Vision - November/December 2007 - (Page 36)

lcd tv unit shipments in eastern europe ( in thousands) 8 7 6 5 4 3 2 1 619 0 1841 2927 4065 5390 7257 6859 the Czech Republic have accelerated their infrastructure, attracting large retailers from Western Europe and elsewhere to expand into the region as part of their “organic growth”, as Somsen describes it. Romania and Hungary are also part of the EU. Change is more challenging in other countries. For example, Russia historically has relied on gray market channels, but observers acknowledge that the situation there is “rapidly changing”. Until recently, CE sales in Russia seemed to lag five to ten years behind other countries, but “it is catching up very fast,” Somsen observes. Underscoring that viewpoint are new rules to curb gray market sales, implemented in July, under which Russia’s electronics retailers must declare the serial numbers and manufacture dates of all imported items. The rules, which apply to laptops, video cameras and digital cameras, video monitors and TV sets, seek to reduce the gray market share, which had accounted for 30 to 50 percent of electronics sales, according to RATEK, the Russian Association of Household Electronics and PC Trading Companies and Manufacturers. On another marketing front, Somsen observes that, “The level of professionalism … is more formalized, more organized.” Some of JVC’s campaigns are developed on a pan-European basis, drawing from international strategies. Like other CE makers, JVC also has established creative marketing concepts on a country-by-country basis, which are managed by local managers. 2005 2006 2007 2008 2009 2010 2011 defining consumer electronics The emerging markets pose new challenges to marketing and distribution. One current hurdle involves a proposal by the European Commission to define video monitors, printers and other products as “new products” because of their converged uses, and therefore not subject to the tariff free designation they currently enjoy under the Information Technology Agreement (ITA) of the World Trade Organization. The consequence is that such products could be subject to a 14 percent tariff, even if they are used as computer peripherals. The High Tech Trade Coalition (an informal grouping of U.S. high tech trade associations including CEA) and others have characterized the effort as improper unilateral move to reclassify products that are defined by the ITA and this has the potential to significantly and negatively affect exports of LCD monitors, multi-function printers, set-top boxes and other products throughout eastern and western Europe. Despite such regulatory growing pains, the electronics markets in Eastern Europe are taking shape rapidly. For example, the fast expansion of broadband capability in many areas is encouraging new video and music access services. And the development of digital television, via cable and satellite as well as broadcasting, has spurred demand for flat-panel monitors. iSuppli Corp. envisions a nearly three-fold increase in the number of LCD screen shipments during the next four years throughout Eastern Europe, growing to seven million units annually by 2011. At the same time, the region is emerging as a new global hub for electronics manufacturing, according to market researchers Frost & Sullivan. Thanks to lower labor costs, increased foreign investment and the establishment of production plants by global electronics makers, the output of these new factories is expected to jump from $6 billion last year to nearly $24 billion by 2012, Frost & Sullivan says. market demand One reason for this rush to set up hightech manufacturing facilities reinforces the market appeal of the region. “Eastern Europe benefits from having a labor force that is typically of a higher level of education compared to other developing nations,” according to iSuppli’s Chief Development Officer Greg Sheppard, in published remarks from his company’s recent European Briefing Series. Sheppard also noted that the region is benefiting from tax grants and other government policies that are intended to boost the gross domestic product (GDP) of individual nations. Those initiatives are creating new jobs and increased income simultaneously, which further fuels the ability of residents to buy the CE products that are competitively available. Indeed, competition—a relatively new concept to many of the former Soviet bloc consumers—has reshuffled the selling process. In Russia, where total CE sales are expected to reach $4.5 billion (U.S. equivalent) this year and jump to $5.6 billion by 2011, large retailers are dueling for dominance. According to Russian news agency TASS, Technosila, currently the country’s third largest electronics retailer, is investing $135 million this year to expand its retail presence; it is opening more than 100 new stores. Meanwhile, M.Video, the second largest CE retailer in Russia, has been negotiating a merger with DARTY, France’s largest retail chain. The deal would make M.Video the first Russian CE dealer to sell its shares to Western investors. In Poland, CE sales will reach nearly $1.4 billion this year and approach $1.7 billion by 2011. Economists say that the expanding market and new jobs are encouraging more spending on entertainment and luxwww.ce.org 36 November/December 2007 Source: iSuppli Corp., April 2007 http://www.ce.org

Table of Contents Feed for the Digital Edition of Vision - November/December 2007

Vision - November/December 2007 Contents Shapiro's Spectrum In This Issue The Economist C4 Visionary Tech Speak Going Global Eye on Business Tech Policy Special Supplement: CES Unveiled 2008 CES Technologies to Watch Eastern Europe Embraces CE M&A Fest Displaying the Future CEA Newsline Market Insider Just the Stats

Vision - November/December 2007

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