China Consumer Electronics Industry Update Quarter 1 2012

Includes 3 FREE quarterly updates
BMI expects the China consumer electronics market will grow by around 9% in 2013. We forecast
headline consumer spending to grow at 8.0% in 2012 and 2013, which marks a downward revision from
our previous forecast of 8.4% for both years. The government’s rural consumer electronics subsidy
programme should continue to drive flat-screen TV sets and other products and electronic vendors and
retailers are expanding and adjusting strategies to take advantage of this opportunity.

Vendors will look to newer technologies such as Smart TVs, LED TV sets and 3D TV sets, to drive sales.
Smartphones are estimated to account for above 40% of total handset sales in China, and this share will
pass 60% by 2017.

Headline Expenditure Projections
Computer hardware sales: US$80.3bn in 2012 to US$88.3bn in 2013, +10% in US dollar terms. Forecast
downwardly revised in US dollar terms due to macroeconomic factors, following a slowdown in H112.

AV sales: US$77.5bn in 2012 to US$84.7bn in 2013, +9% in US dollar terms. Forecast in US dollar
terms unchanged, with the main driver being demand for flat-screen TV sets.

Handset sales: US$42.4bn in 2012 to US$45.1bn in 2013, +7% in US dollar terms. Forecast in US dollar
terms downwardly revised, but with strong volume growth of smartphones.

Risk/Reward Ratings: China’s score was 61 out of 100. China took 5th place in our latest RRR table,
but due to its vast market and rising penetration has potential to rise over time.

Key Trends & Developments
- By the end of BMI's five-year forecast period, the rural PC and notebook market could account
for as much as 35-40% of total China computer sales. The subsidy programme will continue to
boost demand from the vast, under-penetrated rural areas. The lower-tier city and towns are
expected to be the fastest growing segment of the PC market in 2013, although this has placed
pressure on prices.
- After two years of robust growth in the TV market, vendors will also look to third- and fourthtier
cities and rural areas to sustain demand for TV sets, after signs of slower sales in major
cities. . About 58% of LCD TVs are now sold through retail channels, with sales strongest
during holiday peak shopping periods. Despite a tranche of product innovations, average prices
declined in 2012, meaning that revenues growth failed to keep pace with shipments.
- The tastes of Chinese consumers with regards to handsets also appears to be growing more
sophisticated, with China now a key engine driving the global smartphone market. China
Mobile forecasts sales of smartphones could reach 100mn units by 2013, while BMI projects
that sales could pass 500m units by 2017. Vendors such as Samsung expect that China will be
among their most important markets for smartphones.