Suppliers of home entertainment products in China are projecting moderate growth in 2009 as they anticipate a slowdown in sales due to the global financial crisis. Many makers remain optimistic that China can continue to leverage its price advantage in the product line, but companies are nevertheless revising business strategies to remain competitive.

More suppliers of LCD TVs, for example, are boosting core technology development through in-house LCD panel production. Several large companies have established their own panel production facilities to control the supply and cost of this key component.

Suppliers are exploring new export markets to offset the sales downturn in key export destinations, specifically the US. Makers of home theater systems are eyeing countries in South America, the Middle East and Southeast Asia. Companies supplying mini-component systems are confident rising demand in the Middle East and Africa will boost sales this year.

Meanwhile, the robust global gaming market, specifically the console game and handheld gaming device sectors, will sustain growth in the game controller line in China. Suppliers expect sales to start rebounding in 2H09.

The following are some of the key trends we see in China's home entertainment industry:

• Many companies will lower their prices to stimulate demand. Adjustments will, however, be limited to within 5 percent so as not to risk further denting thinning margins.
• The EU is a target market for many suppliers, especially as companies expect sales in the US to continue to slide.
• Licensing costs continue to present a challenge to suppliers, in particular those offering DVD minicomponent systems, DVB receivers and game controllers. Some makers do not include the IPR cost in their price and negotiate with clients to shoulder it.
• Audio quality tops product development priorities of suppliers of home audio products. Makers are also innovating the housing design.
• High definition and digitization are two main trends this year. Many new releases of home video products are either HD-ready or full-HD models.
• Rising supply and the falling cost of large LCD panels will boost the production of larger LCD TVs. Reductions in the cost of plasma display panels will spur the development and manufacture of larger plasma TVs.

This report covers home audio, home video and game controllers. The home audio product range encompasses home theater systems, high-end speakers, amplifiers and mini-component systems. Home video products include plasma and LCD TVs and DVB receivers. The game controllers are gamepads, joysticks, steering wheels, dance pads, drum machines and guitar game controllers.

The supplier survey was conducted on manufacturers and traders of these home entertainment products. The Industry Overview section discusses developments in China's supply market and suppliers' strategies to survive the global financial crunch. Trends in the different product categories are discussed in the product modules.

The majority of China's suppliers of home entertainment products are based in the key cities of Guangdong province. The Yangtze River Delta region is also a major manufacturing hub for TVs.