What CE shoppers will be buying this Christmas

Americans have never had greater access to amazing consumer electronics products thanks toeye-popping innovation that istranslating to uneven growth andinteresting implications for the holiday season, according to the latest sales projections from the Consumer Electronics Association (CEA).

The trade group projects in its recently released report, U.S. Consumer Electronics Sales and Forecasts 2010-2015, that factory sales to dealers will rise a steady 2% this year to a record $211.3 billion compared to a 2013 growth rate of 1.7% that saw sales reach $207 billion. Both figures were well below the 7.7% growth seen in 2011. Next year’s sales are projected to increase 1.2% to $214 billion.

One driver of growth is a range of emerging product categories which were too small to track just a few years ago. CEA’s forecast projects that revenues from emerging product categories will grow by 242% in 2014, and another 108% in 2015. Developing technology categories include such things as 3D printers, health and fitness devices, smart watches, Ultra HD television displays and smart thermostats. Such products now represent sales of roughly $5 billion, less than 3% of the annual total, but are quickly becoming more mainstream.

“There has never been a more exciting time for the technology consumer,” said Gary Shapiro, CEA’s president and CEO. “Across the consumer electronics industry, companies are packing more innovative features than ever into products that have quickly become indispensable – even as the industry continues to introduce breakthrough innovations that are capturing the hearts, minds and imaginations of consumers across the nation.”

According to Shawn DuBravac, CEA’s chief economist and senior director of research, growth of a few specific categories continues to fuel the industry overall while many categories continue to experience declines in average selling prices.

“Although some categories continue to struggle, clearly there are many bright spots within the CE industry, and consumer enthusiasm for new features and emerging product categories provide reasons for long-term optimism about continued overall growth,” DuBravac said.

For example, 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, according to CEA. TV sales remain critical to the industry’s overall bottom line with total TV sets and displays projected to reach $18.4 billion in 2014, down 5% from 2013. Ultra HD, also known as 4K, is performing better than initially projected in 2014, according to CEA. Unit shipments of Ultra HD displays are expected to reach 800,000 in 2014, earning $1.9 billion in revenue, a 517% increase from the prior year. In 2015, sales are expected to reach $5 billion.

LCD TVs dominate the industry though and will account for 94% of all digital display sets sold this year, with 36.7 million units expected to ship to dealers in 2014 generating revenue of $17.3 billion.

Sales of mobile connected devices, specifically smartphones and tablets, will continue to stand as the CE industry’s top two revenue drivers. These two devices alone will represent 35.1% of total CE industry revenue in 2014. Although revenue growth for this category has slowed, unit sales will continue to see increases. Smartphone unit shipments are projected to reach 163.5 million this year, up 8% from the 151 million units sold in 2013. Additionally, smartphone revenues are expected to generate $46 billion in 2014, a 7% increase from $43 billion in 2013. Unit sales of tablets are projected to reach 80.4 million this year, a 4% increase from 77.4 million in 2013. Revenues for tablets will reach $25.6 billion this year, down 3%.

“These top revenue-driving products, namely LCD flat panel TVs and mobile connected devices, can now be found in millions of households in a remarkably short amount of time,” said Steve Koenig, CEA’s director of industry analysis. “This has resulted in a crowded market, naturally lending itself to slowed revenue growth. Yet we’re at an interesting turning point in technology, as these same products are increasingly adopting premium, differentiating features, driving consumer interest and creating opportunities across other categories in the industry.”

Other categories with positive growth characteristics include audio, automotive electronics and gaming. In audio, headphones, Bluetooth wireless speakers and soundbars remain the standout products of the category. Headphones are expected to sell 75.9 million units, earning $1.4 billion in revenue, a 20% increase from the prior year. Bluetooth wireless speakers are expected to generate $650 million in total revenue in 2014, a 69% increase. Automotive electronics are benefitting from new vehicle sales, resulting in factory-installed systems sales increasing 20% to $11 billion. The release of eighth-generation gaming consoles at the end of 2013 is projected to drive revenues of $4.8 billion in 2014, along with a 35% increase in unit shipments.