Computer Peripheral Equipment, NEC

SIC 3577

Companies in this industry

Industry report:

The computer peripheral equipment, not elsewhere classified industry includes establishments that manufacture miscellaneous computer accessories supporting the activities of a computer's central processing unit (CPU). Companies in this industry manufacture a variety of products, including printers, input devices, plotters, graphic displays (monitors), and optical scanners. Not included in this industry segment are computer terminals, storage devices, modems and other communications devices, or computer-driven office machines. For information on computer peripheral equipment classified elsewhere, see SIC 3571: Electronic Computers, SIC 3572: Computer Storage Devices, SIC 3575: Computer Terminals, and SIC 3579: Office Machines, Not Elsewhere Classified.

Industry Snapshot

Computer peripherals suffered overall declines in the early 2000s, along with the rest of the computer industry. Overall shipment values fell from $12.9 billion in 1999 to $10.6 billion in 2001. After leveling off during 2002, shipment values again dropped significantly in 2003 to $9.4 billion, representing a 27 percent decline for the five-year period. The decline in value is due primarily to an ongoing drop in prices that continues to sweep through the industry. Historically, competition in the markets for mainstream or lower-end technology has been tight. At the same time, leading peripherals manufacturers look to high-end and emerging technologies to provide comfortable profit margins, and if they're lucky, give them market supremacy if the technology becomes mainstream. By 2006, however, industry shipments rebounded to $16.2 billion.

Demand for peripheral equipment thrived in the late 1990s as new computer sales remained strong, and as users replaced their older devices. However, by the early 2000s demand waned as the economy weakened and both companies and consumers reduced technology spending. In recent years certain product segments, especially printers, have fared better than others.

The printer segment has continued to fair well, compared to other, weaker segments of the industry. Color ink-jet printers have been the mainstay of the industry, with Hewlett-Packard wielding a hefty 50 percent of the market in 2006. Intense price competition among ink-jet vendors, as well as continued improvements in performance and features, has kept color ink-jet prints at the forefront of the market. Color laser printers continue to gain in popularity but will remain secondary to their ink-jet cousins until manufacturers can bring down the price sufficiently to entice a larger range of consumer buyers. Multifunction printers--those that can act as copy machines, scanners, or fax machines in addition to ordinary printing--were one of the fastest-growing categories in the mid-2000s. Meanwhile, sales of standard monochrome laser printers have decelerated, as these other technologies diverted demand.

Although unit shipments and shipment values both decreased in the early 2000s, trends in the computer monitor segment have been toward larger viewing areas, higher resolutions, and thin display technology that takes up less space on a desk. Conventional cathode-ray tube (CRT) monitors, which have historically made up the bulk of the market, saw a sharp decline in sales during the early 2000s, dropping from 33 million units in 2001 to 24.3 units in 2002. Additionally, due to continuing price declines, the CRT market declined 37.9 percent in value over the same period. While the CRT market declines, the demand for flat-panel liquid crystal displays (LCDs) increased substantially by the midway point of the 2000s. During 2002 alone sales of LCDs more than doubled, and that trend continued through the middle of the decade.

Optical scanners, the third major segment of the peripherals market, likewise expected to continue to grow through the mid-2000s. Again, inexpensive, mass-oriented devices and improving technology, particularly with flatbed models, have fueled strong demand among both consumers and businesses. In 2002, revenues from scanners sales increased over 10 percent to exceed $1 billion, based primarily on consumers replacing equipment. Average unit price also increased. Fujitsu Computer Products of America, who ships 40% of the world's optical scanners, saw sales increase nearly 20% in the first quarter of 2006 over the previous year.

The Annual Survey of Manufacturers reported that overall shipments for the industry were valued at nearly $12.2 billion in 2008. Additionally, a total of 14,112 employees worked in production in 2008 (of 34,407 employees), putting in about 27 million hours to earn wages of nearly $536 million. In 2009, peripheral equipment shipments plummeted to nearly $9.5 billion in 2009, as did production workers to 11,974 who worked nearly 23 million hours earning wages of nearly $449 million.

