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KEY NOTE Household Appliances (Brown Goods) : May 2004

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This report covers:televisions, audio systems, digital versatile disc players and recorders, portable audio products camcorders,digital radio, video cassette recorders, audio separates, digital, cable and satellite-receiving equipment,

Companies covered include: AIWA UK, JVC UK, LG ELectronics UK, Pace Micro Technology, Philips, Electronics UK Samsung, Sharp, eletronics, Sony, UK, Dixons, Group, KESA, Bose, Koninklijke Philips, Pioneer, CeBIT, Hi-Fi Show and AV Expo, IFA, International Consumer Electronics Show, Nepcon Europe, Stuff Live, Hitachi, Matsushita, Panasonic,

TABLE OF CONTENTS

Executive Summary 1

1. Market Definition 9

REPORT COVERAGE 9

MARKET SECTORS 9

Televisions 9

Audio Systems 10

Digital Versatile Disc Players and Recorders 10

Portable Audio Products 10

Camcorders 10

Video Cassette Recorders 11

Audio Separates 11

Digital, Cable and Satellite-Receiving Equipment 11

MARKET TRENDS 11

The Move from Analogue to Digital 11

Moving Manufacturing Overseas 12

Economic trends 12

Gross Domestic Product 12

Table 1: UK Gross Domestic Product at Current Prices

(£m), 1999-2003 12

Inflation 13

Table 2: UK Rate of Inflation (%), 1999-2003 13

Unemployment 14

Table 3: Actual Number of Unemployed

Persons (million), 1999-2003 14

Disposable Income 14

Table 4: Household Disposable Income

(£), 1998-2002 14

Population 15

Table 5: UK Resident Population Estimates by Sex

(000), Mid-Years 1999-2003 15

Market Position 15

The UK 15

Overseas 15

2. Market Size 17

THE TOTAL MARKET 17

Table 6: The UK Household Appliances (Brown Goods) Market by Value at Current Prices (£m at rsp), 1999-2003 17

by MARKET SECTOR 18

Televisions 18

Table 7: The UK Television Market by Value at Current Prices

(£m at rsp and %), 1999-2003 18

Audio Systems 18

Table 8: The UK Audio Systems Market by Value at Current Prices (£m at rsp and %), 1999-2003 19

Digital Versatile Disc Players and Recorders 19

Table 9: The UK Digital Versatile Disc Player and Recorder Market by Value at Current Prices

(£m at rsp and %), 1999-2003 20

Portable Audio Products 20

Table 10: The UK Portable Audio Products Market by Value

at Current Prices (£m at rsp and %), 1999-2003 20

Camcorders 21

Table 11: The UK Camcorder Market by Value at Current Prices

(£m at rsp and %), 1999-2003 21

Video Cassette Recorders 21

Table 12: The UK Video Cassette Recorder Market by Value

at Current Prices (£m at rsp and %), 1999-2003 22

Audio Separates 22

Table 13: The UK Audio Separates Market by Value at Current Prices (£m at rsp and %), 1999-2003 22

Digital, Cable and Satellite-Receiving Equipment 23

Table 14: The UK Digital, Cable and Satellite-Receiving Market

by Value at Current Prices (£m at rsp and %), 1999-2003 23

3. Industry Background 24

HISTORY 24

Number of companies 25

Manufacturers of Radio and Electronic Goods and of Television and Radio Receivers 25

Table 15: Number of UK VAT-Based Enterprises Engaged

in the Manufacture of Radio and Electronic Goods and of Television and Radio Receivers by Turnover Sizeband

(£000 and number), 2003 25

Wholesalers and Retailers of Electrical Household Appliances and Radio and Television Goods 26

Table 16: Number of UK VAT-Based Enterprises Engaged

in the Wholesale and Retail of Electrical

Household Appliances and Radio and Television Goods

by Turnover Sizeband (£000 and number), 2003 26

Employment 26

Manufacturers of Radio and Electronic Goods and of Television and Radio Receivers 26

Table 17: Number of UK VAT-Based Local Units Engaged in the Manufacture of Radio and Electronic Goods and of

Television and Radio Receivers by Employment Sizeband (number), 2003 27

Wholesalers and Retailers of Electrical Household Appliances and Television Goods 27

