Framework Service contract ENTR/2008/006/Lot 1

Study on the Impact of the MoU on Harmonisation of Chargers for Mobile Telephones and to Assess Possible Future Options

Final Report (Annexes to the Main Report)

prepared for

DG Enterprise and Industry

22nd August 2014

Study on the Impact of the MoU on Harmonisation of Chargers for Mobile Telephones and to Assess Possible Future Options

August 2014

Final Report – Annexes to the Main Report

Quality Assurance

Project reference / title J829/Mobile Chargers

Report status Final Report – Annexes to the Main Report

Main authors: Daniel Vencovsky, Dave Fleet, Yvette Le Crom, Scott Marshall, Pete Floyd, Clare Bowman Author(s) With support from: Hayden Postle-Floyd, Vania Simittchieva, Jenny Miller, Esther Reeve, Shaun Da Costa, Anna Heinevetter

Approved for issue by Pete Floyd, Director

Date of issue 22/08/2014

Document Change Record

Report Version Date Change details

Draft Final Report 1.0 23/05/2014

Incorporates revisions following Final Report 2.0 25/06/2014 comments on the DFR and associated meeting

Final Report Incorporates revisions following 3.0 02/08/2014 (revised) comments on the Final Report

Final Report Re-issued following changes to the 3.1 22/08/2014 (revised) Main Reprot

Disclaimer

The information and views set out in this study are those of Risk & Policy Analysts Limited and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the Commission's behalf may be held responsible for the use which may be made of the information contained therein.

Definitions of Key Terms

Term Definition Action cameras are small, lightweight cameras that attach to the body allowing the Action cameras user to record hands-free. They are typically used by those doing high-octane sports. Basic mobile phones have limited functionality and few features. They are primarily Basic phone used for calling and texting. These are typically at the low-end of the price spectrum. Compact digital cameras are point-and-shoot’ cameras, which are small, pocket-sized Compact digital cameras cameras that do not have detachable lenses. A lightweight, handheld video camera which records in digital form onto a storage Digital camcorders device such as a DVD or hard disk. Also known as a dry shaver, an electric shaver is an electrical device for shaving which Electric Shaver uses oscillating or rotating blades behind a metal guard. Electrical device to remove hair by mechanically grasping multiple hairs Epilator simultaneously and pulling them out. E-readers, also called electronic readers or e- readers, are devices for reading E-reader electronic written content, such as e-, newspapers and other documents (Techtarget, nd). Mobile phones referred to as feature phones have more advanced features, including Feature phone web browsing. These are often in the low to mid-range price. Laptops, other than netbooks, are referred to in this report as ‘full-size” or “large” Full-size notebook/laptop laptops. Handheld Games Console Portable electronic device with a built-in screen, game controls and speakers MP3 Player/Portable Media Rechargeable pocket-sized devices that play digital music and videos Player Netbooks can be defined as small, light, low-power notebooks with less processing Netbook power than a full-size laptop. References to ‘laptops’ in this study are to be construed as covering both netbooks Notebook/Laptop and full-size laptops. A company which provides voice and data services for mobile phones. Some Network carrier companies are present in several countries whilst others are unique to a particular country. For the purposes of this report, a Personal Navigation Device (PND) is considered to be a portable rechargeable device that has been designed for use within automobiles Personal Navigation Device or motorbikes for the purpose of assisting navigation. It does not include those devices that are physically integrated into vehicles and do not require charging. Pocket camcorders are small camcorders that offer basic recording functions and the Pocket camcorders possibility to upload to a computer. These figures represent the actual number of sales to consumers, and will often be Sales to end users lower than shipments. Refers to the number of units delivered to network carriers or retail chains for selling. Shipments These figures are commonly higher than sales to end users. are mobile phones which have advanced computing capability and connectivity. They can perform many functions of stand-alone computers. The price ranges from mid to high-end. Smart watches are multipurpose devices that are capable of performing similar Smartwatch functions to a smart phone. They can either be used as a standalone device or be paired with a smartphone

Table of Contents

Definitions of Key Terms ...... i

Table of Contents ...... iii

Annex 1 Mobile Phones ...... 1 Introduction ...... 1 Sales to end users ...... 1 Shipments ...... 8 Imports and Exports ...... 22 Charging requirements ...... 26 Market structure ...... 28 Case studies ...... 40

Annex 2 Tablets ...... 60 Introduction ...... 60 Shipments ...... 60 Sales to end users ...... 64 Charging requirements ...... 66 Market structure ...... 71 Case studies ...... 72

