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Practical Guide to the Consumer Electronics Market in China

It is hard to imagine our daily lives without a smartphone to communicate, a computer to work or headphones to listen to our favorite music. Products such as these, used in our daily routines, are classified as consumer electronics and are designed for communication, entertainment, or information purposes.

The consumer electronics market in China reached a value of $28 billion in 2021, a 9% increase from the previous year. The market size in the region saw a compound annual growth rate of 0.6% from the period 2017-2021, making China one of the major buyers of consumer electronics in the world.

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In 2022, the Consumer Electronics (CE) market experienced a minor contraction primarily due to the market saturation of smartphones and a rebound in the demand for computing devices compared to the previous year. This dip in the market was also attributed to the economic slowdown, surging inflation rates, and increased energy prices, which contributed to decreased consumer spending on home entertainment equipment.

Overall, the Consumer Electronics market in China generated a total revenue of US$987 billion in 2022, representing a 4.4% decline from the previous year.

In 2021, the demand for CE improved as the covid wave boosted demand for communications and entertainment devices such as mobile devices, TV, and laptops. Additionally, both brick & mortar and online businesses resumed their operations after a duration of almost two years.

In recent decades, the digitalization of CE devices increased exponentially – a phenomenon that is set to continue with the rise of products utilizing the internet and communicating with each other.

Today, electronic devices are not only more technologically advanced, but also available at a range of price points, and are more diverse in their functionality. Segments of the market include TVs, PCs, tablets, smartphones, wearables, speakers and headphones, digital cameras, gaming consoles, and augmented reality (AR) and virtual reality (VR) devices.

The rapid urbanization and growth in the disposable income of Chinese citizens have made China one of the major buyers of consumer electronics in the world. Additionally, the technological advancement in the region has boosted local players in the manufacturing of consumer electronics.

The CE market is dominated currently by established companies, such as Apple, Samsung, Huawei, and Sony. These firms maintain a strong position in various product categories, including smartphones, televisions, home appliances, and gaming consoles.

However, emerging players are gaining traction in the market, with Xiaomi being a prime example. Known primarily for its smartphones, Xiaomi has been making notable progress in the industry. Other popular brands in the Chinese consumer electronics industry are Konka and Oppo.

After the 2022 slowdown in all segments of the CE market, analysts expect a recovery in 2023. The TV market recorded last year 240 million-unit sales – a number forecast to increase, supported by the development of advanced TV technologies, such as 8K TVs, and smart and connected TVs.

Smartphone and tablet market revenues decreased in 2022, though the smartphone market size is expected to rebound in 2023. The tablet market is estimated to continue to shrink for the next couple of years.

The market share of mobile phones in China as of the most recent quarter of 2023 is led by Huawei, which recorded 25.70%. It is followed by Apple with 22.83%. Next to them are Xiaomi, Vivo, and OPPO, with market shares at 8.08%, 7.53%, and 5.42%, respectively. Except for Apple, the top 5 brands in China are Chinese-owned companies.

According to the IDC Worldwide Quarterly Mobile Phone Tracker, 285.8 million smartphones shipped in China in 2022, down 13.2% year-on-year (YoY) to below the 300 million mark for the first time in ten years. In 4Q22, the market declined 12.6% YoY to 72.9 million units.

Both full-year 2022 and 4Q22 shipments were near their decade-ago levels as the strict COVID policy and the economic slowdown discouraged demand. Even though smartphones are nearly everywhere in China today, the full-year market size neared the level ten years ago when two out of five mobile phone shipments were still feature phones.

Wearable devices, including fitness trackers, smartwatches, and earwear, are relative newcomers to the CE market, and have become popular among consumers.

In 2022, around 490 million wearable units were shipped worldwide, with this number projected to increase in the future. Other newcomers to the CE market are AR glasses and VR headsets, devices used to enhance entertainment experiences such as in gaming or used for collaborative work scenarios. In 2022, VR headset market sales added up to around 19 million units.

Apple is one of the most popular brands worldwide, ranking number one among other consumer electronics companies on the Forbes list with sales of U$378.7 billion as of 2022. The second-largest company by sales was Samsung Electronics, with over U$244 billion in sales the same year.

Apple's signature product, the iPhone, is the company's most profitable item, with sales accounting for around half of Apple's total revenue. Moreover, thanks to its iPad, Apple is the largest tablet vendor, and since the release of its Apple Watch, the firm also leads the wearable market.

Comparatively, Samsung is the world's biggest consumer electronics manufacturer. As a major manufacturer of electronic components such as semiconductors and image sensors, Samsung is also a leading provider to other CE companies including Apple and Sony. Other strong players in the CE market include Sony, Lenovo, LG and Panasonic.

