Projector market takes a hit

Projector sales witnessed a quiet first half of the year with budget restrictions continuing to dampen market demand. EMEA volumes reached 374,000 in Q2, representing a 29.8 per cent year-on-year drop.

The slow Q2 performance this year was not completely unexpected, with this period traditionally reliant on a heavy supply-side push from vendors and channel partners alike. However, and in stark contrast with previous years, vendor investment in channel promotion programmes has been considerably slower.

Sales for the second half of the year are expected to be stronger, driven by global and european education tenders. The market is forecast to rebound in 2010 as key countries such as France and Germany move out of recession. Futuresource forecasts the market will experience 15 per cent year-on-year growth in 2010 to achieve sales of 2.1 million projectors.

Education investment

With national governments’ stimulus packages focusing on public spending, the education market continues to offer strong growth opportunities. The second half of 2009 is expected to have numerous large tenders, with countries such as Italy, Germany and Spain investing in their IT education infrastructures.

To underline this point, Q2 regional sales of interactive whiteboards have grown by 10 per cent year on year, reaching 52,000 units. Early vendor and channel feedback indicates a positive outlook for Q3, with many reporting a strong July and August. Some vendors are understood to be suffering from stock shortages as the trend of tightening the supply chain inevitably means less stock in the channel.

The corporate market across the region has witnessed a strong decline since the full extent of the recession became clear, but it is interesting to note the performance of emerging countries.

Historically, in periods of recession or economic decline, emerging markets have remained relatively unaffected. However, this has not been the case in the current downturn as these countries have developed closer ties with developed nations and consequently found themselves exposed to similar financial pressures.

On a more micro level, credit lines – which are critically important for channel development in emerging countries – have been severely restricted, which has further hampered growth. General regional feedback from corporate accounts and vendors suggest that budgets are not being cut, but delayed as end users continue to adopt a wait and see policy. This has a substantial effect on replacement demand as end users maintain or ‘sweat’ current hardware assets and therefore extend traditional life cycles. Futuresource expects this trend will have an impact on latent demand as the recession eases and corporate budgets loosen.

The corporate market is expected to recover in 2010, with the area forecast to post 12 per cent year-on-year growth to achieve sales of 1 million units. However, this market is likely to remain comparatively quiet for the remainder of the year.

Emerging technologies

While overall market volumes have been weak, some bright spots include the continued emergence of the short throw and Wide XGA categories. With many interactive whiteboard vendors now offering all-in-one board and projector combinations, short throw is proving popular with users and represents 10 per cent of the market.

The WXGA category also continues to gain traction as corporates increasingly look for 1:1 compatibility between notebooks and projectors. WXGA reached 6 per cent of the market in Q2, representing a 126 per cent year-on-year growth. Interestingly, a recent Quarterly Reseller Survey from Futuresource shows that the channel and end users would be unwilling to pay any kind of premium for WXGA products which, even in a world migrating rapidly to wide formats, has limited the pace of adoption.

Innovative products

With a stronger sales performance expected in the second half of the year, 2009 is also expected to be a key year in the development of innovative product categories that will shape the projector market for years to come.

High brightness LED-based projectors targeting the B2B sector are expected to rejuvenate the market due to the long lifetime and low cost of ownership. LED-based projectors are also set to have some impact in the penetration of projectors in the digital signage market due to their ability to operate 24 hours a day with little maintenance.

The usage of projectors within digital signage applications has always been relatively niche due to positioning problems, ambient lighting and TCO environmental compatibility issues. However, there have been some developments with projectors being used in innovative ways, such as projections onto shop front displays.

The education market is one that is likely to consume LED-based projectors once price premiums become palatable. 3D projection is also expected to be a fast-growing segment.

Current market conditions have accelerated changes to the way that many vendors are approaching the category. Continuing price erosion at the lower end of the market, intense competition and vast number of products competing in any one sector mean that developing a clear, concise strategic positioning is absolutely critical.

This can be highlighted by a market stat: in Q2, the mainstream 2000-2500 lumen sector accounted for nearly half the market volume. This has forced many vendors to shift strategies to the higher-end margin market. With the total amount of competing vendors in the marketplace well in excess of 40, this shift in strategy will pose significant challenges, especially at the higher end as the channel access to these markets is comparatively closed.

Over the next few quarters, changes in market dynamics, signs of economic recovery and product innovation provide a few reasons for optimism.