Performance in the industry's smaller segments, such as keyboards, pointing devices, and specialty input and output devices, has been mostly subdued. Because many of these items are produced for the original equipment manufacturers (OEMs), this segments' production is tied closely to the sales of computer systems. For standard aftermarket devices, there have been few innovations, and thus upgrade and replacement sales are minimal. There is promise for this segment as the use of wireless and handheld technology becomes commonplace among consumers, which should expand the sales of wireless devices and peripherals, such keyboard, mice, digitizers, and light pen tablets.

Organization and Structure

Facilitating communication with a computer's processor, peripheral equipment is used on nearly all types of computers, ranging from home personal computers (PCs) to supercomputers. The three largest categories of peripherals are graphic displays, printers, and scanners. In addition to the major peripheral categories, numerous miscellaneous products include computer input devices (keyboards and mice), computer sound systems, magnetic-ink recognition devices, graphic and technical plotters, graphics production equipment, and various multimedia devices.

Two main markets exist for peripherals: (1) devices shipped as part of original equipment manufacturers' (OEM) computer systems and (2) aftermarket upgrades, add-ons, and replacements that are bought separately from computer systems. Some peripherals manufacturers exclusively serve the OEM market, typically providing peripheral equipment on contract to a large computer maker such as Compaq or Dell. OEM contractors often make customized versions of their products for specific customers. Peripheral manufacturers also serve the aftermarket. They can do so through several channels, including wholesalers and distributors, retailers, or direct sales. Some peripheral makers sell only to the aftermarket. This route can be more profitable, but depending on the kind of device, it can also be smaller than the OEM market, as well as more volatile.

Graphic Displays.
The most popular types of graphic displays are traditional cathode-ray tube (CRT) monitors and flat-panel liquid crystal displays (LCDs). Although some displays are built into computer terminals, most are offered as peripheral devices that attach to a computer's video port. A video card interfaces between the monitor and the CPU, allowing compatibility for specific monitors and computer systems.

CRTs provide either monochrome or color graphics and deliver varying degrees of flexibility, performance, resolution quality, and size. Low-resolution monitors, for instance, display 640 x 480 pixels per inch, while higher resolution CRTs can deliver 1,280 x 1,024; 1,600 x 1,200; or more pixels per inch. Most CRTs measure between 15 inches and 19 inches diagonally. CRT prices ranged from $50 for monochrome displays to several thousand dollars for large, high-definition color monitors. In 2001 CRTs accounted for around 97 percent of all monitor sales but were quickly losing market share to the technologically advanced LCDs, which were expected to outsell CRTs by five to one by 2006.

LCDs are among the fastest growing and most dynamic segments of the graphic display market. Because LCD technology allows for much flatter displays than CRT devices, LCDs originally caught on as monitors for notebook computers. LCDs also tend to weigh less than CRTs, consume less power, and flicker less, potentially reducing eyestrain. Although early versions of LCDs did not function as well as CRTs in terms of resolution, colors, and refresher rates, upgrades in performance in the early 2000s put the LCD on par with its older cousin. Sparked by increased performance and a decrease in price, LCD sales were growing rapidly by the mid-2000s. Originally, most color LCDs sold were passive-matrix displays, also called super-twisted nematic (STN). Active-matrix displays, also called thin-film transistors (TFTs), which provide higher graphic quality, grew quickly in the mid- and late 1990s to become the dominant format.

Input Devices.
Common input devices for personal computers include keyboards, mice, joysticks, touch screens, microphones, and optical scanners. Specialized hardware for commercial applications includes magnetic-ink reading devices, bar-code scanners, and magnetic card readers.

Printers.
The three principal printer types are dot matrix, ink-jet, and laser. Dot-matrix printers were one of the first responses to demands by computer users for an output device that offered more flexibility than impact character printers. Dot-matrix devices dominated the printer market in the early 1990s, accounting for more than 50 percent of unit sales, but offered poor resolution, particularly for graphics. By the mid-1990s the dot-matrix printer was largely being replaced, since it offered smaller profit margins and appealed to consumers less than newer technology. By the mid-2000s dot-matrix print had become all but extinct in the marketplace.

