What Is the Electronics Sector?

The electronics sector produces electronic equipment for industries and consumer electronics products, such as mobile devices, televisions, and circuit boards. Industries within electronics include telecommunications, equipment, electronic components, industrial electronics, and consumer electronics. Electronics companies may produce electrical equipment, manufacture electrical components, and sell items at retail to make their products available for consumers.

Growth in the Electronics Sector

The most profitable sector within electronics, the semiconductor industry, has grown to become worth more than $400 billion globally. The products produced by this sector are used in a variety of consumer and industrial electronics products.

These industries are growing rapidly as a result of increasing demand from emerging market economies. As a result, many countries are increasingly producing more electronics. Investment in foreign production of electronics has increased dramatically and resulted in many new factories and factory expansions. 

Electronics sector growth is greatly accelerated by increasing consumer spending around the world. As developing economies grow, consumer demand for electronics also increases. Countries that produce electronics now have strong consumer bases that can afford new electronic products. Increased competition is driving the costs associated with electronics production down and expanding the availability of affordable electronics products.

China has been a significant electronics producer for a long time and is now also a major market for consumer and industrial electronics. Asia's proportion of the market for electronics is expected to represent about half of the global market within the next several decades. This increase likely means better profitability for the industry at large over this time. The supportive role of the electronics sector in providing equipment and components for other industries also supports a significant increase as consumers demand more automobiles, energy-efficient homes, and medical technologies.

Challenges in the Electronics Retail Market

Electronics retail, however, is becoming increasingly competitive and fragmented while experiencing a unique set of challenges. Many electronics brands are now offering their products at their own stores as a means of becoming more profitable. These stores compete with flagship retailers, such as Best Buy (BBY), for customer traffic. Online stores, such as Amazon (AMZN), also compete for customer spending and offer products not available in traditional stores. As the variety of electronics products increases, stores struggle to offer enough of the more popular products to consumers and concede some of the market to online retailers.

Volatility in company valuations and stock values is increasingly becoming normal for electronics retailers as the industry matures and experiences changing pressures. Changes resulting from store closures, mergers and acquisitions, and declining prices are pressuring the electronics sector to become more efficient and more profitable. While purchasing volume increases, many larger companies are in a period of decline as the sector becomes fragmented with a greater number of companies offering electronic products.