Abstract

As Digital Photo Frames Enter Latter Stages of Growth Phase in Product Lifecycle, Price Competition Will Intensify

Over the period 2007 - 2012, the digital photo frame industry will post a shipment value CAGR of 27.0% and a shipment volume CAGR of 44.5%. During the next few years, the digital photo frame will move into the latter part of the growth phase of its product lifecycle, and vendors will focus on growing their market share. The fact that shipment volume CAGR is significantly higher than shipment value CAGR indicates that price competition in the industry is growing increasingly serious, particularly with respect to smaller sizes of digital photo frame.

Vendors Need to Keep Close Eye on Price-Benefit Trends and Focus on Differentiating their Products

Price-benefit analysis and analysis of vendors' competitive strategies have shown that the primary benefit affecting digital photo frame price is display size, while the seven secondary benefits are: remote control, the ability to send photos directly from camera phone, wireless enabled functionality, display resolution, the ability to automatically receive pictures from the Internet, selectable viewing hours featuring automatic on/off settings, and print capability. The benefits that are correlated with higher prices are: display size, high display resolution, the ability to send photos directly from camera phone, wireless enabled functionality, the ability to automatically receive pictures from the Internet, and selectable viewing hours featuring automatic on/off settings. Low display resolution, remote control and print capability are correlated with lower prices.

Consumers are willing to pay a higher price for a digital photo frame in return for the following product benefits: larger display size, high display resolution, the ability to send photos directly from camera phone, wireless enabled functionality, the ability to automatically receive pictures from the Internet, and selectable viewing hours featuring automatic on/off settings. They are less willing to pay higher prices for low display resolution, remote control and print capability. When developing new digital photo frame products, vendors need to keep a close eye on price-benefit issues; only those vendors that are able to offer an appropriate mix of benefits that can differentiate their digital photo frames from those of rival firms can expect to succeed in growing their market share in their targeted price segments. If a vendor is focusing on the value-line segment of the market, then they may need to eliminate some secondary product benefits. On the other hand, if a vendor is targeting the high-end segment of the market, then they need to provide not only the primary benefit of larger display size but also other, secondary benefits in return for which consumers are willing to accept higher prices. Vendors will also need to think carefully about which secondary benefits to provide for different market segments.

It can be seen from the price-benefit analysis and analysis of vendors' competitive strategies undertaken for this report that digital photo frame vendors are moving away pure hardware competition, and are beginning to focus more on ICT function integration. Interactive digital photo frames are being developed by integrating products with online photo album transmission services. As a result, although digital photo frame prices will continue to fall, they will fall gradually, rather than experiencing a dramatic collapse. Driven by the desire to raise prices, digital photo frame vendors will use large display panels and gradually add more functions that can help to boost prices, such as wireless enabled functionality, the ability to send photos directly from camera phone, the ability to automatically receive pictures from the Internet, and selectable viewing hours featuring automatic on/off settings. It is anticipated that, in 2012, digital photo frame ASP (Average Selling Price) will be around US$85.

7-inch and 8-inch Still Mainstream Sizes; 5-inch Product to Decline; 9-inch and Larger Models to Grow

It is anticipated that 7-inch and 8-inch digital photo frames will maintain their status as the mainstream sizes for some years to come. During the period 2008 - 2012, these two panel sizes combined will account for between 70% and 80% of total digital photo frame shipments; 7-inch panels will gradually decline, while 8-inch panels will rise. By 2012, 7-inch models are expected to account for approximately 40.0% of total digital photo frame shipment volume, while 8-inch models' share will stand at around 37.0%.

One significant development is that, beginning in 2008, the share of total shipment volume held by 9-inch and larger digital photo frames will start to rise steadily. Display size is the product benefit that has the most impact on digital photo frame price. By developing new models with larger display screens, digital photo frame vendors can raise the price of their products, while at the same time escaping from the increasingly intense price competition in the 7-inch and 8-inch segment of the market.

By 2012, 9-inch and larger digital photo frames are expected to account for around 20% of all digital photo frames shipped worldwide. However, in the short-term future some factors could change these forecasts for 9-inch model shipments. New entrant Hannstar is actively developing 9-inch panel products. Hannstar is adding a 1024RGBx600 pixels TFT-LCD panel specification for digital photo frames -mass production of which is scheduled to begin in the third quarter of 2008 -to its existing 640RGBx234 pixels TFT-LCD and 800RGBx480 pixels TFT-LCD panel products, and is promoting this new panel specification aggressively. Hannstar's emergence as a major new supplier of 9-inch panel has added an extra dimension to the competition between digital photo frame display sizes.

At the same time, the share of total digital photo frame shipments held by models with 5-inch display panels will fall rapidly. Consumers expect digital photo frames with small displays to be inexpensive; as a result, vendors have showed little enthusiasm for promoting this product size. It is anticipated that, by 2012, 5-inch models' share of total digital photo frame shipments will fall to only around 3.0%.

Appendix

Research Scope

This report analyses the product specifications of 42 digital photo frame models from six vendors: Philips, Kodak, Ceiva Logic, Pandigital, Westinghouse, and Smartparts, along with the results of a survey administered to users of these 42 models, with an effective sample size of 272. Multiple linear regression analysis is used to analyze competitive positioning in terms of price and product benefits, with the aim of identifying those product benefits that have the most impact on the prices of digital photo frame products.

Glossary of Terms

List of Companies