Despite strong demand for computers, US production will continue to plummet
Los Angeles, CA (PRWEB) January 05, 2013
The Computer Manufacturing industry is being rapidly supplanted by imports, particularly from China. While import penetration in this industry stood at 50.7% in 2007, imports are expected to satisfy an estimated 68.6% of domestic demand in 2012. According to IBISWorld industry analyst Andrew Krabeepetcharat, “as a result of offshoring by US-based companies and increased competition from international firms, domestic manufacturing activity has declined.” Over the five years to 2012, industry revenue is expected to fall at an average annual rate of 5.1% to $36.8 billion, including a drop of 11.1% in 2012 alone.
The industry's woes cannot be blamed on a lack of demand. In fact, the share of US households that own at least one computer increased by 7.5 percentage points from 2007 to 2012. While demand has grown, fierce competition and widespread product homogeneity (the result of computers being assembled from standardized components) have led to falling prices and, consequently, profit margins. Computer and peripheral equipment prices fell at an average rate of 6.0% annually from 2007 to 2012; as a result, personal computer (PC) sales are estimated to generate razor-thin margins of 1.0% in 2012. Meanwhile, the more profitable products sold by this industry, like computers, help bring up the Computer Manufacturing industry's average profit margin to 3.8% of revenue in 2012.
“Further troubles have arisen from Apple's introduction of a product that has cannibalized its own laptop market,” says Krabeepetcharat. The iPad, which sold three million units in just 80 days after launching in June 2010, proved the tablet computing market's viability. Due to its enormous success, other companies like Google and Amazon have developed their own tablets, which are gaining popularity. However, all tablets are manufactured abroad, and therefore do not contribute to this domestic industry's financial performance. Instead, they act as a competitive force to domestically produced computers. As competition from abroad and new technology continues to put pressure on profitability, major operators will aggressively pursue mergers and acquisitions to diversify into more profitable product segments. Consolidation will only push the industry’s already high market share concentration even higher.
While the emergence of new products and services will boost demand for computers, US manufacturers are not expected to produce the required hardware. Major manufacturers make computers abroad to take advantage of lower labor costs and be close to semiconductor manufacturers, which produce essential computer components. As the levels of standardization and price competition increase, industry revenue and profit margins will continue to come under pressure. Consequently, IBISWorld projects that revenue will fall consistently through 2017. For more information, visit IBISWorld’s Computer Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures and assembles personal computers (PCs), laptops and servers. Operators typically purchase computer components (e.g. motherboards and graphics cards) from dedicated manufacturers in other industries (IBISWorld report 33441a, Semiconductor and Circuit Manufacturing). This industry does not include tablet computers, nor does it include manufacturers of computer monitors, mice, keyboards and printers (IBISWorld report 33411b, Computer Peripheral Manufacturing).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.