Why has investment in consumer electronics increased? The growth of the sector is accelerated by the increase in consumer spending worldwide. As the economy grows, the demand for consumer electronics stocks also grows. Countries that produce electronics now have a strong consumer base that can afford new electronic products.
At the same time, increased competition reduces the costs to produce electronics, making the products even cheaper for private individuals. Let’s look in more detail because consumer electronics should not be ignored in an investment portfolio.
Are they worth investing in?
Yes, because of the growth in the electronics sector in the number and quality of innovations. Companies are spending significant sums on research and development to produce better products and increase the efficiency of the production process.
The supporting role of the electronic sector in providing equipment and components for other industries is also a growth factor, as consumers are demanding more cars, energy-efficient buildings, and medical technologies.
Innovations in consumer electronics
The creation of modern chemical compounds and other materials contributes to technological progress in the industry. Since electronics are using more and more technology and benefiting from improved design, new advances in material synthesis and improved materials are becoming more important for the electronics sector than ever before.
The demand for affordable, high-quality electronics is the main reason for research and development in the materials and chemicals sectors. This, in turn, creates new opportunities for electronics and related industries as these products are reaching new consumers in countries with a market economy. Many of these achievements also improve life expectancy and reduce the impact of new devices on the environment.
This popularity of consumer electronics stocks ensures an advantage for well-known companies because they can use the existing machines and equipment to produce new products.
For example, if Apple wants to launch a new device, the company can use the existing marketing staff, plants, and other tools to support the launch. Any variable costs associated with the release of a new product by Apple would be the same variable costs incurred by a new firm. But the total cost per unit for Apple would be lower since the new company would have to absorb the constant cost of staffing and leased space.
Commodity price volatility
Price volatility is an ongoing problem for companies in the electronics sector. Changes in supply and demand for these materials quickly affect their prices and create a point of financial uncertainty for many companies. Many electronics manufacturers are actively working to find possible material substitutes in case their traditional sources become unreliable. Energy consumption for transporting manufactured and produced materials can also create issues. Any part of the supply chain can lead to additional costs when significant changes in the market influence the raw material and stock prices of consumer electronics companies.
Rising commodity futures prices can force a company to consider making significant changes to the supply chain. If materials impacted by price changes are a major resource for the industry, controlling variable costs can be a concern. This can lead to higher prices for finished goods. E-companies are very sensitive to material price increases and work proactively with suppliers to minimize the risks associated with them.
Impact of new technologies on the electronics sector investments
Product differentiation and the development of new technologies are important changes in the electronics sector. In addition to piece intelligence and voice recognition, other products that contribute to continuous growth include wearable devices (e.g., smart meters), smart dynamos, home automation, plug-and-play technology, and drones. The Gainey team has identified the most promising products for which investments in development are reliable and profitable.
1. Smart house products. Consumer demand for smart home products is growing. These products solve the problems people have with home security and safety. The range includes an increasing number of products such as smart locks, doorbells, and cameras; smart dim and smog detectors; and smart switches, dimmers, and sockets.
2. 3.6 million. The number of household chores that help with household chores, such as piloting and cleaning the plinth, that customers have been using for the last couple of years.
3. Smart speakers. Forecasts show that two home products in the voice network of smart speaker systems – Google Home and Amazon Echo – will generate $4.2 billion in revenues over the past two years, up 5% over a year. Both companies are projected to sell 9 million units as customers continue to discover the benefits of voice control technology.
4. Smarter watch. Consumers can count on the emergence of more sophisticated and intelligent units. Manufacturers are trying to reduce the emphasis on the basic trackers to the benefit of those that have expanded functions. This decline is projected to increase revenues in this consumer electronics industry to $4.7 billion.
5. Drones. We predict that the market for drones will be moderate but stable. Sales, according to forecasts, will grow by 4% and will amount to more than 1 billion dollars.
Investing in consumer electronics
- Entry barriers make it expensive for new companies to enter the market and help protect companies from increased competition.
- Established electronic companies benefit from economies of scale and scope, which makes it easier for them to increase production or launch new products.
- Research and Development (R&D) impedes new companies because they often license the technology of established companies or must tie up large amounts of capital to compete with the patents of established companies.
- The costs incurred for commutations make it difficult and costly for customers to switch from one brand to another.
- Established brand loyalty requires new companies to spend significant sums of money on advertising and advertising to attract customers.
- The electronics industry is the most important part of the industry.
- The distributed part of the electronic sector is becoming increasingly fragmented and competitive, as new participants enter the market, such as online stores and companies that eliminate the middleman, such as Best Buy.
- Through a wide range of materials, which are consumed even on the simplest devices, prices for electronics can fluctuate depending on the commodity markets.
Conclusion
Although the electronic sector is growing, primarily the consumer industry, due to increased sales costs in the markets that are developing. This sector continues to become fragmented and competitive as the landscape changes, new technologies are introduced, and new participants enter the market. As a result, Gainey believes, the prices of shares of electronic companies are likely to become more volatile.
