Malaysia Consumer Electronics Report Q3 2012

BMI projects that Malaysian consumer electronics spending will grow by about 6% in US dollar terms during 2012 to US$14.2bn, with a sharp moderation in consumer demand apparent in early 2012.We still expect that will remain relatively robust in key consumer electronics product segments such as LED TV sets and smartphones. However, growth in consumer goods imports slowed for the fourth consecutive month from 33.1% y-o-y in September to 19.9% in December and growth in outstanding credit card balances has also remained on a steady downtrend since January 2011. We expect this trend to continue as growing concerns over the outlook for employment in the export sector weigh on consumer confidence. Malaysia has also emerged as one of the fastest-growing regional smartphone markets and vendors will look to product innovation to drive revenue, with growth areas also including tablets and smart TV sets. Headline Expenditure Projections Computer hardware sales: US$2.6bn in 2011 to US$2.7bn in 2012, +5% in US dollar terms. Forecast in US dollar terms unchanged, despite an expected moderation in economic growth and PC sales will be supported by the government's push for greater broadband penetration. AV sales: US$3.7bn in 2011 to US$4.0bn in 2012, +8% in US dollar terms. Forecast in US dollar terms unchanged, with TV sets expected to provide the most dynamic development. Handset sales: US$1.4bn in 2011 to US$1.5bn in 2012, +7 in US dollar terms. Forecast in US dollar terms unchanged with smartphones the main revenue growth driver. Risk/Reward Rating: Malaysia’s score was 62.5 out of 100.0, which gave it fourth place in our latest Asia CE RRR table. BMI expects rising Malaysia to remain a growth market, with rising penetration of consumer electronics devices such as smartphones and flat-screen TV sets. Key Trends & Developments

In 2012 Malaysian PC sales will be supported by the government's push for greater broadband penetration and it has set an optimistic target of 75% by 2015. Malaysia's IT market is distinguished by a marked digital divide, which effectively creates two separate markets. In the Klang Valley area around Kuala Lumpur, a mature urban population surpasses even some developed nations in terms of IT adoption on some indicators.

A combination of new technologies such as 3D and internet-enabled TV, and more competitive pricing, should help support AV demand. Overall TV set sales growth has been declining in volume terms during the past few years because of increasing competition from other multimedia devices such as computers and mobile phones. The growing popularity of digital TV and pay-per-view will drive revenue growth, due to the greater proportion of sales accounted for by high-end LCD, LED and plasma models.

Half the handset market is made up of the youth segment, defined as those who are younger than 24. This segment is therefore a key target for handset vendors and operators. The youth demographic regards handsets principally as lifestyle devices and are mainly prepaid subscribers Competition among the leading operators has intensified, with all three offering a broader range of product offerings and packages.