What is the growth rate of the electronics sector?

The electronics sector is typically divided between consumer electronics, electric utilities, and general electronics. Consumer electronics drive most of the growth in the sector, however. According to the “Global Electronic Components Market 2020 Research Report,” the global market for electronic components is predicted to grow at a compound annual growth rate (CAGR) of about 4.8% from 2020 to 2025.

A few main drivers of future consumer electronics growth include smartphones’ mass adoption, smart wearables, smart devices and equipment, artificial intelligence, voice recognition technology and virtual assistants, and any equipment Internet Of Things related (IoT), as well as the replacement cycles and dropping prices of many electronics devices to encourage continued consumption.

Predictions from Consumer Technology Association (CTA)

The Consumer Technology Association (CTA) is the leading voice in consumer electronics and technology sector forecasting. The CTA represents more than 2,200 technology companies. Originally named the Consumer Electronics Association (CEA), the association changed its name in 2015—substituting “electronics” with “technology”—to reflect how the electronics sector has evolved to intersect with multiple industry sectors, including software, app development, robotics, artificial intelligence (AI), streaming services, personalized health care, and more.

In January 2020, the CTA predicted U.S. consumer technology retail revenue would be $422 billion, a 4% year-over-year (YOY) growth compared to 2019. This includes sales from both standard consumer electronics revenue powerhouses—such as laptops, smartphones, and televisions—along with revenue from emerging technologies and streaming services.

The Impact of Emerging Technologies on the Electronics Sector

Product differentiation and development of emerging technologies is a significant driver of change in the electronics sector. In addition to artificial intelligence and voice recognition, other products adding to the continued growth include wearables (e.g. smartwatches), smart speakers, home automation, connectivity technology, and drones.

Smart Home Products

According to CTA, consumer demand for smart home products is on the rise. These products address concerns people have for home security and safety. The niche includes a growing number of products, such as smart locks, doorbells, and cameras; smart smoke and carbon monoxide detectors; and smart switches, dimmers, and outlets. In 2020, sales for the category are expected to reach $4.3 billion, a 15% year-over-year increase.

Smart Speakers

Two of the dominant products in the voice-controlled smart speaker niche—Google Home and Amazon Echo—are projected to rake in $4.2 billion in revenue in 2020, a 5% year-over-year growth. The two companies are projected to sell 9 million units as consumers continue to discover the benefits of voice-controlled technology.

Smartwatches

Consumers can expect to see more sophisticated smartwatches available in 2019 as manufacturers look to lessen the emphasis on basic trackers in favor of those with advanced features. This shift is projected to boost revenue to $4.7 billion in this consumer electronics niche, a healthy 19% increase from 2018.

Drones

The drone market is expected to see modest but steady growth in 2019. Sales are projected to grow by 4% to just over $1 billion, while units sold should also increase by 4% for a total of 3.4 million units sold for the year.

Semiconductor Growth

Less well known than consumer electronics is the semiconductor industry, which is also part of the electronics sector. The Semiconductor Applications Forecaster from International Data Corporation (IDC) shows an expected decline to $440 billion in 2019, down 7.2% from $474 billion in 2018. This comes on the heels of three consecutive years of semiconductor growth, with year-over-year growth of 13.2% in 2018.

One of the driving forces for this decline was the strong demand of the previous years, which led to manufacturers ramping up semiconductor production and thus causing an oversupply. The forecast for 2020, however, projects this supply-demand imbalance will be short-lived. IDC expects semiconductor growth rates will rebound in 2020, estimating a compound annual growth rate (CAGR) of 2.0% from 2018 through 2023, reaching $524 billion in 2023.