Scope of the study
For the purpose of the sector study, conducted in 2006,
the sector has been defined by business activities subsumed under NACE
of radio, television and communication equipment and apparatus”.
However, the more recent NACE Rev. 2 (not ratified yet) explicitly uses
the term “consumer
electronics” (Group 26.40: “Manufacture of consumer electronics”)
and has a more consumer-oriented focus than the technology-related focus
of NACE 32.3. The analysis will follow this approach and put the emphasis
on those electronic products and their manufacturing that are intended
for the use by consumers.
Adoption of ICT and e-business in 2006: the statistical picture
- Results from the e-Business Survey 2006 reveal that CE companies are
well-equipped with basic ICT infrastructure. Simple e-business technologies
are widely used. However, more complex ICT systems are less widespread
than could be expected for an ICT-related manufacturing industry.
companies are well equipped with ICT infrastructure. The share
of employees with access to the internet is well above the all-sectors
average. CE companies are also forerunners with regard to the use of
remote access, VoIP, and open source technologies.
ordering is widespread – but mainly with national partners.
The share of CE companies that reported placing or accepting orders
online is above the average of all sectors surveyed. However, most
e-ordering activities take place with national or regional partners.
Financial processes related to international trade are mainly handled “paper-based”.
a small share of CE companies uses e-business technologies to support internal
and external process integration. Software systems as a basis
for internal and external process integration (e.g. ERP and SCM systems)
are not as widespread as could be expected in an ICT-related manufacturing
sector. Only a small share of CE companies has integrated their ICT
systems with those of their customers or suppliers. Finally, only a
marginal share of CE companies reported using XML- or EDI-based e-business
play an important role for product and process innovations. The
share of reported ICT-enabled product and process innovations is clearly
higher than on average in all sectors covered by the e-Business Survey
problems constitute the main barriers for e-business adoption. SME-typical
problems such as the small company size, or technologies that are too
expensive or complicated, are perceived as the main barriers for e-business
Sector trends and key issues analysed
There are two important trends challenging CE companies today. First,
the industry’s globalisation drive, which is accompanied by an
increased trend to outsource production processes to specialised service
providers. As a consequence, CE companies have to deal with a global
and highly fragmented supply chain. Second, the trend towards digitising
content challenges CE manufacturers to produce devices that are able
to deal with it. This trend is further driven by an increased impact
This report analyses three key issues that reflect the
relevance of ICT and e-business for these major trends in more detail: Convergence
of markets, products and services in the CE industry due to
the increased availability and impact of broadband, Digital Rights
Management (DRM) and ICT supporting a global supply
Convergence issues in the CE industry due to the increased impact of
CE devices increasingly enable broadband access and evolve as distribution
channels for digital content to the consumer. The following points are
particularly relevant for CE companies in this context:
is an impact of broadband internet connections on the CE market:
Due to increased availability of broadband connections at reasonable
charges and the evolvement of broadband-based services, there is increasing
demand for CE devices supporting the distribution of content over broadband.
challenges for CE companies active in this segment
relate to the support of different formats and their new role as content distributors. Partnerships
with content providers and technology partners turn out to be crucial
are many opportunities for CE manufacturers to leverage broadband:
CE manufacturers have the opportunity to establish themselves as enablers
in a converged broadband market as well as to tap additional revenue
streams by supplying related services.
increased impact of broadband on CE products also
for smaller CE companies: SMEs entering the market early
with innovative products have the opportunity to position themselves
with visible brands, as illustrated by the case study on KiSS,
a Danish manufacturer of networked devices.
Digital Rights Management
Digital Rights Management (DRM) is a technology that protects digital
content from infringing use, such as unauthorised copying or distribution.
Key messages that were derived from the discussion about the relevance
of DRM for the CE market include:
manufacturers are facing a conflict of interest: On
the one hand users perceive DRM as a limitation to usability, on the
other hand content providers express vital interest in it.
are various challenges related to the implementation of DRM technologies,
including legal uncertainty, technical risks, dependency on DRM technology
suppliers, and additional licensing costs.
is a key issue for DRM integration: The heterogeneity of diverse
DRM systems on the market aggravates the challenges mentioned above.
interoperability between systems will be critical for the economics
of DRM implementation.
interoperability frameworks seem to be a promising approach
for providing interoperability. These frameworks are
developed by industry consortia with the objective to make existing
DRM systems interoperable.
