Boston, MA -- (SBWIRE) -- 12/27/2012 -- BMI View: We expect the Taiwan consumer electronics market will grow by around 3% in 2012, with demand affected by supply-side constraints and an uncertain economic outlook. Due to Hard-Disk Drive shortages resulting from the Thailand floods in late 2011, Taiwan PC market sales slid into negative growth territory in Q411 and we believe that Taiwan's economy is set to face further weakness in 2012. However, demand for certain high-end product categories including smartphones and LED and 3D TV sets should help to drive growth. Smartphones accounted for above 50% of handset shipments in 2011, while LED TV sets comprised about 20% of LCD TV set sales in and will continue to rise.

Headline Expenditure Projections

- Computer sales: US$5.0bn in 2011 to US$5.1bn in 2012, +2% in US dollar terms. Forecast in US dollar terms unchanged but tablets are expected to provide a growth area in 2012.
- AV sales: US$1.6bn in 2011 to US$1.7bn in 2012, +4% in US dollar terms. Forecast in US dollar terms unchanged, with the main driver being production innovation such as smart and 3D flat-screen TV sets.
- Handset sales: US$1.7bn in 2011 to US$1.8bn in 2012, +10% in US dollar terms. Forecast in US dollar terms unchanged after continued strong growth in smartphone sales.

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Risk/Reward Rating: Taiwan's score was 60.7 out of 100.0, with high Country Risk and Market Risk scores compensating for a relatively small market size. Taiwan is in sixth place in our latest Asia CE RRR table, ranking behind Hong Kong and Singapore, but ahead of regional tech peers South Korea and Malaysia.

Key Trends & Developments

- Local TV vendors reported increased LCD TV sales in July and expected to see continued increases throughout August, due to the Taiwan government's programme of subsidies for a range of energy-saving home appliances, including LCD TVs. The subsidy of TWD2,000 (about US$60) was available for LCD TV sets with screen sizes of 32 inches or above. Vendors responded by launching aggressive promotions models that were eligible for the subsidies.
- In H112, the Taiwan PC market was forecast to be affected by parts shortages, resulting from the Thai floods of late 2011. Thailand is the world's largest producer of hard-disk drives, and the natural disaster there led to supply bottlenecks in the global PC industry chain. This caused Taiwan PC sales to slip into negative growth territory in Q411, and in H112 sales are expected to be down by around 3-4% year-on-year (y-o-y) before picking up in H212.
- Smartphone users' ARPU is nearly two times the level of non-smartphone users, providing a strong incentive for Taiwanese operators to migrate its installed user base to smartphones. In Q212, Taiwan Mobile reported that smartphones accounted for 74% of total handsets sold, with mid- to lower-end products (defined as retailing at price points below TWD9,000) making up 45%..

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