Ink-jet printers offer much higher resolution and flexibility than dot-matrix technology. Mid-priced ink-jets in the mid-2000s commonly offered resolution of 1,200 x 1,200 dots per inch (dpi) for standard printing and 4,800 x 1,200 dpi for color photo printing.

Laser printers are often seen as providing the highest quality printing short of professional printing machinery, although some of the better ink-jet models increasingly compete with lasers on quality. Laser printers typically offer 1,200 x 1,200 dpi resolution. Laser printers are likewise often faster than ink-jets and usually have a greater paper-handling capacity. They are, however, more expensive than ink-jet printers. Whereas many mid-range ink jet printers retail for under $100, an entry-level black-and-white laser printer sells for between $100 and $200. Color laser machines have gradually made their way onto the market and are becoming an increasingly affordable option, although they have yet to compete in price with ink-jet printers (an entry-level color laser printer retails in the $300 to $500 range).

Multifunction printers, often based on laser technology, emerged in the second half of the 1990s as a popular and viable alternative. These models (which double as fax machines, scanners, or copiers) appeal particularly to small businesses and home workers, who tend to have occasional need for the various functions but don't use them enough to warrant buying separate machines.

Scanners.
Peripheral scanners are used to translate images and text into electronic signals. Able to recognize characters, line art, gray-scale, and color images, scanners use photosensitive arrays that reflect light to digitize printed information. The three types of scanners common in the 2000s were handheld, flatbed, and drum. Drum scanners are not considered peripheral equipment, however, because they are high-end tools used primarily in the printing industry.

Flatbed, or desktop, scanners are the most common form. Using optical character recognition (OCR) technology, these scanners can be used to translate printed pages into a document that could be viewed, searched, and manipulated using a word processor. Particularly for home users, Web developers, and graphic artists, desktop scanners are also frequently used to input and manipulate photographs and other graphic images. Typical flatbed scanners have a resolution of 1,200 to 2,400 dpi, although some models offered levels of 2,400 to 4,800. Despite the proliferation of e-mail, Web-based technology, and digital equipment, scanners have continued to hold value for consumers. Many multifunction printers are also equipped with scanning capabilities.

Handheld scanners are usually priced much lower than flatbeds and are more useful for scanning small graphics. They tend to deliver lower resolution than flatbeds and have limited OCR capability; as a result, handhelds have not sustained a significant share of the market, but nonetheless continue to remain popular within specific niches for their use in commercial and industrial applications such as scanning bar codes.

Background and Development

The peripherals industry emerged from the commercial computer industry in the 1970s. Not until the creation and subsequent widespread acceptance of desktop and PCs in the 1980s, however, did the industry capture a significant share of all computer-related expenditures. PCs extended the market for peripherals to the consumer market and generated demand for numerous add-on products.

Some of the early peripherals included card punching and sorting machines, microfilm output units, plotter controls, tabulators, tape cleaners, and tape print units. During the 1980s, however, scanners, printers, and displays that complemented PCs, workstations, and network systems grew to dominate the market. As the speed and memory storage capacity of desktop computers increased, so did the capabilities of peripherals. By the mid-1980s, peripherals accounted for 20 percent of all computer industry revenues.

Global computer equipment and services sales escalated from $243 billion in 1988 to about $280 billion in 1990. Despite an overall slowdown in computer industry growth in the early 1990s, revenues from peripherals continued their spiral to $290 billion in 1991, reaching nearly $320 billion in 1992. Throughout this period the market for peripherals, including storage devices as well as some other peripherals classified under other industries, maintained about a 20 percent share of the total market.

