Consumer Electronics Market in Taiwan

Consumer Electronics  Market  in Taiwan-Dissertation Writing Help

Executive Summary

Innovations Lead the Growth

In 2008 the consumer electronic market, both sales in volume and value terms still grew at stable rates compared to the previous year. Technology innovations and replacement demands were the key drivers leading to growth. For instance, analogue products have been completely displaced by digital products in the review period. New innovation has been the key demand driver for the market growth.

Overall market growth was induced by increasing replacement demands for new innovated consumer electronics products. Smart phones outperformed in the mobile phone sector. Full HD and the Blue-ray technology for LCD TV, digital camcorder, DVD player, and projectors are widely applied and lead the sales.

Influences of Multi-function Devices

The trend towards the integration of different technologies and functions in the same product continued in 2008. While the development of mobile phones combining multiple portable functions, single function devices such as MP3 players, digital cameras and PDAs have been negatively impacted. In addition, technology changes and product developments lead to stronger market competition across different sectors and even impact upon home, portable, even in-car consumer electronics product segments. The trend also provides market potentials for new players to penetrate the market by launching products with multiple function concepts.

Segmentation, Strategic Way of Local Brands

Reviewing the strategic movements of local manufacturers, companies grow through the efforts of product development and market segmentation following with own brand development. Niche market positions provide business opportunities for local players to establish their brand and compete with imported brands in Taiwan as well as global market places. This strategic direction is able to help local manufacturers to allocate resources into the selected market segments to avoid direct market competition. Secondly, following successes in certain subsectors, local players then expand their operations to other product segments through acquisitions or other strategic paths. Over the review period, there are many local manufacturers, like Acer and Asus, who became the global leading brands by employing such strategic movements. 

Growing Purchasing Power of Youth

Lifestyles associated with digital life, such as communication and entertainment have become the centres of young people’s daily lives. Since services of 3G applications, mobile internet services, and wireless communication are easily available and becoming more affordable in Taiwan, young people will likely replace and upgrade their devices to obtain new innovated ones. In view of this trend, most consumer electronics players need to seriously pursue brand preferences from the younger generation and respond to their demands. This trend is expected to continue over the forecast period.

Influences of Economy Slow Down

The economic outlook for the forecast period will be less promising as the review period due to current global financial situation. Recent growth of consumer electronics market has been slow reflecting this trend. However, during the economic downturn, market players will continuously concentrate on product development and price promotion to stimulate market demands. As a result, overall prospects for consumer electronics products remain positive over the next five years. While the economic situation is expected to improve in one or two years time, the demand for new innovated products will be strong to generate future growth.

Key Trends and Developments

Slow Down Economy, Slow Down the Growth

The recent financial crisis is likely to impact on Taiwan’s GDP growth in the immediate term. The GDP growth of 2008 was revised to 3.8% compared to 4.8% forecasted at the beginning of the year. In addition, economy growth forecast of 2009 was even worse than 2008. The slow growing economy was reflected in the negative factors and trends within the consumer electronics market.

According to national statistics, the growth of national income per capita was less than the inflation rate in 2008. Household expenditure fell whilst most families became more conservative toward spending. Due to the credit problems of financial institutions, lending and credit policies are more stringent. Hence, the short term impact will stop customer spending on high ticket and premium items.

Current Impact

In order to attract consumers’ spending and purchases, price promotions and store credits are the strategy of players to ride the economic challenges. For instance, distribution channels have co-operated with credit card companies to provide three, six, to twelve free instalments for in-store purchases of consumer electronics products.

Although current performance of the consumer electronics market grew in 2008, future growth for most sectors will slow down in general. In view of the growth limitation and bad economic condition for coming years, market players’ strategies for product innovation, sales, marketing, and pricing would play important roles during the lean times.

Outlook (of the trend)

The main challenge for the Taiwan Government during the global recession would be to stimulate GDP and national income growth and keep inflation and consumer prices in control. However, Taiwan’s export oriented manufacturing sector will be influenced by decreasing global demands. The situation may last for one or two years until the global economy is back a trend of growth.