The success of these standardisation activities, however, requires
a broad and dedicated involvement of all industry players; it requires
extensive specification and testing processes before new standards
are introduced to the market; and, last but not least, it requires
that innovative features are incorporated in the DRM specifications
that support new, promising business models.
ICT supporting a global supply chain
ICT and e-business tools can help CE companies to streamline supply
chain processes, increase supply chain visibility and integrate with
external and internal trading partners. In this regard, the key messages
companies face serious challenges related to their
supply chain activities: Highly fragmented
and global supply chains, short product lifecycles and dependency on
distributors are the most important of these challenges.
are various ICT and e-business tools that help CE manufacturers to
related to supply chain management: While simple ICT
tools, e.g. for ordering goods, are used by a large share of CE firms,
specific tools like SCM (Supply Chain Management) systems are less widespread than
expected in the CE industry. Case studies, however, illustrate
that this should not be solely attributed to scepticism on the side
of the companies but also to missing knowledge about appropriate e-business
tools available, particularly among SMEs. In addition, sophisticated
e-business solutions do not appear to be the sole best answer to challenges
typical for the CE industry, such as compressed product lifecycles.
- E-business standards (like
EDIFACT) or industry accepted
solutions (like RosettaNet) can be an answer to many challenges of
CE companies. However, it seems that it is the large
players primarily profiting from such solutions so far.
tools supporting marketing and sales activities on a global basis are
increasingly important in this sector: Direct sales to consumers via
the Internet may not only help to increase revenue; CE companies’ web shops are also
a source of data about customers’ needs and their shopping behaviour.
Almost three quarters of CE companies interviewed state that e-business
accounts for a “significant” or “some” part of
their operation. Firms experience an ICT impact in almost all business
functions. A positive ICT impact is most pronounced on productivity growth,
business process efficiency, and the quality of customer services.
for enterprises: ICT and e-business have a significant
impact on CE companies’ management of internal processes
and supply chain
activities as well as integral part of products and services
supplied by CE manufacturers.
for the industry structure: ICT has a strong impact on rivalry
in the market and is, thus, a main force for competition in this sector.
In addition, product substitution, e.g. substitution of conventional
analogue devices by digital CE products, is stimulating competition
among CE companies.
Two areas should be brought forward where policy initiatives could
promotion of e-business support initiatives and their outputs to SMEs. The
report provides statistical and anecdotal evidence that SMEs still
lack information on reliable and affordable tools available for their
needs, although such information is already available to a large
extent from various sources. It is provided, for example, by
numerous SME initiatives at national and regional levels. However,
it seems that many SMEs are not aware of these initiatives. Therefore,
it is suggested to focus the efforts aiming to accelerate e-business
adoption by SMEs on a targeted promotion of SME support initiatives
and their outputs towards ICT managers in small companies. In
this sense, “targeted” means
that the limited time resources of people supporting ICT in SMEs are
taken into account. This issue is of cross-sectoral nature and
of relevance for European, national and regional e-business and
SME support initiatives.
awareness on statistical effects related to convergence in high tech
and emerging industry trends do not seem to be sufficiently reflected
in recent industry classifications such as NACE 2.0. Reliable statistics
on market dynamics in these segments, however, are needed as a basis
for identifying relevant policy implications. It is, therefore, suggested
to initiate a workshop or conference in order to raise awareness and
broadly discuss this issue. The workshop could be taken as a starting
point to decide whether more research on this problem is required.
Competent platforms to discuss this issue already exist, but mainly
for representatives of statistical services. Thus, it is suggested
to involve policy makers and industry through the respective associations
in such an event.
Reference to earlier sector studies
The sector was covered as part of the "Manufacture of electronics & electrical
machinery" in sector studies of
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