The cap on the number of gaming machines restricts the local sales potential of gaming machine manufacturers
Melbourne, Australia (PRWEB) January 10, 2015
The Gaming and Vending Machines Manufacturing industry is comprised of gaming machine manufacturers, which account for the majority of industry revenue, and vending machine manufacturers. Over the past five years, high local overheads have prompted the offshoring of manufacturing functions to countries with lower wages, and the drop in the number of manufacturing facilities has contributed to weakening industry revenue. Industry players typically maintain small manufacturing activities that produce small batches, and predominantly import components and undertake assembly to suit local requirements. According to IBISWorld industry analyst Nick Flores, “the cap on the number of gaming machines restricts the local sales potential of gaming machine manufacturers.” As a result, industry revenue is forecast to drop by an annualised 0.7% in the five years through 2014-15, including a fall by 1.9% in 2014-15 to $359.9 million.
Vending machine manufacturing has declined due to strong import penetration, which has been exacerbated by the strong Australian dollar over the majority of the past five years. A strong dollar makes imports cheaper and exports less affordable, thereby negatively affecting the industry. “Research and development costs are increasing, which is indicative of firms gravitating towards high value-added products that are more likely to have a competitive advantage,” says Flores. Profit margins declined in the past five years in light of slowing sales coupled with rising research and development expense. In the next five years, the industry is projected to exhibit moderate levels of consolidation, as firms operating at a loss gradually exit the industry. The trend of offshoring is expected to continue but at a slower pace, as firms transition to focus on niche segments that have higher profit margins. Gaming machine companies are projected to continue to ramp up research and development expenditure as the industry investigates the viability of integrating online gambling with current gaming machines in light of government regulations. Vending machine demand is expected to strengthen as firms innovate on new features and products.
The Gaming and Vending Machines Manufacturing industry exhibits high market share concentration. Given the high level of barriers to entry, it is not surprising that the industry is controlled by a few major players. IBISWorld forecasts that concentration will begin to fall as more manufacturing is outsourced overseas, leaving room for smaller companies. Greater emphasis on local development indicates firms are producing in small batches, which provides opportunities for smaller firms, given the absence of economies of scale.
For more information, visit IBISWorld’s Gaming and Vending Machines Manufacturing industry in Australia report page.
Companies in this industry primarily manufacture gaming and vending machines. Gaming machines are broadly defined as any machine that serves the purpose of gaming and offers a potential return on a single game that is greater than the amount risked on that game. Vending machines refer to automated machines that are operated by coin, cash or credit card and dispense various packaged goods.
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