In addition, the forecast for 2009 was further revised to 3.2% because of shrinkage of national exports and private consumption. However, since consumer electronic products have historically been at the centre of the Taiwanese lifestyle, the market outlook remains positive with slight growth regardless of the present financial crisis. The forecast of future growth is at 4.1% over the next five years.

Future impact

Household expenditure will be the key factor to observe the future performance of the consumer electronics market. With the downtrend of oil prices and other commodities, the inflation situation will be controlled in the following years. Therefore, household expenditure could be back to a growth trend and benefit consuming markets while the international financial crisis eases off. In addition, local manufacturing is expected to provide positive impacts on future growth. Compared to importing products, local players are able to supply quality products at more affordable prices. The downward trends on the average prices for products in different sectors will help to overcome the impacts from recession.

Considering the impact from economic strife, pricing strategy will be very important to market players. Mid market positioning will no longer attract most customers as it did in the past. Cheap products will be the movement of product launches, or high end product catering for the high end segment. Therefore, players need to move their marketing positions to the higher end markets or add on more added value to the products. Market competition among players as well as products will be more dynamic in following years.

Pursue for Better Enjoyment

Replacement demands are the key drivers for the growth of consumer electronics products. As technology innovation, upgrading features and new launching products were introduced into market this caused shorter and shorter replacement cycles. Although the household penetration rates for most of consumer electronics products are relatively high in Taiwan, consumers’ demands are drawn by new innovation and thus continuously contribute to future growth. The desire for more entertainment and features from electronics products will help to maintain market sales activities as well as stimulate players to develop better products.

Trends for new innovation not only impact on the consumer electronics market within the same sectors but also cross over with functions across different sectors. For instance, the new concept of full HD has been widely used in televisions, projectors, camcorders, and computers.

Current Impact

Changes in technology and innovation are the key factors influencing sales performance and outlook of consumer electronics products. Products with new innovation have taken place in many sectors over the review period. Some products are withdrawn from the market and replaced by new products with similar and better functions and features. For instance, cassette players and analogue cameras have disappeared from the market.

In addition, to drive consumers’ demands for replacing old consumer electronics products is the key aim by market players. New technologies, innovations, product developments are blooming. For instance, Full HD which provides better picture quality has been widely applied in LCD TVs, DVD players, and digital camcorders and becomes the marketing emphasis for new product launches.

Outlook

Despite severe market competition and challenges, the replacement demands for consumer electronics will be strong as all major players are devoted to product developments. In Taiwan, consumers tend to purchase sophisticated and newly innovated consumer electronics products. Product with unique designs and advanced technology are gaining in popularity. Technology research and product development play a key role for the success of market players.

Sales growth in one sector will influence another sector product because of technology changes. For instance, LCD TVs outperformed in the review period because of the trend for pursuing a better entertainment experience. Sales growth of LCD TVs will further stimulate the growth of related products in the same concepts like Full HD, blue ray, and home entertainment. Projectors, home cinema systems, and new blue ray DVD players would grow based on the increasing penetration of LCD TVs.

Future Impact

More product development will impact on the product prices of two different price extremities. New innovated products will be set to target the higher market to capture the premium market. In addition, technological change will develop exponentially. Product prices will drop quickly once the products are launched within a certain time period. As a result, mature products need to be lower in price for maintaining sales growth. Mid price products will be influenced because of the market trend.

Considering the shorter and shorter lifecycle of consumer electronics products, the time to market will be very important for market players. In addition, product launch and related marketing activities are also important to maximize the returns and profits of new products. Joint promotions with distribution channels or other industries, such as entertainment business, will be more popular for sales and marketing activities. The business nature of the consumer electronics market will increase complications and difficulties for both local manufacturers and international brands.

Mingled Functions Devices Drive Cross-category Competitions

Reviewing the product development trend of consumer electronics market, products tend to integrate more and more functions in single devices. For instance, mobile phones are added on functions like digital camera, short video recording, MP3 player, and PDA functions. Multi-function devices now become more and more popular in the consumer electronic market especially for portable products.