Annex 3 E-readers ...... 86 Introduction ...... 86 Sales ...... 86 Charging Requirements ...... 89 Structure of the Sector...... 92 Market Trends ...... 93 E-reader Sample ...... 93 Case Studies ...... 94

Annex 4 Laptops (Including Netbooks) ...... 100 Introduction ...... 100 Sales ...... 100 Europe ...... 101 Charging Requirements ...... 102 Structure of the Sector...... 102 Market Trends ...... 104 Case Studies ...... 105

Annex 5 Compact Digital Cameras and Camcorders ...... 110 Introduction ...... 110 Sales ...... 110 Charging Requirements ...... 113 Structure of the Sector...... 114 Market Trends ...... 119 Case Study Countries ...... 120 Non-EU Countries ...... 136

Annex 6 Portable Media Players ...... 139 Introduction ...... 139 Sales ...... 139 Charging Requirements ...... 140 Structure of the Sector...... 140 Market Trends ...... 140 Case Studies ...... 140

Annex 7 Sports and Activity Monitors ...... 145 Introduction ...... 145 Sales ...... 145 Charging requirements ...... 149 Future Markets ...... 156 Smart Watches ...... 157 Case Study Countries ...... 158

Annex 8 Personal Navigation Devices ...... 160 Introduction ...... 160 Sales ...... 160 Market Structure ...... 170 Case Study Countries ...... 173

Annex 9 Portable Handheld Games Consoles ...... 177 Introduction ...... 177 Sales ...... 177 Charging Requirements ...... 178 Structure of the Sector...... 178 Market Trends ...... 179 Case Studies ...... 180

Annex 10 Personal Care Products with Self-Contained Motor...... 191 Introduction ...... 191 Sales ...... 191 Charging requirements ...... 193 Structure of the sector ...... 194 Case Study Countries ...... 195

Annex 11 Methodology for Quantitative Modelling ...... 209 Mobile Phones and Their Chargers ...... 209 Market Share of Tablets using Micro-USB charging ...... 212 Market Share of Personal Navigation Devices using Micro-USB charging ...... 215 Market Share of E-Readers using Micro-USB charging ...... 219

Annex 1 Mobile Phones

Introduction

The handset market is truly global and the following section will give an overview of the worldwide market and the key trends from 2008 to 2013.

In this report, the term mobile phone encompasses both feature phones, which have basic functionality such as calling and text messaging, and smartphones, which have advanced computing capability and can be used for web browsing, video calling and navigation. For the purpose of this study the term ‘smartphone’ will be used as a proxy for data enabled mobile telephones. This categorisation will be used in the following sections to facilitate analysis of the mobile phone market.

Market research analysts typically report two figures in relation to sales of mobile phones and smartphones, ‘Sales to end users’ and ‘Shipments’. Sales to end users

Figures represent the actual number of sales to consumers, and will commonly be lower than shipments.

Worldwide

Mobile phones

In 2012, the EU25 made up 13% of mobile phone sales globally; the majority of sales were in Brazil, Russia, India and China (BRIC), Table A1-1.

Table A1-1: Distribution of global mobile phone sales by region in 20121 Region Percentage of sales BRIC 39% EU25 13% USA 12% Rest of world 36%

Between 2008 and 2012, the total number of mobile phone sales increased by 43%, with the largest increase occurring between 2009 and 2010 (32%). Interestingly, the market contracted by 3% from 2011 to 2012, perhaps a result of the worldwide economic downturn. Sales appear to have recovered in 2013, increasing by 2% compared to the same period in 2012. Table A1-2 provides the sales to end user by manufacturer for 2008 to 2013.

1 BITKOM (2012): Statistics portal. Webpage from the website of Statista. Available at http://www.statista.com/statistics/173069/distribution-of-global-mobile-phone-sales-by-region/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 1 Table A1-2: Worldwide sales (to end users) of mobile phones by manufacturer (units in million)2 Year Manufacturer 2008 2009 2010 2011 2012 2013 Apple 11.4 24.9 47.5 89.3 130.1 150.8 Blackberry 23.1 34.4 46.6 51.5 34.2 * HTC * 10.8 28.8 43.3 32.1 * * 13.5 23.8 40.7 47.3 53.3 - - - * * 45.3 LG 102.6 122.1 114.2 86.4 58.0 69 106.6 58.5 38.6 40.3 33.9 * 472.3 440.9 461.3 422.5 333.9 250.8 199.2 235.8 281.1 313.9 384.6 444.4 93.4 54.9 41.8 32.6 * 37.6 TCL * * * 34.0 37.2 49.5 Yulong - - * * * 32.6 ZTE - * 24.7 56.9 67.3 59.9 Others 213.6 299.2 488.6 597.3 587.4 613.7 Total 1,222 1,211 1,597 1,775 1,746 1,807 % change - -1% 32% 11% -2% 3% *Included in Others