Table 18: Number of UK VAT-Based Local Units Engaged in the Wholesale and Retail of Electrical Household Appliances

and Radio and Television Goods by Employment Sizeband (number), 2003 28

Regional Variations in the Marketplace 28

DISTRIBUTION 28

HOW ROBUST IS THE MARKET? 29

LEGISLATION 29

Waste of Electronic and Electrical Equipment Directive 29

Restriction on Use of Certain Hazardous Substances in Electrical and Electronic Equipment 29

Energy Consumption 29

key TRADE ASSOCIATIONS 30

British Audio Dealers' Association 30

British Federation of Audio 30

The Digital Radio Development Bureau 30

The Digital Television Group 30

Institution of Electrical Engineers 30

Intellect 31

Recycling Electrical Producers Industry Consortium 31

4. Competitor Analysis 32

THE MARKETPLACE 32

MARKET LEADERS 32

Table 19: Selected Leading Companies in the UK Household

Appliances (Brown Goods) Market by Turnover

and Pre-Tax Profit (£000), 2002/2003 32

MANUFACTURERS AND WHOLESALERS/IMPORTERS 33

AIWA (UK) Ltd 33

Company Structure 33

Current and Future Developments 33

Financial Results 33

JVC (UK) Ltd 34

Company Structure 34

Current and Future Developments 34

Financial Results 34

LG Electronics UK Ltd 34

Company Structure 34

Current and Future Developments 34

Financial Results 34

Pace Micro Technology PLC 35

Company Structure 35

Current and Future Developments 35

Financial Results 35

Philips Electronics UK Ltd 36

Company Structure 36

Current and Future Developments 36

Financial Results 36

Samsung Electronics (UK) Ltd 36

Company Structure 36

Current and Future Developments 36

Financial Results 37

Sharp Electronics (UK) Ltd 37

Company Structure 37

Current and Future Developments 37

Financial Results 37

Sony United Kingdom Ltd 37

Company Structure 37

Current and Future Developments 38

Financial Results 38

RETAILERS 38

Dixons Group PLC 38

Company Structure 38

Current and Future Developments 38

Financial Results 38

KESA Electricals PLC 39

Company Structure 39

Current and Future Developments 39

Financial Results 39

OUTSIDE SUPPLIERS 39

Chemicals 39

Electronic Components 39

MARKETING ACTIVITY 40

Main Media Advertising Expenditure 40

Table 20: Main Media Advertising Expenditure

of Entertainment and Media Companies (£000),

Years Ending December 2002 and 2003 40

Table 21: Main Media Advertising Expenditure

on Brown Goods by Product Sector (£000),

Years Ending December 2002 and 2003 41

Television Sets and Satellite Systems 41

Table 22: Main Media Advertising Expenditure on Television Sets and Satellite Systems by Selected Product (£000),

Year Ending December 2003 42

Other Product Sectors 42

Current News and Promotions 42

AIWA (UK) Ltd 42

Bose Ltd 42

Koninklijke Philips Electronics NV 42

Pioneer GB Ltd 43

Other Forms of Advertising 43

Sponsorship 43

Exhibitions 43

CeBIT 43

electronicsAmericas 43

Hi-Fi Show and AV Expo 43

IFA 43

International Consumer Electronics Show 43

Nepcon Europe 44

Stuff Live 44

5. Strengths, Weaknesses, Opportunities and Threats 45

STRENGTHS 45

WEAKNESSES 45

OPPORTUNITIES 45

THREATS 46

6. Buying Behaviour 47

HOUSEHOLD EXPENDITURE ON AUDIO-VISUAL EQUIPMENT 47

Expenditure by Gross Income Decile Group 47

Table 23: Average UK Weekly Household Expenditure

on Audio Equipment, Accessories, CD Players, Televisions,

Video Cassette Recorders and Computers by Gross Income Decile Group (£), 2001/2002 47

Expenditure by Age 47

Table 24: Average UK Weekly Household Expenditure

on Audio Equipment, Accessories, CD Players, Televisions,

Video Cassette Recorders and Computers by Age of Head of Household (£), 2001/2002 48

Consumer penetration 48

Household Penetration of Televisions 48

Table 25: Number of Televisions Present per Household

(% of households), 2003 49

Table 26: Penetration of Televisions (% of households), 2003 49

Household Penetration of Video Cassette Recorders and Digital Versatile Disc Players 51

Table 27: Ownership of Video Cassette Recorders and Digital Versatile Disc Players (% of households), 2003 51

Table 28: Penetration of Video Cassette Recorders and Digital Versatile Disc Players (% of households), 2003 52

Table 29: Usage of Video Cassette Recorders and Digital Versatile Disc Players (% of households), 2003 53