China as a major CE manufacturer in the world:

The term consumer electronics refers to a broad range of electronic equipment with functionalities designed for casual daily use. It includes two product segments – brown goods (communications or entertainment gadgets like TVs, DVD players, smartphones, tablets, and printers) and white goods (housekeeping devices like refrigerators, washing machines, and built-in kitchen systems).

The latter is different from the so-called white label manufacturing in consumer electronics production. White goods pertain to a product category while white label is a way of producing goods, which involves the manufacture and supply of generic products (flash drives, power banks, phones, monitors and displays) to offshore retailers which resell them under their own labels. While a specific product prototype may be manufactured by specialized suppliers, white label goods are typically similar for a given product category.

China is the world’s largest consumer electronics producer, especially for brown goods product category. It is the world’s most extensive electronics manufacturing ecosystem and supply chain, with more than five times the electronics suppliers based in Japan and a labor force of manufacturing workers close to 150 million.

The COVID-19 pandemic greatly affected not only China but the entire world’s electronics production. This notwithstanding, consumer electronics still topped China’s list of export products in 2020, accounting for 42% of the total electronic exports to the US alone.

The COVID-19 pandemic has had a substantial negative influence on the CE market in many different regions of the world. Factors such as limited availability of raw materials, transportation restrictions, the shutdown of manufacturing facilities, and economic slowdown had a major impact in market growth.

Shipments were impacted during the initial lockdown due to halted automotive production, and stringent government rules. The overall impact of COVID-19 on the industry is estimated to be minimal because the situation has stabilized. Post COVID-19, there was a positive impact on the market growth due to the increased industrial manufacturing processes and rising demand for environment-friendly alternatives.

According to IBISWorld, the global consumer electronics manufacturing industry was valued at U$500 billion in 2022. China’s production corresponds to more than one-third of the global consumer electronics manufacturing output.

Revenue for the Electric Component Manufacturing industry in China increased at an annualized rate of 5.5% over the five years through 2022, to total U$342.9 billion, estimated IBISWorld.

China is the world's manufacturing center for electronic products, such as TVs, computers, and other electronic devices. Subsequently, China's output of certain electronic components is the highest in the world, especially for commonly used and medium- and low-end electronic components.

The Electronic Component Manufacturing industry in China produces electrical equipment and components (except optical fibers and cables, batteries, printed circuit boards and semiconductors) as inputs for other electronic devices. The industry's products change the electrical signals of the circuit, but do not change the electrical voltage or current.

Some of these products include electric connectors, magnetic elements, capacitors, induction coils, frequency controls and selection elements and sensing components.

The CE industry’s rapid development is attributed to the sophistication of China’s Information and Communication Technology (ICT) sector and greater consumer demand for virtual reality, smart gadgets, and drones.

In terms of large-scale production of consumer electronics, China remains the go-to destination. Shenzhen alone, the so-called “electronics capital of the world,” is home to more than 4,700 national-level high-tech enterprises, 30,000 science and technology companies, 5,000 product integrators and design houses, caters to the white label requirements of majority of the world’s premium consumer electronics brands – Apple, Sony, Nintendo, Dell, Acer, Microsoft, and Huawei – all of which work with Chinese suppliers usually unheard of in the West, with the exception of Foxconn.

China‘s CE production has a comparative advantage over other manufacturing countries. Strong supplier and supply chain infrastructure tops the list of China’s industry strengths, enabling it to fulfill large volume orders at shorter production lead times.

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A smartphone, for instance, requires 2,000 different components – from tiny machine screws and capacitors to circuit boards and LCD screens – all of which are readily sourced from China. This high density of suppliers, ranging from automated high-tech factories like Foxconn to small workshops, makes China’s production capacity more than capable of developing functional prototypes from custom design to production engineering.

China has adopted advanced technologies to optimize its manufacturing ability, investing in smart robotics, cloud data and automated factory technologies as groundwork for industrial upgrade.

A well-developed supply chain makes China an ideal base for consumer electronics manufacturers like Foxconn, Neway, and DJI. Its supply chain management facilities help clients ensure on-time cross-border movement of finished products consistently, allowing shorter lead times.

Potential Problems in China’s Consumer Electronics Industry:

The CE industry is highly competitive, and companies are constantly pushing to bring the newest technology to market first. To succeed, electronics brands must stay ahead of its competitors in terms of research and development, implementation, and production output.

Unexpected problem areas in product development – performance variations, negative reliability test results or faulty designs — increase lead times, making lead time assessment and meticulous planning more imperative.

The procurement process also must be set up in a timely manner and prices reassessed regularly. Flexibility in supplier selection is required to allow for immediate changes in supplier in case of backlogs or failure to deliver components at expected quality or rate. However, these steps are often overlooked by clients, resulting in higher costs and delays.

Without local presence in the region, companies are left without any means to monitor compliance with project timeframes. Delays attributed to disrupted supply chains, design changes or extended failure analysis are not always detected due to lack of transparency, leaving clients with no choice but to de-feature the product or shell out more money to expedite.