The rapid shift toward graphic user interfaces, multimedia computing, and Internet computing in the mid-1990s gave a solid boost to peripheral sales. However, net revenues and profits in some peripherals categories were sluggish, as prices fell faster than unit sales rose. As computer prices trended downward, and many PCs were selling at or below $1,000, peripherals makers felt pressure to lower prices. In some OEM arrangements, large computer manufacturers required their peripherals vendors to cut costs by a target percentage. To reach the goal, peripheral makers sometimes had to skimp on quality and sacrifice their own profitability. Manufacturing was done increasingly outside the United States, where it was cheaper.

Nonetheless, new computer shipments in the United States and worldwide continued to boom into the late 1990s, with unit sales rising more than 20 percent a year. Peripheral sales rose in tandem. Economic crises in Asia and Latin America, however, deflated sales in those regions.

Worldwide, according to Lyra Research of Newton, Massachusetts, 75 million printers of all types were shipped in 1999, a better than 13 percent increase in volume. Global printer revenue, however, was flat with the year before, at $32 billion, due to lower prices. Manufacturers located in the United States produced less than 20 percent of the world's printers, although that percentage doesn't include output by foreign factories owned by U.S. firms.

By printer type, ink-jets dominated two-thirds of world volume in the late 1990s, driven by their popularity as low-cost consumer devices. Monochrome laser and multifunction printers weighed in with 13 percent each. The rest of the market consisted of impact printers, thermal printers, and the fast-growing color laser segment.

In 1999 peripheral manufacturers shipped about 100 million graphic displays, according to various estimates. Most--up to 96 percent--used cathode-ray tube (CRT) technology; the remainder employed LCD screens. The United States manufactured less than 3 percent of the world's monitors and thus depended dearly on imports for as much as 94 percent of all new monitors purchased that year. The value of world monitor shipments in 1999 was estimated at $20 billion, although International Data Corp. (IDC) reckoned monitor revenues at closer to $33 billion.

Taiwanese firms were the biggest in the monitor segment based on volume, according to statistics released by the Taiwanese government. Although only about 11 percent of the world's monitors in 1999 were assembled on Taiwan's soil, Taiwanese companies such as Acer and Mitac laid claim to a startling 59 percent stake in global unit production. Taiwanese affiliates in China supplied the largest share, equal to about a quarter of the world market.

LCD displays in the late 1990s remained on average several hundred dollars more than a typical CRT display--many flat-panel LCDs cost more than the popular sub-$1,000 PCs. Indeed, LCD prices actually rose somewhat because of new features. As prices eased, LCD flat-panel monitors quickly began to consume market share previously held by traditional CRT devices, through both the OEM and replacement channels. According to a DisplaySearch market report, a third of LCDs in 1999 were shipped with new computer systems; the rest were sold in the aftermarket. Within the LCD category, TFT devices became the predominate technology, making up 70 percent of the product mix by 2002.

In 1998 manufacturers around the world shipped 13.9 million scanners of all types, according to estimates by IDC. With color depth pushing 36 bits and prices slipping below $100 in some models, color flatbeds have been the most widely sought, displacing drum scanners in the high-end market, as well as usurping share from the low end. The introduction of contact image sensor (CIS) technology in the late 1990s to replace the older charged-coupled device (CCD) standard also significantly deflated prices of CCD-based machines. Handheld units, particularly for bar-code reading and other specialized functions, weren't selling as well as expected in the late 1990s, but unit shipments were still growing at a low double-digit clip.

Although the major peripheral product segments experienced solid growth in the late 1990s, conditions changed during the early 2000s as the economy worsened. Aside from premium products, downward pressure on prices was expected to continue for most classes of peripherals.

Printers.
Historically, the United States has been the world's largest printer market, representing almost half of global demand by volume, according to estimates based on census and trade data. Consequently, the United States imports nearly twice as many monitors as it produces domestically. Because of tightening profit margins on printers, however, some printer manufacturers are actually more dependent on sales of printer supplies like toner and ink cartridges for their profits than they are on the hardware that requires those supplies.

