"Self-isolation and social distancing measures are generating demand for products that complement and improve the stay-at-home lifestyle,” says Luke Pearce, Research Analyst at Futuresource Consulting. “The seismic cultural shift is proving to be of real benefit to the headphones market, and we’re seeing particular activity around features like active noise cancellation (ANC), microphone performance, TV connectivity and kids’ headphones."
Although the spread of Coronavirus and its long-term effects are difficult to gauge, Futuresource has modeled a range of scenarios to explore the potential impact on the headphones market. The most likely, middle-ground scenario suggests that the Chinese manufacturing shortages experienced in Q1 will be resolved, on the whole, by Q2 2020, and Chinese domestic demand will recover earlier than most. Western Europe and North America will be impacted mostly in Q2 and Q3, but will recover strongly, with delayed new product launches and latent demand from earlier in the year combining for a heavily loaded Q4.
Short-term Supply Chain Challenges
“Our research shows that Q1 shipments outside China weren’t as affected, due to many major brands maintaining inventory from 2019,” says Pearce. “However, we expect Q2 to be significantly impacted. This is due to a combination of a lack of manufacturing in the previous quarter, the depletion of inventories and the spread of the pandemic into an increasing number of countries. Despite the uncertainty, some brands will continue to build inventory throughout the year, while others are being a little more cautious."
Futuresource expects prices to rise gently due to supply shortages being passed on down to consumers. In addition, a scarcity of cheaper alternatives will redirect consumers to more premium brands with higher ASPs. The adoption of true wireless, particularly in developing regions, will also experience some inertia due to the reduced supply of products in cheaper price segments, while premium over-ears products, which are considered discretionary purchases, might also be affected.
"Despite the challenges, we expect the headphones market to hold up well," says Pearce. "Futuresource carried out a consumer research study earlier this year, across France, Germany, Spain, the UK, USA and China, focusing on buyer behavior habits across a range of CE categories. Even then, online purchases dominated the audio sector, with 67% of headphone purchases made online. It’s a good sign for the continued stability of the headphones market."
In the true wireless category, Apple continues to lead the pack. Yet even when Apple’s figures are excluded, the market still saw huge growth last year, to 52 million units from less than five million in 2018. True wireless will continue to grow exponentially out to 2024, accounting for more than 75% of overall volumes by the end of the forecast period.
ANC will also continue to gain traction, with Futuresource forecasting the technology will be embedded into 42 million units this year, up from 11 million in 2019. Biometrics will also begin to play a larger part in the category later in 2020 and throughout 2021. Watch out for monitoring of heart rate, sleep tracking, ECG, SpO2, body temperature and even blood sugar measurements. Futuresource research also points to products with assistive hearing capabilities emerging into mainstream consumer electronic products towards the end of 2020 and early 2021.
Futuresource Consulting’s worldwide headphones market report provides an updated outlook for the worldwide headphones market, with all figures and forecasts representing Futuresource’s latest assumptions on the impact of COVID-19 as of the time of April 2020. For further information on this report, please send an email to Jack Tammaro.