ABI Research has also reported worldwide shipments for mobile phones, Table A1-3. Although the figures are different for some manufacturers, it does provide a more complete image of the up and coming Chinese manufacturers, namely Lenovo, Coolpad (Yulong) and . Indeed, it has been reported that in the second quarter of 2013, all of these manufacturers’ shipments exceeded Apple in the Chinese smartphone market. Samsung remained number one with 17% of the market share, followed by Lenovo (13%), Coolpad (10%) and Xiaomi (6.5%) (ABI Research, 2013). At present these manufacturers are only selling to the Chinese market, but given the size of the market (28% in Q2 2013) they have made it to the global top 12.

2 Gartner (2014): Various Gartner press releases. Available at http://www.gartner.com/newsroom/archive/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 2 Table A1-3: Worldwide shipments of mobile phones (units in millions) Vendor 2010 2011 2012 2013 (Q1 and 2) Apple 47.5 93.1 135.8 68.6 Blackberry 48 54 33.2 12.8 HTC 24.6 45.1 28.2 11.1 Huawei 27.4 51.5 48.4 27.1 Lenovo - 3.7 25.5 18.9 LG 116.7 90.4 56.6 32.4 Motorola 37.2 42.8 29.5 7.4 Nokia 453 417 335.6 123 Samsung 280.2 322.5 397.1 226.8 Sony 43.1 34.2 32.8 17.7 TCL 32 34.1 42.5 20.6 Xiaomi - 0.2 7.2 7 Yulong - - 20 19.6 ZTE 36.1 73.7 77 32 Others 214.6 304.2 320.9 199.5 Total 1,360 1,567 1,590 825 Source: Fierce Wireless Europe (2013)

In terms of the market share held by manufacturers, Nokia held the largest share from 2008 to 2011 and since 2012 Samsung has held the majority share, Table A1-4. Apple’s iPhone was released in June 2007 and has gradually gained market share, holding 8% in 2012. Market research analysts typically release market share figures for the top 5 or 10 performing manufacturers, therefore the remainder are grouped under the ‘Others’ category where indicated.

Harmonisation of Chargers for Portable Electronic Devices RPA | 3 Table A1-4: Market share by manufacturer of worldwide mobile phone sales (to end users)3 Year Manufacturer 2008 2009 2010 2011 2012 2013 Apple * 2% 3% 5% 8% 8% Blackberry * 3% 3% 3% 2% * HTC * 1% 2% 2% 2% * Huawei * 1% 2% 2% 3% 3% Lenovo - - - 1%** 2%** 3% LG 8% 10% 7% 5% 3% 4% Motorola 9% 5% 2% 2% 2% * Nokia 39% 36% 29% 24% 19% 14% Samsung 16% 20% 18% 18% 22% 25% Sony 8% 5% 3% 2% 2%** 2% TCL * * * 2%*** 2% 3% ZTE - 1% 2% 3% 3% 3% Yulong - - * * * 2% Others 20% 25% 31% 34% 34% 34% * Included in Others **Accessed via Statista website ***TCL (2012) Please note that due to rounding the total may not equal 100%

Smartphones

Focusing on smartphones, worldwide sales to end users have increased by 385% between 2008 and 2013 to 968 million units. Table A1-5 shows the worldwide sales to end users for smartphones by manufacturer. Figures released by Gartner from 2009 to 2012 were categorised by (OS) rather than manufacturer, therefore it has only been possible to include sales for Blackberry and Apple who utilise a proprietary OS.

3 Gartner (2014): Various Gartner press releases. Available at http://www.gartner.com/newsroom/archive/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 4 Table A1-5: Worldwide sales (to end users) by manufacturer for smartphones (units in millions)4 Year Manufacturer 2008 2009 2010 2011 2012 2013 (Q1-3) Apple 11.4 24.9** 46.6** 71.3** 129.1** 299.8 Blackberry 23.1 34.3** 47.5** 51.5** 35.3** * HTC 5.9 - - - - * Huawei - - - - - 46.6 Lenovo - - - - - 43.9 LG - - - - - 46.4 Motorola - - - - - * Nokia 60.9 - - - - * Samsung - - - - - 299.8 Sony - - - - - * TCL - - - - - * ZTE - - - - - * Yulong - - - - - * Others 37.9 - - - - 380.2 Total 139 172 297 473 675 968 % change - 24% 72% 59% 43% 43% * Included in Others ** OS market share used as approximation Please note that due to rounding the total may not equal 100%

Due to a lack of available data it is only possible to determine the market share by manufacturer for 2008 and 2013. As was the case in the mobile phone market, the dominant manufacturer in 2008 was Nokia and in 2013 is Samsung (see Table A1-6).

