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Market Trends Global

Market Trends Global Electronic Vision Jürgen Boyny, Global Director of Consumer Electronics, GfK Retail and Technology – on major consumer electronics trends As we arrive at IFA 2013, what are the key trends and how is the CE market progressing? We put the question to GfK “market guru” Jürgen Boyny… It is difficult in some regions around the world. If we look first of all at the global approach, we have what we call mature markets including not only Western Europe, but also mature Asian countries such as Japan, Korea and Hong Kong, where homes are fully equipped with digital products. In these areas, consumers are more likely to buy smartphones and tablet PCs and are less likely to buy new consumer electronics products. In emerging markets such as Middle East / Africa, Latin America, India and South East Asia, people are still in many cases buying their first flat TV. They are still buying smaller sized flat screen TVs, meaning there is still potential in the next years when people trade up their old 24-inch LCD TV for a 32-, 42- or even 52-inch screen. The market is still, all around the world, going to larger screen sizes. What are the trends with Smart TV? It was quite astonishing. I recently had a meeting in Japan with a Japanese TV manufacturer where we discussed at great length whether there is a need for a complete re-invention of TV. The chance with Smart TV is at least to move TV benefits to a complete new level of information and usage where the TV develops into some kind of video conference centre in the living room. Grandchildren today still call their grandparents on the phone, but in the very near future they will do this through the TV. Education is Jürgen Boyny Global Director of Consumer Electronics, GfK Retail and Technology still done in classrooms or on a notebook or tablet PC, but not with a big screen, which can be connected to other classes in other countries. It’s only the beginning of Smart TV and the applications that will be added in the future will both surprise and delight us. How will UHD TV progress over the next years? In technical terms, these are fantastic products. The picture quality is incredible… something that consumers had been asking from their TVs for a long time. But for the moment, the developments are primarily being made by engineers, and the big challenge is that the content industry is following too slowly. Why is OLED taking so long to get off the ground? It’s a technical issue. While it is quite easy to make an OLED screen to fit a smartphone, for big screen sizes it’s a huge technical challenge, with something like eight out of ten screens that are produced being thrown on the scrap heap. In any case, consumers will not care whether a TV is OLED or UHD TV. In the past, they didn’t even understand the difference between plasma and LCD. However with curved OLED, the consumer can see that this is something totally new that was not possible with LCD. The curved screen will add a new lifestyle benefit for the consumer. How are tablets evolving? We are still in a hype phase. But people are coming to understand exactly what the tablet can be used for – as a useful additional screen. I think the growth curve will flatten out quite soon as people come to better understand their own needs. Tablets and smartphones are becoming excellent devices for searching content in relation to one’s TV. Such a device is thus becoming an exceptional remote control. We are seeing manufacturers such as Panasonic, LG and Samsung developing v o c al and g e s t u r e interaction with the TV. What do you think of this? Turning off a TV with a button on a remote control remains for many a lot easier than gesturing or talking to the TV. It’s an interesting gimmick, but what will be more interesting is to see how this interactivity can be combined in the future with apps on a Smart TV. In terms of geographical developments, we are seeing the Chinese manufacturers starting to make a big push into global markets. What are the trends there? We have to be aware that the Chinese economy is not growing as fast as it was in the past, so Chinese manufacturers have to start planning to go on a global level. At the moment, whether we talk about Changhong, Hisense, Haier , or anyone else, they are doing more than 90% of their business in China itself. So they are looking more and more to expand globally. But the only USP many have is still more or less just price, and the retailers outside China are not looking for yet another low cost brand. So these companies today are being forced to establish marketing strategies – thinking what USPs they can offer the market. GfK posts sharp rise in second quarter income The GfK Group achieved growth in organic terms of 1.7 percent in the first half of 2013 and posted sales totalling €728.6 million. The second quarter was particularly profitable, with adjusted operating income up by 15.7 percent in organic terms. For 2013 as a whole, GfK expects organic sales growth of up to 3 percent and therefore to exceed industry growth, as well as a margin between 12.4 percent and 13 percent. “Grandchildren today still call their grandparents on the phone, but in the very near future they will do this through the TV” 28

