Economic sanctions and our in-house Country Risk team's weak economic outlook for Russia, particularly the rouble - which we now forecast will weaken from an average of RUB38.6/USD in 2014 to an average of RUB62/USD in 2015 - are behind our bearish outlook for a severe contraction in device sales in 2015. Russian purchasing power in global markets will be eroded, hitting demand for consumer electronics devices, and resulting in both deferred purchases and substitution for cheaper models, particularly in the smartphone market. After the serious disruption of 2015 BMI expects a gradual recovery to begin in 2016 with rouble stabilisation, before an acceleration in growth in 2017, but total demand in 2019 is forecast to still be 34.2% below the 2012 peak in US dollar terms. In this perspective, it is to be expected that heightened price sensitivity will increase the share of sales captured by local low cost vendors such as Yota Devices , Explay and FLY , which all made major inroads in terms of market share in 2013 and 2014 and look set to capitalise on wider economic trends over the medium term. There is also additional downside risk to our core scenario from the political sphere where tensions between Russia and the US could see the sanctions imposed on Russia in mid-2014 maintained or even extended.
Headline Expenditure Projections
Computer Hardware Sales: USD12.0bn in 2014 to USD7.0bn in 2015, -42% in US dollar terms. Rouble depreciation causing both deferred purchases and a shift to lower value products due to erosion of consumer purchasing power.
AV Sales: USD9.4bn in 2014 to USD5.1bn in 2015, -45% in US dollar terms. AV spending expected to underperform in 2015, with depreciation exacerbating the existing weak market dynamics due to TV market saturation and digital camera unit cannibalisation.
Handset Sales: USD8.4bn in 2014 to USD5.9bn in 2015, -29% in US dollar terms. The lower average price of handsets will...
TABLE OF CONTENTS
Industry View SWOT Political Economic Operational Risk Industry Forecast Table: Consumer Electronics Overview (Russia 2013-2019) Macroeconomic Forecasts Economic Analysis Table: RUSSIA - Private Consumption Forecasts Table: RUSSIA - Government Consumption Forecasts Table: RUSSIA - Fixed Capital Formation Forecasts Table: RUSSIA - Net Exports Forecasts Industry Risk Reward Ratings Industry Risk Reward Index Table: Europe Risk/Rewards Index - Q4 2015 Market Overview Computers Table: PC Sales (Russia 2013-2019) AV Table: AV Sales (Russia 2013-2019) Mobile Handsets Table: Mobile Communications (Russia 2013-2019) Competitive Landscape International Companies Table: Huawei Technologies Table: Lenovo Table: Foxconn Local Companies Table: Explay Table: Yota Devices Industry Trends And Developments Regulatory Development Table: IT Authorities Demographic Forecast Demographic Outlook Table: Population Headline Indicators (Russia 1990-2025) Table: Key Population Ratios (Russia 1990-2025) Table: Urban/Rural Population & Life Expectancy (Russia 1990-2025) Table: Population By Age Group (Russia 1990-2025) Table: Population By Age Group % (Russia 1990-2025) Methodology Industry Forecast Methodology Sector-Specific Methodology Sources Risk/Reward Index Methodology Sector-Specific Methodology Table: Consumer Electronics Risk/Reward Index Indicators Table: Weighting Of Indicators