4 Gartner (2014): Various Gartner press releases. Available at http://www.gartner.com/newsroom/archive/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 5 Table A1-6: Market share by manufacturer of worldwide smartphone sales 5 Year Manufacturer 2008 2009 2010 2011 2012 2013 (Q1-3) Apple 8% 14%** 16%** 15%** 19%** 16% Blackberry 17% 20%** 16%** 11%** 5%** * HTC 4% - - - - * Huawei - - - - - 5% Lenovo - - - - - 5% LG - - - - - 5% Motorola - - - - - * Nokia 44% - - - - * Samsung - - - - - 31% Sony - - - - - * TCL - - - - - * Yulong - - - - - * ZTE - - - - - * Others 28% - - - - 39% * Included in Others ** OS market share used as an approximation Please note that due to rounding the total may not equal 100%

Smartphone market 2013

In 2012, sales (to end users) of smartphones were close the 1 billion mark, with 968 million sales. TomiAhonen Consulting Analysis have estimated the distribution of sales across the world by region; Figure A1-1.

5 Gartner (2014): Various Gartner press releases. Available at http://www.gartner.com/newsroom/archive/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 6

Figure A1-1: Distribution of worldwide smartphone sales in 20136

These proportions can be used to calculate the total smartphone sales in each region, for example, in Europe sales will be around 170 million. In terms of the distribution of sales throughout the year, most sales are completed in the final quarter of the year; Table A1-7 shows the quarterly worldwide sales and estimated EU28 sales for 2013.

Table A1-7: Distribution of smartphone sales in 2013 (units in millions)7 Period Worldwide EU28 Q1: Jan – Mar 210 37 Q2: Apr – Jun 225 40 Q3: Jul – Sep 250 44 Q4: Oct – Dec 282 50

Smartphones vs. feature phones

In the absence of separate figures for feature phones, mobile phone and smartphone sales figures can be used to calculate estimations. As Gartner typically release sales figures for the top 5 performing smartphone manufacturers and top 10 mobile phone manufacturers, only the annual totals can be compared (see Table A1-8).

Total smartphone sales have been increasing year on year from 2008 to 2013 from 139 million to 968 million, representing an overall increase of 596%. Conversely sales of feature phones have been more variable, in 2010 and 2011 sales increased by 25% and 3% respectively, after which sales have been decreasing. Overall, the sales of feature phones have decreased by 23% from 2008 to 2013.

6 TomiAhonen Consulting Analysis (2013): National Smartphone market data. Report by TomiAhonen Consulting Analysis from Mary Meeker & Informa data, and UN population statistics. Available at http://communities-dominate.blogs.com/brands/smartphone/ on 14 March 2014. 7 TomiAhonen Consulting Analysis (2013): National Smartphone market data. Report by TomiAhonen Consulting Analysis from Mary Meeker & Informa data, and UN population statistics. Available at http://communities-dominate.blogs.com/brands/smartphone/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 7 Table A1-8: Smartphone vs. feature phones worldwide sales to end users (units in millions) Year Smartphones % change Feature phones % change 2008 139.3 - 1,083.0 - 2009 172.4 24% 1,038.9 -4% 2010 296.6 72% 1,300.2 25% 2011 472.7 59% 1,335.9 3% 2012 674.9 43% 1,071.3 -20% 2013 967.8 43% 839.2 -22%

In 2013, smartphones accounted for the majority (54%) of worldwide mobile phone sales for the first time; this had been predicted to happen by several market analyst firms and was confirmed by Gartner’s press release of sales to end users in August 20138. Market analyst firm IDC proposes two reasons for this, firstly the falling price of handsets as more budget smartphones are released and network carriers continue to subsidise handsets and secondly the advent of 4G technology (IDC, 2013b).

Europe

Sales data from Kantar Worldpanel ComTech shows the difference in the market share held by manufacturers across Europe, largely a result of handset subsidies and differing economic prosperity. It reported that Sony and LG, whose portfolios include low and mid-range smartphones have significantly increased their market share in Spain and Italy where there is a desire for devices below €1509. Whereas in Germany, the SIII, considered a high-end smartphone, accounted for 23.5% of smartphone sales compared to 4.7% in Spain. Shipments

Mobile phone sales are commonly reported as shipments, which is the number of units delivered to network carriers or retail chains for selling. It is important to note that this does not reflect actual sales to end users and is generally a sign of a company’s expected sales. For ‘hot’ products, these figures may be virtually the same, but in most cases not every shipped item is sold to a customer. It is also important to be aware that a company may ship more units than the shop can sell in order to artificially inflate sales figures; this is known as channel stuffing.

