Consumer electronics

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Market analysis

Consumer sentiment toward technology spending reached its highest level since December of 2012. The CEA Index of Consumer Expectations (ICE), which measures consumer expectations about the broader economy, increased by 0.6 points from last month to reach 171.3 in July, the highest level so far in 2014. The improved sentiment is helping establish a solid foundation for stronger tech spending—especially with the growth of emerging technologies like wearables and Ultra HDTV—to materialize in the back half of 2014.1

The new US Consumer Electronics Sales and Forecasts report projects that total industry revenue will reach a record US$211.3bn in 2014; a steady, two percent increase from US$207bn in sales in 2013. This mid-year update is in line with CEA’s projection in January, slightly adjusted after better-than-expected 2013 revenue growth. Looking ahead to 2015, CEA expects industry sales to grow by 1.2 percent, with industry revenues reaching another all-time high of US$214bn.1

Revenues from emerging product categories will grow by 242% year over year in 2014, and another 108% in 2015. These developing technology categories include 3D printers, health and fitness devices, smart watches, Ultra HD television displays and smart thermostats, a newly-introduced sales category to the ICE report.1

Innovations within the television category will help drive sales this year, as consumers choose larger screen sizes and premium display features to upgrade their home video experience. Despite a steady decline in average wholesale prices, TV sales remain critical to the industry’s overall bottom line with total TV sets and displays projected to reach US$18.4bn in 2014, down 5% from 2013.1

Reflecting these industry trends, Apple Inc’s revenue increased by US$2.1bn in Q3’14 compared to the same period in 2013, representing growth of 6%. Net sales and unit sales increased for iPhones, resulting primarily from the continued shift to smart phones by consumers across the globe. Net sales and unit sales increased for Macs due to strong demand for MacBook Air which was updated with faster processors as well as lower prices in April 2014 and due to sales of the new Mac Pro which became available in December 2013. Net sales of iTunes, Software and Services grew primarily due to increased revenue from sales of iOS Apps, AppleCare and licensing. In contrast, net sales and unit sales for iPad declined in the third quarter of 2014 compared to the same period in 2013 due to lower unit sales in many markets. Growth in total net sales during the third quarter of 2014 was also negatively impacted by the continuing decline of iPod sales. Geographically growth in net sales was particularly strong in Greater China where revenue grew 28% in the third quarter of 2014 compared to the same period in 2013.

Sony also benefitted from the increased consumer demand, with sales of 1,809.9bn yen (US$17,920mn), an increase of 5.8% year over year. This growth was primarily due to a significant increase in G&NS segment sales, reflecting the contribution of the PlayStation 4 (“PS4”) which was launched in November 2013, a significant increase in the Pictures segment sales primarily due to higher theatrical revenues in Motion Pictures, as well as the favorable impact of foreign exchange rates. This increase was partially offset by a significant decrease in sales in “All Other Category”, primarily related to Sony’s exit from the PC business. Operating income increased 34.3bn yen year over year to 69.8bn yen (US$691mn). This growth was primarily due to a significant improvement in the operating results of the G&NS segment, but was partially offset by a significant deterioration in the operating results of the MC segment.

  1. Consumer Electronics Association, May 2014

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