Boston, MA -- (SBWIRE) -- 06/24/2013 -- Despite a slowdown in consumption growth in 2013, squeezing the consumer electronics market, Israel's market remains one of the standout markets in the Middle East. There are some downside risks to our outlook, however we continue to expect Israel to outperform the region, with strong government demand for computers and increasing use of smartphones, tablets and hybrids among consumer maintaining a five-year CAGR of 5% for overall market growth. New laws on mobile handset imports will have a notable impact on that segment, encouraging greater volume sales of devices. As demand for smartphones increases, the value of the mobile handset segment will increase as a share of the overall market.

Headline Expenditure Projections

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- Computer Hardware Sales: US$2.62bn in 2012 to US$2.74bn in 2013, up 4.5% US dollar terms. Spending in the consumer segment will be buoyed by new devices, although a squeeze from the rising cost of living will result in a small proportion of consumers delaying upgrades.
- AV Sales: US$503mn in 2012 to US$553mn in 2013, +6% in US dollar terms. Flat-screen TV sets expected to provide the most dynamic development, however the launch of next generation games consoles in Q413 by Sony and Microsoft could prove a fillip to spending.
- Handset Sales: Outperforming segment of the consumer electronics market, rising 11.3% between 2012-2013 to US$415mn. Smartphone demand will drive market growth with values of devices increasing. Growth will remain in double digits between 2012-2014 and then average 9% in the 2015-2017 period.

Key Trends & Developments

In 2012, the Knesset Economic Affairs Committee passed a plan to relax restrictions on importing mobile phones. Previously, cellular phone operators dominated the application process for import approval, and controlled about 80% of phone sales in Israel. The new law should increase the range of handsets available by making it possible for firms to import any cell phone that is approved in the EU or the US. In Q1 2013, Nokia's flagship Windows Phone 8 device, the Lumia 920 arrived in Israel, as did Google's own Nexus 4 device. This represents a deepening of the smartphone market at the top end, while the wider availability of handsets from Chinese vendors including ZTE, which targeted Israel's market in 2012, and Huawei should increase choice in mid-range smartphones.

The launch of Windows 8 in October 2012 symbolises a shift in the PC market by introducing touch functionality. This has seen a range of tablets produced, as well as innovation on the part of Microsoft partners in the notebook segment. Hybrids are expected to only take a small share of total tablet and notebook sales in 2013, but the wave of innovation in multi-use case mobile computing devices will be a more significant factor as vendors continue to experiment with designs and tailor products for wider consumer appeal.

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