In addition to an analysis of mobile phone and smartphone shipments, the device type in terms of mobile communication standards i.e. 2G, 3G and 4G and the market share of smartphones and feature phones will also be reviewed.

8 Gartner (2013) Gartner Says Smartphones Sales Grew 46.5 Percent in Second Quarter of 2013 and Exceeded Feature Phone Sales for First Time. Press release by Gartner. Dated 14 August 2013. Available at http://www.gartner.com/newsroom/id/2573415 on 14 March 2014. 9 Kantar Worldpanel (2013): News - Sony and LG boosted by faltering EU Economies. News article by Kantar Worldpanel. Dated 3 June 2013. Available at http://www.kantarworldpanel.com/global/News/Sony-and- LG-Boosted-by-Faltering-EU-Economies-and-Low-Handset-Subsidies on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 8 Worldwide

Mobile phones

As expected worldwide mobile phone shipments have increased year on year, from 2009 to 2012 shipments increased by 57%, an average of 12% per annum, Table A1-9. From 2011 to 2012 shipments in the EU grew by 4.7%, the US by 3% and BRIC by 4.9%10. Freely available press releases from IDC only report on the top five performing companies, which have remained largely unchanged over the last two years.

Table A1-9: Worldwide shipments (units) of mobile phones by manufacturer (units in millions)11 Year Manufacturer 2008 2009 2010 2011 2012 2013 Apple - - - 93.1 135.9 153.4 Blackberry - - - - - HTC - - - - - Huawei - - - - - 55.5 Lenovo - - - - - LG - - - 88.1 55.9 70.0 Motorola - - - - - Nokia - - - 416.9 335.6 251.0 Samsung - - - 330.9 406.0 446.7 Sony - - - - - TCL Communications - - - - - Yulong - - - - - ZTE - - - 69.5 65.0 Others - - - 716.8 737.5 845.2 Total - 1,157 1,391 1,715 1,736 1,822 % change 20% 23% 1% 5%

The market share of worldwide shipments mirrors the sales (to end user) figures, with Nokia having the majority share of the market from 2010 to 2011, after which Samsung has held the largest share, Table A1-10. Although there is no available data for shipments by manufacturer in 2008 and 2009, it is reasonable to assume that Nokia had the largest market share as sales and shipments should be relatively similar.

10 EITO (2012): growth rate of mobile phone shipments by world regions from 2011-2012. Statista website. Available at http://www.statista.com/statistics/173072/growth-of-mobile-phone-shipments-in-selected- world-regions/ on 14 March 2014. 11 IDC (2014): Various IDC press releases. Available at http://www.idc.com/about/press.jsp on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 9 Table A1-10: Market share by vendor of worldwide mobile phone shipments12 Year Manufacturer 2008 2009 2010 2011 2012 2013 Apple - - 3%* 5% 8% 8% Blackberry ------HTC ------Huawei - - - - - 3% Lenovo ------LG - - 8%* 5% 3% 4% Motorola ------Nokia - - 33%* 24% 19% 14% Samsung - - 20%* 19% 23% 25% Sony ------TCL Communications ------Yulong ------ZTE - - 4% 4% 4% - Others 32% 42% 42% 46% *Accessed via Statista website Please note that due to rounding the total may not equal 100%

Smartphones

The worldwide shipments of smartphones are presented in Table A1-11 for 2009 to 2013. From 2009 to 2012, the top 5 performing companies have remained the same; Apple, Blackberry, HTC, Nokia and Samsung. The shipment data for 2013 shows that the market may be about to change with several new companies making an appearance in the top 5; LG, ZTE, Huawei and Lenovo, replacing Nokia, Blackberry and HTC. Over this period, there has been a 477% increase in the number of global shipments of smartphones, peaking in 2010, with a 76% increase compared to the previous year.