While the functions of consumer electronics products become more powerful with all-in-one functions, competition will increase not only within products in the same category but also across different sectors. For instance, the smart phone may influence the sales of PDA or hand held navigation systems. Therefore, this trend should be reviewed not only for a single product category but also across products with related functions.

Current Impact

The development of multi-functional devices has been the strategic direction for players to enter different market segments and enlarge their market shares. Within stable market conditions, it is difficult for new players to compete. However, new products with strong and additional functions can help new entries to differentiate from existing products and brands. For instance, HTC, which specialises in smart phone development, has achieved significant shares in mobile phone market.

Multi-functional devices do mingle and cross over with different functions of other consumer electronics products. Technology changes of product developments also lead to stronger market competition across in-home, portable, even in-car consumer electronics product segments. The sales growth of single function products may be influenced by other multifunctional products. 

In addition, the trend for multi-functional devices also impact on the replacement cycles of consumer electronics products. Consumers are attracted by products in these types to replace single function products. As a result, competition has occurred among different product categories. For instance, portable MP3s or computers with audio playing functions have impacted the sales of in-home audio consumer electronics products, especially in the young customers.

Outlook

The trend will continuously impact on the rate of technology development and different devices become more compatible. For instance, portable MP3s can be connected directly to speakers, desktop computers or in-car speakers, to become a part of the in-home or in-car entertainment system. In addition, the similar trend on smart phone development will impact the sales of PDAs, navigation systems, as well as other hand-held consumer electronics products. 

In addition, local manufacturers’ product development actions will reinforce this trend in the future. Major players like Acer and Asus has announced an increase in research and development as well as technology consolidation capabilities in order to enter different market sectors. The trend will continuously impact on the market shares of major players including international and domestic brands.

Smart phones will be the key products to reflect this trend. Most local brand players have been involved in the development and marketing of smart phones. The future market for consumer electronic products can be seen in the trend for multi-functional devices.

Future Impact

The future impact of this trend will be that sales growth of single function devices such as MP3 players, traditional PDAs and digital cameras will decrease over the forecast period. As a result, this trend will continuously impact on product development as well as market competition. Players who pursue consolidation within the market will lead the market in developing consumer electronics products.

Portable consumer electronics will be the sector most influenced by the trend. Smart phone application in the mobile phone subsector will benefit while consumers tend to upgrade their phones with the latest in MP3, PDA, or digital camera functions. The sales of smart phones will increase over the forecast period. On the other hand, other subsectors will be severely impacted by this trend in the future market conditions.

In general, the trend towards cross over functions and integrated technologies will not only impact on the sales potentials of consumer electronics products but will also have great influences on market competition in every sector. The trend will force more manufacturers to move into new product segments in order to survive. Therefore, merger and acquisition will be more common in the market since players will try to enhance their capabilities in product development.

Strategic Direction Toward Niche Segments

Taiwan is famous for contract manufacturing services for international brands of consumer electronics products. In view of market growth and sales margins of having own brands, local manufacturers would grow their brand locally as well as in the global market place.

In order to compete with importing brands, local brands have developed strategies to focus on niche segments where they specialise in product development and manufacturing. With the successes in certain subsectors, local players will then expand their operations to others through acquisitions. For instance, Asus and Acer concentrate on the computer segment and obtain the largest shares in the domestic market, and they also focus on other subsectors like mobile phones and other consumer electronics products.

Current Impact

The strategy of building a brand will force local manufacturers to allocate resources into the selected market segments to avoid direct competition with international brands. For instance, HTC is dedicated to smart phone manufacturing to differentiate itself from mass market brands. This strategy made local players able to fully utilise limited resources to for marketing and product development in the selected segments. That is why some local brands are able to obtain leading positions in specific subsectors. As a result, increasing competition among importing and local brands is becoming obvious in the consumer electronics market.

