The consumer electronics industry saw reasonable improvement in the last quarter of 2014 with most companies showing positive results compared to the third quarter. Most of the companies under study reported double-digit revenue growth sequentially, but had a marginal dip year on year.
Following a strong November showing, consumer sentiment toward the overall economy reached a record level in December. The Consumer Electronics Association Index of Consumer Expectations (ICE), which measures consumer expectations about the broader economy, jumped 7.3 points from last month to reach 180.1 in December—the highest ICE level since the Consumer Electronics Association Indices began in January 2007. Unfortunately, consumer sentiment toward tech spending decreased in December.
Black Friday and Christmas holiday sales led to increased demand for consumer electronics in Q4’14.1
Another factor impacting consumer electronic sales and revenues is the increasing polarization of the smartphone market into high- and low-end market price points. On one hand, there is the premium phone, with an average selling price of US$447 in 2014, which saw its growth dominated by iOS. On the other end of the spectrum is the Android and other open OS phones with an average cost of US$100, with growth occurring in the basic phone segment. For midrange smartphones, however, the market opportunity is becoming increasingly limited as the PC market stabilizes and the challenge for the next iPhone to find significant growth becomes greater.
In the operating system (OS) market, Android surpassed a billion shipments of devices in 2014, and will continue to grow at a double-digit pace in 2015, with a 26% increase year over year.2
As a result of the demand for high-end devices, Apple reported outstanding earnings in the last calendar quarter of 2014 on the strength of outsized demand for the iPhone 6 products launched near the end of the prior quarter. Apple is not only generating revenue by selling its mobile handsets but is also maintaining its margins. Although Apple does have one competitor that made money in the commodity smartphone business, Apple's profits were much higher than its nearest competitors but the difference in units sold were not that high. This is due to the higher margins Apple achieves. Apple's new phones are very popular in the Chinese market, and it has successfully confronted local competitors. In fact, it has recently overtaken Xiaomi, the recent unit sales leader, for the top slot in the China market—not just in profit, but even in raw unit sales share.
In Q4’14 Sony Corp earned net income of US$736.0mn, compared to a net loss of US$1.3bn in Q3’14. The turnaround was attributed to the Mobile Communications business restructuring, which posted operating income of US$76mn in Q4 against operating loss of US$1.6bn in the previous quarter. This was also due to very high goodwill impairment charges in Q3’14. Year on year, Sony bettered Q4’13 results by 6.1%. The increase is primarily due to favorable foreign exchange rates, a turnaround of the Mobile Communications business and a significant rise in Devices and Game & Network Services businesses.
Toshiba Corporation posted net income of US$339.4mn in Q4’14 against US$201.0mn in Q3’14 and US$163.3mn in Q4’13. This reflects a sharp rise of 68.9% quarter on quarter and 107.9% year on year, even though revenues declined by 12% quarter on quarter (US$13.8bn in Q4’14 against US$15.6bn in Q3’14) and 7% year on year (US$13.8bn in Q4’14 against US$14.8bn in Q4’13). This is primarily due to a US$241.3mn non-operating income from the settlement of a lawsuit, received in Q4’14. Besides this, net income was also helped by rise in revenues from several business segments, especially Energy & Infrastructure (15% year on year) and Electronic Devices & Components (14% year on year).Though Lifestyle Products & Services revenues declined by 15% year over year, revenues rose 5% during the quarter from the combined performance across all business units.