12 IDC (2014): Various IDC press releases. Available at http://www.idc.com/about/press.jsp on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 10 Table A1-11: Worldwide shipments of smartphones by vendor (units in millions)13 Year Manufacturer 2008 2009 2010 2011 2012 2013 YTD Apple - 25.1 47.5 93.2 135.9 153.4 Blackberry - 34.5 48.8 51.1 32.5 HTC - 8.1 21.5 43.5 32.6 Huawei - - - - - 48.8 Lenovo - - - - - 45.5 LG - - - - - 47.7 Motorola - - - - - Nokia - 67.7 100.3 77.3 35.1 Samsung - 5.5 23.0 94.0 215.8 313.9 Sony Ericsson - - - - - TCL Communications - - - - - Yulong - - - - - ZTE - - - - - Others - 32.6 61.5 132.3 260.7 394.9 Total - 174 303 491 713 1,004 % change 76% 62% 45% 41%

The worldwide smartphone market share figures, Table A1-12 shows that Nokia held the largest share in 2009 and 2010, whereas in the mobile phone market as a whole Nokia also held the majority in 2011. Samsung gained the majority of the smartphone market in 2011 which was also the case for 2012 and 2013.

13 IDC (2014): Various IDC press releases. Available at http://www.idc.com/about/press.jsp on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 11 Table A1-12: Market share by vendor of worldwide smartphone shipments14 Year Manufacturer 2008 2009 2010 2011 2012 2013 Apple 8%* 15% 16% 19% 19% 19% Blackberry 20% 16% 10% 5% HTC 5% 7% 9% 5% Huawei 5% Lenovo 5% LG 5% Motorola Nokia 39% 33% 16% 5% Samsung 3% 8% 19% 30% 31% Sony TCL Communications Yulong ZTE Others 19% 21% 27% 37% 39% *Accessed via Statista website Please note that due to rounding the total may not equal 100%

Smartphones vs. feature phones

This analysis will now provide a direct comparison between smartphones and feature phones where data are available, Table A1-13. As expected the shipments of smartphones have increased each year since 2009 to date, although the magnitude of this increase has waned. Sales of feature phones actually increased in 2010 and 2011 compared to the previous year, but since 2012, sales have begun to decrease noticeably.

Table A1-13 Smartphone vs. feature phones worldwide shipments (units in millions) Year Smartphones % change Feature phones % change 2008 - - - - 2009 174 - 983 - 2010 305 75% 1,088 11% 2011 491 61% 1,224 13% 2012 713 45% 1,023 -16% 2013 1,004 41% 818 -20%

ABI Research have provided alternative figures for mobile phone shipments in 2Q 2013 split by smartphone and feature phone, these are displayed in Figure A1-2. The total number of shipments varies slightly to those provided by IDC presented earlier in Table A1-9. The portfolios for two of the three leading manufacturers, Samsung and Nokia, comprise feature phones and smartphones. In the case of Samsung, smartphones represent 65% of shipments. In comparison, just 12% of Nokia’s mobile phone sales are smartphones and consequently does not appear in the top 5 smartphone manufacturers. There are several companies which only manufacture smartphones, including Apple, Lenovo, Sony, Blackberry and HTC.

14 IDC (2014): Various IDC press releases. Available at http://www.idc.com/about/press.jsp on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 12

Figure A1-2: Worldwide mobile phone shipments by manufacturers in 2Q 201315

Moving further back in time, Figure A1-3 shows the split of mobile phone shipments which are feature phones and smartphones. Since 2010, shipments of smartphones have gradually increased from 56 million to 229 million in the second quarter of 2013. During the same period feature phones have shown more variability, remaining fairly constant until the end of 2011, after which they have decreased to low of 189 million units in 2013.

15 Fierce Wireless (2013): Analyzing the world’s 14 biggest handset makers in Q2 2012. Available at http://www.fiercewireless.com/europe/special-reports/analyzing-worlds-14-biggest-handset-makers-q2- 2013 on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 13

Figure A1-3: Split of worldwide mobile phone shipments from 2010 to 2Q 201316

2G vs. 3G vs. 4G

In 2013, the latest mobile phone technology 4G was released, following on from its predecessors 2G and 3G. Each generation of technology allows mobile phones to perform functions, 2G was suitable for making calls and sending text messages, 3G makes it possible to access the internet more effectively and the latest 4G technology will make browsing the internet much faster and will support streaming of videos, mapping and social networking sites17.

Smartphones are defined as a mobile phone which is built on an operating system which allows more advanced computing capability and connectivity than a feature phone. Therefore, for the purpose of this analysis 2G will correspond to basic phones which only have limited capabilities, 3G will include feature phones and smartphones and 4G will correspond to smartphones only.

At the start of 2011 the UTMS Forum gave predictions on the worldwide device mix in 2020, Table A1-14. As previous figures have suggested the presence of basic phones will markedly decrease, so that in 2020 they represent just 17.2% of all devices. Smartphones will acquire this market share and by 2020 are expected to occupy 60.5%, 40% of which will be mid-range smartphones. The expected small proportion of 4G enabled smartphones provides evidence that 3G provides an adequate solution for most people that want or need to access the internet via their mobile phone. This is particularly the case in the emerging markets where many people do not have access to the internet via a computer.

