Despite an increase in consumer spending, headphone manufacturers will continue to move to countries where labor costs are low
Los Angeles, California (PRWEB) November 16, 2011
In the five years to 2016, the Headphone Manufacturing industry will echo a rebound in economy-wide consumer spending, according to a new report from IBISWorld, the nation’s largest publisher of industry research. The US Headphone Manufacturing industry will also benefit from the continued adoption of MP3-enabled cell phones, with in-ear headphones becoming increasingly popular during the past five years. Nevertheless, the industry will continue to have trouble as import penetration increases. Furthermore, the rising price of commodities, including plastic materials and copper, will limit profit growth during the next five years.
According to IBISWorld, revenue from the Headphone Manufacturing industry in the US has declined in the five years to 2011. A decline in consumer spending and fast-paced offshoring has caused a steep revenue reduction for the industry, affecting industry operators like the Bose Corporation, headquartered in Framingham, MA. According to IBISWorld, revenue for Bose's headphone segment is expected to decline at an over the five years to 2011. Bose manufactures auto sound systems, home stereo speakers, music systems, PC sound systems, headphones and professional loudspeakers.
Despite an overall decline, headphone manufacturers have taken advantage of some key trends during the past five years. In-ear headphones have increased in popularity as MP3-enabled cell phones have become more ubiquitous. Headphone companies have also increasingly relied on marketing and brand development, using celebrity-endorsed products to promote sales. This trend, coupled with rising consumer expenditure, is expected to boost industry revenue in 2011.
According to IBISWorld, despite an increase in consumer spending, headphone manufacturers will continue to move to countries where labor costs are low. US manufacturing has long been vulnerable to cheap imports and the establishment of facilities in countries where labor costs are lower. As advancements in technology and transportation have made it cheaper to transport goods, the propensity for US firms to outsource manufacturing in order to focus on marketing has heightened.
More manufacturers are moving their production facilities overseas. Similarly, many companies primarily focus on marketing their headphones and use third-party manufacturers. Consequently, a number of new headphone brands that are based in the United States manufacture their products overseas. While these brands have achieved moderate success, they do not directly contribute to industry revenue. In the five years to 2011, offshoring has caused the number of firms operating in the domestic market to decline. Many products that have been outsourced and offshored are low-margin products. Consequently, industry profit margins have increased marginally in recent years, despite the rising cost of raw materials, which include copper and plastic.
In the five years to 2016, the headphone manufacturing industry revenue is expected to increase to $1.18 billion. According to IBISWorld analyst, Kevin Culbert, while import penetration will continue to eat into domestic production, the industry will benefit from an increase in consumer spending during the short-term. “Companies will further rely on celebrity endorsements and lifestyle-based marketing,” says Culbert. Nevertheless, these factors will ultimately give way to imports, which are forecast to increase as a proportion of domestic demand.
For more information, download the full report from IBISWorld on the headphone manufacturing industry
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