Audio and Video Equipment Manufacturing
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Industry Overview
The US audio and video equipment manufacturing industry includes about 550 companies with combined annual revenue of about $10 billion. Major companies include Harman International, Bose, and US divisions of foreign companies like Sony and Philips. The industry is highly concentrated: the 50 largest companies have almost 90 percent of overall revenue.
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 theatre system. Average annual revenue per worker is about $500,000 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.
Products, Operations & Technology
Major products include TVs, auto and home stereos, speakers, DVD players, VCRs, 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 8 to 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. Raw material costs represent about 60 percent of revenues. 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. The majority of video products are digital; radio is still primarily analog, but the transition is underway. 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.