16 Fierce Wireless (2013): Analyzing the world’s 14 biggest handset makers in Q2 2012. Available at http://www.fiercewireless.com/europe/special-reports/analyzing-worlds-14-biggest-handset-makers-q2- 2013 on 14 March 2014. 17 Ofcom (2014): What is 4G? Webpage from the website of Ofcom. Available at http://consumers.ofcom.org.uk/what-is-4g/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 14 Table A1-14: Worldwide device mix in 2010 and 2020, by device18 Device 2010 2020 Connected devices 0.4% 8.8% Dongles 2.5% 6.7% M2M (machine to machine) 1.0% 6.7% High-end smartphones 12.4% 20.5% Mid-range smartphones 7.0% 40.0% Low-end mobile phones 76.6% 17.2%

Predictions from Jefferies & Company in 2011 for the shipments of mobile phone by technology are shown in Table A1-15. Within Western Europe and the US the market for feature phones was predicted to have ceased by 2013 and 2012 respectively. However this is not the case for Western Europe, where feature phones continue to ship albeit at a diminishing rate; in the 1st quarter of 2013, shipments were down 31% from the same period in 2012. Shipments to Eastern Europe and indeed worldwide will continue although these are likely to decrease by a significant margin, in 2020 there is expected to be just 1.5 million units shipped to Eastern Europe. Again there are similarities for the 3G market in Western Europe and the US, where shipments gradually increase until the middle of the decade and gradually decline, whilst shipments of 4G increase from the year of release. Shipments of both 3G and 4G mobile phones to Eastern Europe and worldwide continue to increase until 2020, however 3G remains the most common type of mobile phone technology. These market trends are most likely a result of the level of affluence and the amount of disposable income within each region.

18 UMTS Forum (2011): Worldwide device mix in 2010 and 2020, by device. Statista website. Available at http://www.statista.com/statistics/219008/global-mobile-device-mix-since-2010-by-device/ on 14 March 2014. Harmonisation of Chargers for Portable Electronic Devices RPA | 15 Table A1-15: Shipments of mobile phones by technology from 2008 to 2020 (units in millions)19

Western Europe Eastern Europe US Worldwide Year 2G 3G 4G 2G 3G 4G 2G 3G 4G 2G 3G 4G 2008 86.6 87.9 - 70.4 25.7 - 72.1 109.6 - 800.8 421.5 - 2009 49.8 140.0 - 49.2 30.3 - 54.2 128.0 - 677.8 533.5 - 2010 35.4 162.6 - 55.0 49.5 - 25.3 165.5 - 844.6 752.2 - 2011* 17.7 167.4 - 49.5 59.4 - 16.5 174.3 3.6 826.6 917.3 4.2 2012* 10.6 177.5 0.3 39.6 74.2 0.2 - 178.8 9.1 726.9 1117.7 13.6 2013* - 186.4 6.8 30.0 89.0 1.8 - 187.4 13.8 609.9 1338.3 40.5 2014* - 186.4 13.5 23.8 97.9 7.0 - 185.9 20.4 500.0 1549.1 88.9 2015* - 177.0 27.0 19.0 104.8 14.1 - 176.9 30.1 371.1 1769.3 158.3 2016* - 159.3 48.6 14.3 110.0 23.9 - 174.4 43.5 258.4 1937.8 256.0 2017* - 143.4 68.1 10.0 115.5 33.5 - 165.0 58.2 175.4 2062.6 364.0 2018* - 129.1 88.5 6.0 121.3 43.5 - 153.1 81.3 104.1 2187.5 478.1 2019* - 113.6 115.1 3.0 127.4 52.2 - 136.5 107.4 56.7 2275.6 596.6 2020* - 96.5 138.1 1.5 131.2 60.1 - 94.5 135.4 28.9 2361.9 712.7

19 Information collated from Statista, accessed at: http://www.statista.com/ Harmonisation of Chargers for Portable Electronic Devices RPA | 16 Europe

Mobile phones

Mobile phone shipments to Western Europe20 have not followed the global trend with shipments dropping by 9% from 2009 to 2012. Within the region, shipments of mobile phones dropped by 4.3% in the first quarter of 2013 compared to the same period in 2012. This is predominantly in the feature phone market, where shipments fell by 31% to 12 million units, as consumers migrate to smartphones. Table A1-16 gives the shipments of mobile phones to Western Europe by manufacturer. Nokia, Samsung and Apple are among the top performing manufacturers from 2009 to 2013.

