Margins Are Grim Electronics Industry Consolidation Is Inevitable


Placed in front of the global consumer electronics industry is a grim new world, the pattern of the industry may soon experience a shock, just like 20 years ago, the PC industry has experienced the kind of pain.

Emerging new technology, start-ups and overwhelming products prices are spiraling back troubled consumer electronics industry. Sony (SonyCorp.), Philips Electronics (Philips ElectronicsNV) and other industry giants record profits suffered heavy losses, forcing them to think about the next steps towards where.

To sit down and consumers will play off of this change, because under pressure electronics manufacturers will continue to introduce new products, and prices getting lower and lower.

The impact of this change clearly reflected in Japan, Korea and European electronics manufacturers the most recent quarter report. Sony plans to release results today. Expected profits of the company from October to December quarter fell 12 percent from a year earlier, the main reason is that DVD recorders and flat-panel TV prices fall, the decline in the quarter annualized rate of 30% during this period, Sony failed to corresponding reduction in costs.

Expected to Dutch Philips Electronics (Philips) will announce profit dropped 40 percent due to televisions and other appliances deficits. South Korea’s LG Electronics (LGElectronicsInc.) earlier this week warning that, due to an oversupply of plasma TVs and mobile phones price pressures, the 2005 operating profit will suffer. Japan’s Pioneer (Pioneer) may also be released as DVD and other product prices lead to smaller profits. DVD recorders because manufacturers cut prices surge.

Consumer electronics manufacturers feel the pressure now and 20 years ago, the computer industry is similar. The situation was leading to large-scale computer industry consolidation, DigitalEquipment, and DataGeneral other manufacturers is the annexation of other companies, while some other companies have merged together, such as Burroughs, and Sperry Group Unisys Corporation (UnisysCorp.).

Before the eighties of last century, a group of industry giants has been firmly in control of computer design, production to sales of all aspects, even including their computer to run most of the software. But the personal computer came into being, it uses standard chip, the software is also readily available. PC open design allows anybody to be involved in computer production, and even individuals can “save” from a computer. This sparked a personal computer industries reduce costs and improve efficiency of production race, the aftermath is still fresh in.

TV, digital cameras, music players, cell phones and other consumer electronics parts and components are standardized, it is easy to mass production, machine production, therefore the threshold is very low. Under these circumstances, many new companies began to sweep all the production processes and Sony’s existing manufacturers challenged, many of which are Chinese companies.

Development Director KatsumiIhara Sony announced earnings warning last week, said that the current low price is almost unimaginable in the past. The reason for this happening is that after entering the digital age, the production has become very simple, anyone can enter this area. What trick is difficult to make their products stand out, unique.

To deal with this situation, the large electronics manufacturers have been the key to firmly control the most profitable parts. Result, many enterprises are also devoted substantial resources to engage in several areas, independent research and development, such as flat panel displays and digital cameras, special chips and other fields.

Which in turn led to a lot full of similar products on the market. For example, 7-September quarter, for flat-panel LCD TV prices down 20%, 10-December quarter to drop 20%. The reason is that South Korea’s Samsung Electronics (SamsungElectronics Co.) And Taiwan’s AU Optronics (AU OptronicsCorp.), Etc., more than 10 companies for new, expanded display factory invested 17 billion U.S. dollars in huge amounts of money.

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