Consumer electronics products come with a traditional promise of quality and reliability. The introduction of defective products diminishes branding – recall of Samsung’s Galaxy Note 7 negatively impacted Samsung’s smartphone market share – and results in lost consumer loyalty, costly product recalls, bad customer reviews or even lawsuits.

Quality issues are a normal part of electronics production, even in China’s highly automated manufacturing bases. There are underlying root causes, ranging from frequent design changes during testing, faulty coding implementation or negligent product testing. Poor workmanship is a common complaint against Chinese suppliers.

As products become increasingly complex, they are prone to non-apparent defects. Robust quality assessment of both micro/macro components is critical to ensure product functionality and compliance with technical specifications.

Strict quality standards and product testing must be carried out consistently, as well as supplier assessment to determine if the supplier has proper certifications and licenses from China’s regulatory agencies.

A feasibility study significantly reduces the risks of setting up an offshore production line in China. When companies fail to conduct feasibility assessment before production, they base crucial business decisions on assumptions, not on relevant data. This leads to inaccurate cost estimates, overestimated production speed, higher costs, and schedule delays.

Meticulous planning is critical to effective implementation of a production line in China. Before product development and OEM manufacturing, firms must clearly communicate to suppliers desired product specifications for their technological model – its software algorithms, hardware, appearance, and design.

Setting up offshore production lines in China for consumer electronics is an intricate process. It is highly technical and mandates rigorous supply chain management and strict quality assessment. To stay on track, due diligence and routine checkups with the suppliers are imperative.

Companies with no presence in China often find themselves distraught on how to go through the entire process, from finding the right supplier to producing the product prototype, without compromising quality. Without proper supplier selection, they run the risk of collaborating with suppliers who are ill-equipped to handle large-scale orders or implement product design changes.

Foreign players may encounter the pitfalls of bad contract negotiations, failing to execute a detailed Chinese contract that sets out the terms and condition of their agreement. This makes them vulnerable to contractual breach and incapable of legal enforcement mechanisms in case the supplier’s lack of transparency blindsides them with subpar product quality, under delivery and backlogs.

Certification requirements of the CE market:

Importing or exporting CE products to a European Union member state requires a CE marking, which is not a product standard, but a conformity mark signaling compliance with all applicable EC directives. The specific directives and technical standards differ depending on the type of device.

CE marking is not required when selling into the United States, Australia, or any other market.

CE compliance is therefore critical for both EU-based companies importing goods, and exporters selling to the EU – either as traditional B2B exporters or B2C cross-border eCommerce sellers.

As each EC directive regulates specific products, their scope of regulation varies. Some EC directives regulate substances, while others regulate energy efficiency and electrical safety. Some directives also cover product and packaging labeling, other than the CE mark itself.

China’s Compulsory Certification (CCC) mark is the equivalent to Europe’s CE-mark. CCC was established more than a decade ago and is mandatory for both foreign and domestically produced products in China. Products can’t be affixed with a CCC-mark until they fulfill all mandatory standards required.

The application process for the CCC mark can take several months and an authorized Chinese laboratory must test the products. Factory inspections must be performed by Chinese officials and in most cases, third party performed tests can’t be approved.

Products that need CCC certification can belong to the following product categories (not all are included): Electrical wires and cables, circuit switches, electric devices for protection or connection, low-voltage Electrical Apparatus, household and similar electrical appliances, information technology equipment, motor vehicles, toys, and medical devices.

Short articles

The Chinese standards are divided into four different types called National standards, Professional standards, Local standards, and Enterprise standards.

The national standards are so-called GB-standards (Guobiao-standards) and often derive from international standards like ISO or IEC. Despite that, it is not sufficient for a product to meet only international standards.

The professional standards are used if there’s no National standard existing, local or provincial standards are valid in a specific area, while enterprise standards are used (and sometimes created) by single companies.

The China Inspection and Quarantine (CIQ) and AQSIQ (The General Administration of Quality Supervision, Inspection, and Quarantine) are the two main authorities that manage registrations and inspections of goods that enter or leave China.

Since 2018, the State Market Regulatory Administration (SMRA) oversees four different authorities:

The State Intellectual Property Office (SIPO)

The Food Safety Commission of the State Council (FSC)

The Certification and Accreditation Administration (CNCA)

Standardization Administration of China (SAC)

Nowadays, GACC (the customs) are solely managing the CIQ division. Thus, SMRA and GACC are the two authorities that manage all operations related to imports and exports, including quality standards and inspections.

It’s crucial that to maintain good relationships with the two if your company is to import and export successfully to/from China.

According to experts, the latest trends and technologies, including the popularity of smart homes and virtual reality, will continue to fuel the CE market in the coming years, thus creating interesting opportunities for the sector to expand.


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