By printer type, ink-jets represented the majority of manufacturer shipments in 2001, totaling roughly 8.0 million units with a value of about $615 million. Laser printers were the next largest category, at 3.5 million units with a value of approximately $2 billion. In the first quarter of 2002, research firm Gartner Dataquest revealed that ink-jet printer shipments were falling, as end-users opted to purchase multifunction peripherals (MFPs) instead. Shipments of ink-jet printers fell almost 6 percent during that time period, while MFPs, also referred to as "all-in-ones," skyrocketed 98 percent. Because of their versatility, MFPs--which had increased in quality and decreased in price--represented a greater value for consumers and small business owners in tough economic times.

By the third quarter of 2002, Gartner reported that overall printer sales were down 11 percent from the previous year, totaling $1.7 billion. At that time color printers remained the strongest printer segment, driven by consumers' adoption of digital photography. In addition, the corporate sector was buying an increasing number of color printers, although color printing was still regarded as a luxury in the business world overall, according to Gartner.

Graphic Displays.
According to U.S. Census Bureau figures, U.S. manufacturers shipped approximately 2.2 million monitors in 2001. Of these, 97 percent were CRTs. In the CRT category, 60 percent of monitors had screens less than 19 inches, while CRTs with screens larger than 19 inches accounted for about 37 percent. Flat-panel displays accounted for approximately 3 percent of all monitor shipments. Unit shipments of CRTs fell from 2.7 million in 2000 to 2.1 million in 2001, while values fell from $933.9 million in 2000 to $719.1 million in 2001. Flat panel shipments fell from 74,096 in 2000 to 67,062 in 2001. Shipment values in that category also declined, dropping from $52.3 million in 2000 to $48.9 million in 2001.

Scanners.
Despite a weak economy, demand for optical scanners has remained relatively strong, especially in the small business market. A business spending survey conducted by Computer Reseller News and released in the publication's October 14, 2002 issue, found that some 70 percent of executives in the small business sector cited the imaging category (which includes scanners) of the computer peripherals industry as a moderate-to-high spending priority. According to the survey, of all peripheral categories, respondents rated imaging/scanners the highest. Contributing to the demand for scanners in the early 2000s were sharply falling prices and rapid improvements in technology. For example, a decent high-resolution scanner could be found for $100 to $150.

Shipment values of computer peripherals totaled $16.2 billion in 2006, an increase over the previous five-year period that had seen a 27 percent decline. Although shipment of printers, copiers, fax machines, and MFPs increased by 3.5 percent in 2003, compared to the previous year, consumer spending actually decreased by 11.5 percent over the same period. This increase in sales but corresponding drop in revenues is indicative of a market undergoing price reductions and strong market competition, rather than a lessening of consumer demand. Likewise, fourth quarter printer shipments in 2004 showed an increase of 10.5 percent year over year, compared to a decline in end-user spending by 3.5 percent.

Declining prices in some market sectors, such as ink-jet printers and CRT displays, have severely tightened profit margins. This disparity between shipments and revenues also reflects the midstream crossover in technology as consumers are pushed to switch to such advanced and more expensive products as the LCD display, MFP, and color laser printer. LCD sales, which were once projected to increase from more than $23 billion in 2003 to more than $60 billion by 2008, already reached nearly $70 million in 2007. In 2006, shipments of LCD monitors doubled from the previous year.

Although LCDs are expected to drive CRTs into extinction, laser printer technology has not come down in price sufficiently to be able to compete with low-cost ink-jet printers for the average consumer. In 2006 U.S. consumers purchased 30 million ink-jet printers.

Color ink-jet prints have found a new and growing market with consumers who want to print photographs from their digital cameras. A result of this new market was the proliferation of photo printers, usually compact in size and specifically designed to the task of printing high-quality photos. Consumers also can take advantage of advanced features on full-sized ink-jet machines to print both documents and photos. Higher-end devices include a 2.5 inch LCD screen and options to alter and correct the photo prior to printing.

