Companies in the consumer electronics sector are facing difficult times. Panasonic (its owner Matsushita), Samsung, LG Electronics, Sony and Philips are all experiencing a rocky ride. The marketplace...

Companies in the consumer electronics sector are facing difficult times. Panasonic (its owner Matsushita), Samsung, LG Electronics, Sony and Philips are all experiencing a rocky ride. The marketplace is crowded and the struggle to stay one step ahead of competitors is relentless. Philips was in 2004 rumoured to be considering cutting down or even abandoning its consumer electronics offerings. The Philips consumer electronics unit is Europe’s biggest and generates more than a quarter of group revenue, but has consistently low profit margins. In the same year, Samsung blamed a 42 per cent profit drop on falling mobile phone margins and tumbling prices for flat-screen televisions. So, how have these electronics manufacturers found themselves in such a precarious situation? The fact is, while consumer demand for new products is high, once a product has been out for a few years prices have to be slashed to shift units. Major supermarket chains are selling equipment from smaller, niche suppliers at low prices resulting in major manufacturers being forced to cut prices to compete. The period between the launch of a new consumer electronics product and its reaching rock bottom price seems to be ever-decreasing. When the VHS video recorder was launched in the late 1970s, prices remained high for many years. DVD players, however, took a comparatively short time to drop from their entry price. Plasma televisions have also been steadily dropping in price since their release. Multi-billionaire Microsoft founder Bill Gates said this year the digital evolution of technology is progressing faster than expected. This may be good news for consumers, but what does it mean for manufacturers? It means they have to stay on their toes and always be ready to produce and market the ‘next big thing’, almost before it has been invented. It also means they have to keep watching their costs. A cheap workforce becomes a necessity rather than an option when profit margins become so narrow. For instance, Matsushita, which makes Panasonic and Technics products, closed its television factories in Wales in 2004 and relocated the jobs to the Czech Republic. Sony cut hundreds of jobs at its plants in Wales in 2005.