New Market Report: South Korea Consumer Electronics Report Q3 2013

We project South Korean consumer electronics spending will grow by about 4.7% in US dollar terms, from US$13.3bn in 2012, to US$14.0bn in 2013, with a moderation in consumer demand expected. The Korean consumer electronics market is forecast to grow in 2013, despite the mixed trading environment due to high household debt levels. In future, the maturity of many market segments means growth will be driven to a large extent by product innovation, such as new models of smartphones, touchscreen handsets, as well as emerging technologies such as OLED and ultra-HD TV sets. The roll-out of digital TV broadcasting ahead of analogue switch-off in 2013 will help support sales of premium TV sets.

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Smartphones, tablets and internet-enabled TV sets were among the main growth areas in 2012, with smart TV set technology a fierce competitive battleground for vendors ahead of a possible product launch by Apple. However, the market remains challenging for many vendors, due to the dominance of domestic giants like Samsung and LG.

Headline Expenditure Projections

* Computer Hardware Sales: US$4.5bn in 2012 to US$4.7bn in 2013, +4.0% in US dollar terms. Growth areas will include demand for mobile form factors such as tablets, as well as Microsoft's Windows 8 operating system.
* AV Sales: US$2.6bn in 2012 to US$2.7bn in 2013, +2.6% in US dollar terms. TV set product innovation expected to be the most dynamic development.
* Handset Sales: US$6.62bn in 2012 to US$6.6bn in 2013, +5.7% in US dollar terms. Migrations to 4G/ LTE smartphones will drive growth in 2013, despite market saturation.

Risk/Reward Ratings

* South Korea's score was 59.8 out of 100.0, which means that it rose from third to sixth place in our latest Asia CE Risk/Reward Ratings (RRR) table*. South Korea was boosted in our table by high Industry Risk and Country Risk scores of 70.0 and 83.7, respectively. * This report was written before the rise of tensions in North Korea. Full analysis will be included in the next quarter's report.

Key Trends & Developments

* A combination of new technologies such as OLED and Smart TV, and more competitive pricing, should help to support AV demand. The falling price and profitability of LCD TV panels led Samsung and LG to announce in 2012 that they would cease domestic production of LCD TV sets, to focus on LED. A new focus for vendors is OLED TV sets, with leading local players like Samsung and LG vying to become market leader in this area of technology. However, initial sales of OLED models was slow in 2012, but vendors expect solid growth over the next twenty-four months as prices fall from currently levels of above KRW10mn. These new technology Internet-enabled TV sets will remain a significant growth area, even though high prices have led to uncertainty about an appropriate commercialisation strategy.

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