The peripherals business is, and will continue to be, highly internationalized. Asian firms, especially in China and Southeast Asia, are involved in a disproportionate share of the manufacturing and assembly work. Whereas the value of exports of computer peripherals has declined since the late 1990s, the value of imports has steadily increased so that by 2003, import values were more than double export values. It is therefore important to distinguish between what products are actually made in a country such as the United States, and what products are made elsewhere by affiliates or contractors to the company whose name goes on the products. In addition, a considerable share of the brand name peripheral companies are headquartered in Asia, and some of these own factories in the United States. As with many segments of the manufacturing industry, the U.S. showed a trade deficit in computer peripheral equipment. In 2006, the U.S. imported nearly $40 billion in products while exporting $32 billion.

Current Conditions

According to the State of Technology: Peripherals survey published by Computer Reseller News, found 78 percent of those queried cited the economy as their major obstacle going into 2009. Another 87 percent indicated pricing pressures, while 72 percent pointed out competition. One industry bright spot, standard desktop LCDs were expected to perform well during 2009. Based on solution providers figures, most LCD sales were derived by Dell and ViewSonic, both with (30 percent); Hewlett-Packard held (29 percent); and Samsung with (29 percent). Still, another bright spot centered on increased demand for networked multifunction printers and networked color printers as they too were expected to provide opportunity for growth. Hewlett-Packard was still the clear leader when it came to MFPs, with 74 percent of VARs surveyed implied they were "extremely willing" to sell Hewlett-Packard printers versus other printers.

According to research firm Gartner, global printer shipments fell from 64.2 million in the first half of 2008 to 53 million during the same time period in 2009, a 20.2 percent decline. Thus, even the top printer manufacturers experienced steep declines. Hewlett Packard's printer shipments fell from 27.8 million units in 2008 to 20.5, a 26.4 percent decline; Canon shipped 10.8 million units in 2009 falling to 9.7 million units in 2009, a 9.8 percent decline; Epson shipped 8.8 million units in 2008 dipping to 7.7 million units in 2009, a 17.4 percent decline; Brother shipped 3.4 million units in 2008 compared to 3.1 million units in 2009, a 8.5 percent decline; and Samsung shipped 2.8 million units in 2008 to 2.5 million units in 2009, a decrease of 10.5 percent.

Despite sluggish demand for personal computer, where shipments plummeted 15.9 percent in 2009, demand for LCD monitors pushed shipments up to 176.5 million units or 3.8 percent. Throughout the economic downturn consumers spurred LCD shipments; however, as the economy rebounds the business sector will increase shipment value in 2010 and beyond. Innovation will increase LCD demand as manufacturers compete within the mobile PC market, 3-D monitors and touch screens were poised to make their debut, and corporate America begins hiring which in turn will require the purchase of new equipment. As a result, LCD monitor shipments were projected to reach 211.5 million units by 2013.

Industry Leaders

Because of the industry's diverse product segments, many of its estimated 1,000 U.S. companies specialize in a relatively narrow range of technologies, such as printers only or input devices only, although a few larger companies compete across several segments. A number of the top participants, both in the U.S. market and the world market, are based outside the United States--particularly in Asia, and to a lesser extent, in Europe.

In the printer segment, Hewlett-Packard (HP), which held 58 percent of the market in 2003, down from more than 75 percent in previous years, continues to dominate the industry. Other leaders include Seiko Epson, Canon, Lexmark, NEC Corp., and Xerox. Hewlett-Packard has led the U.S. market in most of the mainstream printer categories, especially laser printers, but it faces a stiff challenge from Epson, Canon, and Lexmark in the low-cost ink-jet arena, which already caused HP to lose market share. During the early 2000s, Xerox made a push to increase its market share, but by the mid-2000s had not significantly cut into HP's portion.

Leading display manufacturers include NEC, Sony, Fujitsu, Samsung, IBM, Acer, Mitsubishi, and Viewsonic. A large number of the monitors sold with new computers in the United States are branded under the names of computer makers like Dell and Gateway; many of these are actually produced by other companies, often abroad.

Important names in the comparatively small keyboard and input device market include Key Tronic, NMB Technologies, and Mitsumi Electronics.

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