Hungary Consumer Electronics Report Q3 2012

BMI expects the Hungarian CE market will grow by around 2% in 2012, which is a deceleration compared with 2011. The Hungarian consumer faces yet another tough year in 2012, as fiscal austerity, tighter credit conditions, weakening confidence, a still-large overhang of debt and elevated unemployment level all pose major challenges to households. However, the Hungarian consumer electronics market still has considerable latent growth potential. Home computer penetration remains low compared with peer group countries for example – only slightly higher than Romania and Bulgaria – while internet penetration is also relatively low as a percentage of households.

Headline Expenditure Projections Computer sales: US$1.26bn in 2011 to US$1.27bn in 2012, +0.8% increase in US dollar terms. Forecast in US dollar terms unchanged after sluggish sales in 2011, but faster growth expected in 2013. AV sales: US$785mn in 2011 to US$813mn in 2012, +4% in US dollar terms. Forecast in US dollar terms unchanged, with growing penetration of digital TV driving demand for flat-screen TV sets.

Handset sales: US$285mn in 2011 to US$303mn in 2012, +6% in US dollar terms. Forecast in US dollar terms unchanged, but operator promotions are driving sales of smartphones. Risk/Reward Rating: Hungary’s score was 45.5 out of 100.0. Hungary took 5th place in our latest RRR table, behind the Czech Republic and Poland, but still ahead of emerging markets Bulgaria, Serbia and

Croatia. Key Trends & Developments Telecoms operators reported solid growth in mobile broadband subscriptions in 2011 and this trend should help to support sales of mobile connectivity devices such as tablets and notebooks, which are bundled with service contracts. Credit is still tight throughout the economy however, and should the forint depreciate significantly further, consumers would be subject to considerable pressure, which in turn would depress spending.

While about 99% of Hungarian households have TV sets, there is a trend for multiple sets, with half of households having at least two sets. Flat-screen TV sets will be the main driver of AV category sales growth over the forecast period as consumers upgrade and trade their old models for digital. The market for analogue TV sets has collapsed dramatically over the last few years, coinciding with the economic crisis. Meanwhile the number of digital television subscriptions in Hungary is steadily increasing and rose to 712,000 in February 2012, according to official data.

Demand for smartphones and higher-end models should mitigate handset revenue stagnation, despite the slowing subscriber growth rate. Operators will drive the market for smarpthones as they introduce new models to attract high-end subscribers and boost data usage. However promotions and discounts on handsets will restrain revenue growth.