CEA: Flat Year Ahead

Manufacturers and retailers don't expect an upswing in electronics sales next year. That's the consensus of members polled by the Consumer Electronics Association, published in mid-October.

The CEA is predicting slow growth in 2004, with projected total revenue at $97.3 billion, a 3% rise over the $95 billion expected for fiscal 2003. The industry has seen back-to-back years of incremental growth. For 2002, the CEA reported total sales of $93.9 billion. Results for 2003 should come in just over 1% above that mark, and significantly under the $98 billion predicted by the Arlington, VA–based trade group last January.

The CEA has long hoped to break the $100 billion mark. That goal has now been pushed back to 2005 at the earliest. The projected 2004 total of $97.3 billion is 6% lower than the CEA's first estimate of $103 billion, and the industry isn't likely to see a revival until the general economy perks up—an eventuality some market analysts are predicting for the following year.

Some of the CEA's hopes for 2003 failed to materialize, such as big gains in the video sector. Despite the growing popularity of flat-panel and big-screen televisions, the sector actually declined 1.4% from 2002, due to rock-bottom pricing on entry-level DVD players, VCRs, and direct-view televisions. The CEA predicts that the video sector will come in at about $18.2 billion in total revenue for 2003, with 2004 slightly better at $18.4 billion. The strongest related category will likely be video games and software, up 12% to $12.5 billion for 2003 and projected to hit $13.8 billion in 2004.

In January of 2003, the trade group projected a down year for audio, expecting sales to be off by approximately 3% over 2002 levels. In October, the projection was revised downward to an 18.1% decline for a total of $4.19 billion. The trend may continue through next year; the CEA projects total audio sales for 2004 at $4.06 billion. A note of dismay for high-end manufacturers, the strongest categories next year will likely be portable music players, automotive electronics, and home-theater-in-a-box systems. One of the strongest niches this year and next is blank media (recordable CDs and DVDs) and accessories such as batteries. The CEA lumps these together in a single category, predicting a $9.48 billion total this year and $10.1 billion in 2004, increases of 8.2% and 6.7% respectively.

One bright spot in the CEA's projections is a surge in sales of home security products. The niche should hit $2.05 billion in total sales this year and reach $2.12 billion in 2004, increases of 4.6% and 3.3% respectively. This projection seems depressingly rational, considering that economic downturns are frequently accompanied by increased crime.