The trend for domestic players creating their own brands has influenced the market competitive. With their strength in manufacturing cost and product design catering to local demand, local brands have successfully penetrated into the market over the review period. In addition, most players have established their sales networks by opening the directly owned retail shops to expand market share. In addition, given that much of the technology on the market is similar, local companies have tried to gain advantage by maximising economies of scale after obtaining success in a niche segment. That is why local computer or LDC TV manufacturers will focus on product development of other in-home consumer electronics product market in Taiwan.

Outlook

Reviewing the strategic direction of local brands, companies will continuously grow their sales through the efforts of market segmentation and promoting owned brands. Niche market positions will provide business opportunities for local brands players who are not only able to survive in the severe market competition environment. The trend will evolve in the medium to long term to encompass the entire consumer electronics market. Local brands will start in niche segments following by expansions into other consumer electronics markets.

In view of local market sizes and the limitation of niche market positioning, the next strategy for local brands will be to expand business operations into other countries. While the business scales become bigger from exporting sales, local players will move global operations by establishing sales networks around the world. It is foreseen that local brands will be more active in the consumer electronics market.

Future Impact

The activity of local brands will impact on average product prices. With their pricing advantage, local players can compete with imported products and international brands by price promotions. This will make average product unit prices fall over the forecast period. On the other hand, decreasing unit prices will make products more affordable; thus, replacement cycles may become shorter for new consumer electronics products.

Competencies of brand management as well as global operations will be essential to local companies. Marketing products in different countries takes greater effort in single niche segments locally. Risks associated with global expansion should be addressed. In addition, mergers and acquisitions will be adapted more often by local players in the future. However, post merger integrations will be very challenging and influence the success of strategic activity.

Young Generation Dominates

Using consumer electronics products is central to the daily life of young people and is more widely accepted among younger generations than other age groups. Young consumers are familiar with new technologies and easily attracted by new products. In fact, the growing importance of the younger generations as a consumer group has influenced market players’ marketing direction toward young people.

Young people have influenced the sales of consumer electronics products. For instance, sales of digital cameras, MP3 players and mobile phones grew dramatically due to high product penetration rates and increasing usages among young generation. Products associated with the younger generation’s lifestyle would be the best selling products in the consumer electronics market.

Current Impact

Influenced by this trend, major market players would primarily target the younger population. Most advertising campaigns, marketing events and promotions target the youth. Marketing themes associated with consumer electronics products have been around their lifestyles. For instance, Sony has launched a series of campaigns and marketing activities to prompt young people to use digital cameras as diaries of their active lives.

The growth of mobile phones with MP3 players is another evidence of this trend. To launch various models of MP3 mobile phones and target on the young generation, Sony Ericson achieved great success in gaining market share. Since Taiwan has a very high penetration rate for mobile phones, inducing shorter replacement cycles would be the key concern for market players. In view of young people’s lifestyles and preferences, marketing focusing on this segment would be more easily and effectively rewarding than other customer groups.

Outlook

Digital life, communication and entertainment are central to young people’s lifestyles. Most market players will continuously target the demands of this age group. While 3G applications and wireless internet services are getting popular in Taiwan, the young generation is likely to consume related consumer electronics products for replacing and upgrading their devices. Considering future development, most market players need to seriously focus on this trend, and the trend is expected to continue.

Other issues will be the key movements for this trend in addition to product functions. Product design, quality, price, marketing campaigns and distribution channels will be also important for targeting the demands of the young generation. Products with cool aesthetic design and celebrity endorsement will be essential for marketing products to this target group. Channels for marketing and product distribution will be different due to the trend. Internet sales and interactive marketing will play more important roles in the future.

Future Impact

As the trend will continuously impact on the growth of consumer electronics in the future, market players should be focusing on differentiating their products to attract the young generation in the competitive market. On the other hand, manufacturers may also adapt different product differentiation strategies for other consumer groups. In the future, consumer electronics products will become consumer focused to cater for different preferences of lifestyles or age groups.

Since Taiwan has a declining birth rate, there will be fewer teenagers or children in future households. Parents are likely to be willing to spend more money or provide more pocket money to their kids or teens. As a result, the purchasing power of the young generation will increase in the future. This impact will be a positive influence on the future growth of consumer electronics market.