Audio & Video Equipment Manufacturing
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Industry Overview
The US audio and video equipment manufacturing industry includes about 450 companies with combined annual revenue of about $7 billion. Major companies include Harman International, Bose, and US manufacturing divisions of foreign companies like Panasonic and Toshiba. The US industry is highly concentrated: the 50 largest companies have almost 90 percent of overall revenue.
Internationally, the top 10 manufacturers of audio and video equipment generate roughly $200 billion in annual revenue from A/V products. Major companies include Panasonic, Sony, and Pioneer (Japan); Royal Philips (The Netherlands); and LG Electronics and Samsung (South Korea).
Competitive Landscape
Demand is driven by consumer income and the rate of product innovation. The profitability of individual companies depends on manufacturing efficiency and effective marketing and distribution. Large companies have advantages in economies of scale in manufacturing, marketing, and distribution. Small companies can compete effectively by offering specialty products or components in system solutions, such as speakers in a home theater system. The industry is capital-intensive: average annual revenue per worker is about $450,000 per year.
Audio and video equipment competes with PCs and game consoles in the consumer home entertainment market. PCs and game consoles are covered in profiles of the Computer Manufacture and Electronic Gaming Products industries.
US manufacturers of audio and video equipment face significant foreign competition. The majority of the equipment sold in the US is now manufactured elsewhere; consequently, employment in the US audio and video equipment manufacturing industry has dropped about 60 percent in the last decade.
US audio and video equipment manufacturers export about 40 percent of total production. Mexico and Canada receive half of US exported products. Imports comprise about 90 percent of the US market, with China, Mexico, and Japan the leading sources.
Products, Operations & Technology
Major products include TVs, auto and home stereos, speakers, DVD/VCR players, Blu-ray players, and camcorders.
Audio and video equipment manufacturers depend on product engineers to design new products that are high performance, low cost, and easy to use. Small companies tend to focus on being either first to market with premium-priced products offering higher functionality and performance, or being a "fast follower" with lower-priced products. Large manufacturers may follow both strategies by having multiple product lines. The industry is extremely competitive and new products are a major source of profits. Some companies spend 10 percent of revenue on R&D.
Production processes include installing circuit boards and relays, soldering, bending and drilling metal and plastics for casements, assembling, painting, inspecting, and packing and shipping products. Most manufacturing operations employ fewer than 100.
Raw materials include printed circuit boards (some manufacturers build their own); relay switches; sheet metal (steel and aluminum); plastics; and glass. Some major components are controlled by a few large suppliers, who may also produce their own finished products in competition with their customers.
Digital technologies are replacing analog components in audio and video equipment. Rapid technological innovation is an industry trademark. Companies invest in information systems to support new product development, increase manufacturing efficiency, and manage product distribution. Given the short product life of many new products, manufacturing technologies and processes are designed to be flexible and easy to change.