Market Trends TV Market Round-Up NPD DisplaySearch’s Paul Gray gives his summary and outlook for the TV market The TV market in Western Europe is going through a tough patch at present. The factors that caused roaring growth from 2004 to 2010 (upgrading from CRT, digital broadcast and HD) have largely played out and consumers face hardship or have less to spend. By contrast, in Eastern Europe rising living standards have supported a robust market. It was hit hard by the 2008 crisis, but has since rebounded with the region showing the strongest sales growth globally. We expect that growth will continue as far as 2015, when the transition to digital broadcast (and analogue switch-off) completes. TV brands have faced hardship in recent years, with painful restructuring and scaled-down ambitions. Overall the message has become one of sustainability: historically some growth was bought at the cost of limited profits or even losses. TV businesses have to make reliable profits to survive. The industry has not been short of ideas – LED backlighting revolutionized styling and now almost all TVs have an LED backlight. The result has dramatically cut the power consumption of the TV. 3D promised a new type of viewing: while the penetration of the feature into the market has grown rapidly, a shortage of content remains. Consumers do not seem particularly excited by 3D after the initial thrill. The underlying technology trends that brought digital broadcast have also enabled internet video streaming and connected TV has become a hugely important feature. Over 40% of TVs now shipping in Western Europe can receive internet content, with Eastern Europe close behind at 35% and rising rapidly. The game for TV brands has evolved rapidly from simple portals to rich apps and now interoperability with handheld devices. The latest feature, which began to tease us at IFA last year, is 4Kx2K – double the horizontal and vertical resolution of conventional 1920x1080 displays. There is a general resolution war in consumer products at present, especially tablets and smartphones. In handhelds a lack of size and format standardization means that it is measured as pixels per inch (ppi). More pixels mean improved text readability and smoother graphics shading. 4Kx2K in TV promises even sharper images. However, the TV industry is ahead of the rest of the production pipeline and standards need to be established for broadcasting, interconnects, storage and the production and editing flow. Such standardization can be portrayed as dull and slow by the internet industry. However, it is the kind of investment that produces a robust, durable platform which in turn will satisfy consumers with products that are interoperable, simple to use and install and which do not become obsolete overnight. The clarity of the EICTA ‘HD-Ready’ label is a good historic example. There is a danger that the lessons of 3D are not learned: cutting corners on quality in the name of speed degrades the experience and ultimately risks failure. 4Kx2K should be about much more than simple resolution: extra detail needs to be added in terms of bits per pixel (giving more colours in the palette) while a faster refresh rate gives better sharpness for moving objects. We expect a new HDMI standard supportive of 4Kx2K imminently, while broadcasters have spent the year starting to build robust standards. Broadcasters are busy with technical trials on satellite, cable and terrestrial with 2014 likely to see pioneering commercial services and wider launches in subsequent years. In the meantime, we expect around 1 million TV sets to ship with 4Kx2K panels this year. Of these, 600,000 will ship into China where 4K2K is fast becoming a ‘numbers marketing’ product. This is a different strategy to Korean and Japanese brands, who are aiming to maximize image quality and develop the feature in step with the availability of content. Their long-term plans are a strategic step towards a next-generation of broadcasting. In future, as LCD panel yields improve and dedicated semiconductors reach the market, costs will fall significantly and shipments will expand dramatically. We believe that 50” is the entry size for the feature; otherwise it is necessary to sit unnaturally close to the screen. However, shipments in 2017 of 3.5 million in Europe are likely to be constrained by consumers’ willingness to live with a very large screen in the home. Paul Gray Director of European TV Research, DisplaySearch TV shipment history and forecast 4Kx2K TV shipment forecast IFA International • Monday 2 nd September 2013 29

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