Asia Pacific was the world’s most dynamic region in consumer electronics over 2010-2015, recording a CAGR of almost 6.5% in volume sales. Over the same period, the region was also the second most dynamic globally in value sales terms with a 5% CAGR. With value sales exceeding US$303.6 billion in 2015, it is by far the world’s largest consumer electronics market.
As I also explore in our “Consumer Electronics in Asia Pacific: How Demographics and Income Shape Demand” global briefing, the rise of the middle class in China and India and other major emerging markets in Asia Pacific is driving consumer expenditure as well as changing consumption patterns towards more discretionary spending and a greater focus on status-related items.
Asia Pacific: % Households with Annual Disposable Income over US$15,000, Selected Markets 2014-2030
Source: Euromonitor International
Rising disposable income
In general, annual disposable income of over US$15,000 per household is seen as the threshold for determining the middle class globally. This is set to increase dramatically across the emerging economies of Asia Pacific over the next 15 years.
Middle-class households are vitally important to the consumer electronics industry as they largely drive consumer spending. The majority of countries in Asia Pacific have experienced a prolonged period of dynamic economic growth, which was reflected in rising incomes and the emergence of a middle class in those markets in recent years. As the annual disposable income of households increases, the potential pool of the middle class will also grow.
However, it should be noted that although the middle class in the emerging markets of Asia Pacific is seeing rapid expansion, purchasing power remains low. Average incomes across social classes remain far behind those in developed regions. This lag is reflected in the low higher education attainment rates in emerging countries compared to developed ones.
Impact on consumer electronics
The main consequence in Asia Pacific for consumer electronics of the changes in macroeconomics, such as rising disposable income, expanding middle class, demographics, rapid urbanisation and education attainments, has been a shift in spending priorities. The region’s consumers are increasing spending on products designed to be used by an individual rather than a group. This is stimulating growth in certain categories, namely smartphones, tablets and, most recently, wearable electronics such as smartwatches.
On the other hand, growth in demand for televisions and home audio and cinema products has been far less than that for portable devices as incomes in emerging Asian markets have risen. This trend will become even more pronounced over the forecast period.
As an increasing number of technologies approach maturity, technology adoption will become an increasingly less influential demand driver in consumer electronics. With demand becoming ever more reliant on replacement purchases, reducing replacement cycles will be paramount to sustaining volume demand. This will make income the main demand factor for consumer electronics, as growth in internet and computer usage is expected to slow over the forecast period.