Mexico Consumer Electronics Report Q3 2012

BMI projects that Mexican consumer electronics spending will grow by about 8% in US dollar terms in 2012 to US$12.8bn, slower than previously forecast, due to an uncertain economic outlook. In 2011 the Mexican consumer base started to show signs of a modest recovery, with consumer confidence and credit trending upwards, despite continued economic headwinds. Demand also benefited from the minimum wage being raised 4.1%, although this effect has tapered off. In 2012, growth of remittances remains weak. The US economy is sluggish and credit growth is expected to tighten. However, we expect continued demand for flat-screen TV sets, tablets and notebooks, and smartphones, to be driven by product innovation and growing affordability.

Headline Expenditure Projections Computer hardware sales: US$6.5bn in 2011 to US$7.0bn in 2012, +7% in US dollar terms. Forecast in US dollar terms downwardly revised due to macroeconomic factors and following stronger than expected retail sales growth in H211.

AV sales: US$1.9bn in 2011 to US$2.0bn 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$3.5bn in 2011 to US$3.8bn in 2012, +9% in US dollar terms. Forecast in US dollar terms unchanged, with smartphones the main revenue growth driver.

Business Environment Rating: Mexico’s score was 51.3 out of 100.0, which gave it fourth place in our latest Americas CE RRR table. BMI expects rising penetration of consumer electronics devices such as smartphones and flat-screen TV sets.

Key Trends & Developments • A significant growth opportunity exists in provincial areas and second-tier cities, where multinational vendors are now trying to strengthen distribution. Mexico's under-penetrated southeast region is expected to offer growth opportunities over BMI's five-year forecast period, particularly in the public sector.

• Digital TV sets will account for of the majority of sales by 2016 and TV revenue will account for a similarly high portion of total AV demand. Mexico has one of the region’s highest TV household penetration rates, but continued growth should be driven by increased demand for multiple set ownership.

• Operator promotions have played an important role in driving the high-end phone market Smartphone/PDA sales are expected to grow to US$3.8bn by 2016, with smartphones accounting for more than half of unit sales. Operators reported that demand for smartphones is high and value-added services are driving revenue upwards.