million owing mainly to a US$1.5 billion gain in Other Income (consisting of foreign exchange gains, gain on sale of securities, and gain on disposal of fixed assets, among others).


1. Consumer Electronics Association, Sept 2015

2. Chicago Tribune, Oct 2015

3. LEDs Magazine, Oct 2015

4. Notebookcheck, Nov 2015

5. Reuters, Nov 2015