Household Penetration of Satellite, Cable and Digital Television 53

Table 30: Penetration of Satellite, Cable and Digital Television (% of households), 2003 54

7. Current Issues 55

Corporate activity 55

KESA Electricals PLC 55

Koninklijke Philips Electronics NV 55

LG Electronics Inc 55

Pace Micro Technology PLC 55

Sony Corporation 55

NEW PRODUCTS 56

Awards 56

IMPORTANT CHANGES IN THE MARKETPLACE 57

FREEVIEW 57

Digital Radio 58

Extended Warranties 58

8. The Global Market 59

MANUFACTURING 59

RETAIL MARKET 59

SELECTED PRINCIPAL GLOBAL COMPETITORS 60

Koninklijke Philips Electronics NV 60

Hitachi Ltd 60

Matsushita Electrical Industrial Company Ltd 60

Pioneer Corporation 61

Samsung Electronics Company 61

Sharp Corporation 61

Sony Corporation 62

9. Forecasts 63

introduction 63

Forecast Economic Trends 63

Population 63

Table 31: Forecast UK Resident Population by Sex

(000), 2004-2008 63

Gross Domestic Product 63

Table 32: Forecast UK Gross Domestic Product

in Real Terms (%), 2004-2008 64

Inflation 64

Table 33: Forecast UK Rate of Inflation (%), 2004-2008 64

Unemployment 64

Table 34: Forecast Actual Number of Unemployed

Persons (million), 2004-2008 65

forecasts 2004 to 2008 65

The Future for UK Electronics Manufacturers 65

The Future for Products 65

Projected Value 66

Table 35: The Forecast UK Household Appliances

(Brown Goods) Market by Sector by Value at Current Prices (£m at rsp), 2004-2006 66

10. Company Profiles 68

Lg Electronics Uk Ltd 69

Pace Micro Technology Plc 71

Panasonic Uk LTd 73

Philips Electronics Uk Ltd 75

Samsung Electronics (uk) LTd 77

Sharp Electronics (uk) LTd 79

Sony United Kingdom Ltd 81

11. Further Sources 83

Associations 83

Publications 83

General Sources 84

Government Publications 84

Other Sources 84

Bonnier Information Sources 85

EXECUTIVE SUMMARY

The retail value of the total market for household appliances (brown goods) as covered by this report stood at £4.46bn in 2003, representing a 15.1% increase between 2002 and 2003. This growth was largely attributable to an escalation in value sales of digital versatile disc (DVD) players and the more expensive DVD recorders. Ignoring this product category, overall growth was a more modest 8.2%.

The UK is the world leader in digital television with the highest uptake in the world - twice the European average. According to the Office of Communications (Ofcom), the media and communications industry regulator, by 31st December 2003, 50.2% of UK households were reached by digital television.

The industry is characterised by high levels of new product development (NPD), with manufacturers constantly striving to introduce products incorporating the latest technological advances. However, such products can initially seem less than consumer-friendly and would-be customers often prefer to delay purchase while early problems are resolved. The take-up of DVD recorders (as opposed to DVD player-only machines), for example, has been hindered by consumer confusion over which recording format of the five currently used by manufacturers to opt for, bearing in mind that discs recorded in one format cannot always be played on another machine.

The worlds of computing and consumer electronics are moving ever closer and PCs are fast becoming part of many home-entertainment systems. While the hard drive in the home has traditionally been located in the PC, it is now expanding into consumer electronic products such as MP3 players. Hard drives for consumer electronics products were estimated to number 18.2 million units in 2003, expanding to 84.4 million by 2008, with personal video cassette recorders (VCRs) accounting for almost half the market. Although this report does not include computer-based equipment, it must be mentioned as the future is one of converged products. As such, it is difficult to estimate the future value of an industry currently in the early stages of massive change.

The principal competitors in the home entertainment industry are huge multinationals, some of which incur significant pre-tax losses on massive turnovers in a business that is characterised by low margins and brutal competitiveness. Some overseas companies have been tempted by regional grants to invest in production facilities in the UK, only to now be found unloading low-margin businesses to others. Samsung's factory in Billingham is a recent casualty as, in January 2004, the Korean company announced that it was to close, with the loss of 425 jobs, as the factory could not compete with the cheap labour costs to be found in Eastern Europe. As in other areas of manufacturing, the industry in the UK is concentrated on research and development (R&D) and on producing quality, high-end value goods

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Last updated by Amanda Porteous June 2004