Table A1-16: Western Europe shipments (units) by manufacturer for mobile phones (units in millions)21 Year Manufacturer 2013 2008 2009 2010 2011 2012 (Q1&2) Apple - 8.0* 15.5* 18.0* 24.4* 6.2 Blackberry - 6.1* 11.7* 13.0* 8.8* - HTC - - 4.6* 11.4* - - Huawei ------Lenovo ------LG - 18.0* 13.1* - - 2.5 Motorola ------Nokia - 69.2* 67.0* 43.2* 33.6* 6.1 Samsung - 53.0* 52.8* 54.8* 70.8* 19.9 Sony - 20.9* 15.9* 8.6* 8.4* 3.2 TCL Communications ------Yulong ------ZTE ------Others - 9.2 13.6 26.3 21.8 5.7 Total - 184.5 194.2 175.3 167.8 43.6 % change - 3% -17% -2% - *Accessed via Statista website. Please note that due to rounding the total may not equal 100%

Table A1-17 gives the market shares of manufacturers for shipments of mobile phones to Western Europe. In 2009 and 2010 the market leader was Nokia and from 2011 onwards Samsung has held the largest share of the market. This is a slight variation on the global trend, as Nokia maintained dominance of worldwide shipments in 2011, accounting 24% of shipments compared to Samsung’s

20 Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK. 21 IDC (2014): Various IDC press releases. Available at http://www.idc.com/about/press.jsp on 14 March 2014.

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19%. In Western Europe, Nokia has gradually lost market share since 2009 to other companies, in particular Samsung which held 46% in 2013 (Q1 & 2).

Table A1-17: Market share by manufacturer of Western Europe mobile phone shipments22 Year Manufacturer 2013 2008 2009 2010 2011 2012 (Q1 & 2) Apple - 4%* 8%* 10%* 14%* 14% Blackberry - 3%* 6%* 8%* 5%* - HTC - - 3%* 6%* 4%* - Huawei ------Lenovo ------LG - 10%* 7%* - - 6% Motorola ------Nokia - 37%* 34%* 25%* 19%* 14% Samsung - 29%* 27%* 31%* 41%* 46% Sony - 12%* 8%* 5%* 5% 7% TCL ------Yulong ------ZTE ------Others 5% 7% 15% 13% 13% *Accessed via Statista website Please note that due to rounding the total may not equal 100%

Smartphones

It has only been possible to access the same level of information for smartphone shipments for the 1st quarter of 2013, Table A1-18. Unlike feature phones, shipments of smartphones have increased by 12% for the 1st quarter of 2013. Mimicking global trends, Samsung holds the majority of the market at 45.3%, followed by Apple at 19.6%.

22 IDC (2014): Various IDC press releases. Available at http://www.idc.com/about/press.jsp on 14 March 2014.

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Table A1-18: Western Europe shipments (units) by vendor for smartphones (units in millions)23 1Q12 1Q13 Manufacturer Shipments Market share Shipments Market share Apple 7 24.8% 6.2 19.6% LG 0.5 1.8% 2.4 7.6% .3 8.2% 1.6 5.1% Samsung 10.9 38.7% 14.3 45.3% Sony 1.6 5.7% 3.2 10.1% Others 5.9 20.9% 3.9 12.3% Total 28.2 31.6

Smartphones vs. feature phones

Jefferies & Company have calculated Europe’s proportion of worldwide smartphone and feature phone shipments until 2020, Table A1-19. Within Western Europe, there is a decreasing trend as a result of market saturation and increased sales in the emerging markets. IDC estimate that emerging markets will account for 64.8% of worldwide shipments in 2013, which will rise to 70.6% in 201724.

Shipments to Eastern Europe show little variation over this period, perhaps resulting from the small number of developed markets in the region, namely the Czech Republic, Hungary, Poland and Russia25.

23 IDC (2013): The Western European Mobile Phone Market Declines in 1Q13, Driven by the Smartphone Slowdown, says IDC. Press release by IDC. Available at http://www.idc.com/getdoc.jsp?containerId=prUK24197413 on 14 March 2014. 24 IDC (2013): Smartphones Expected to Grow 32.7% in 2013 Fuelled By Declining Prices and Strong Emerging Market Demand, According to IDC. IDC website. Available at http://www.idc.com/getdoc.jsp?containerId=prUS24143513 on 14 March 2014. 25 According to the MSCI, accessed at http://www.msci.com/products/indices/tools/index_country_membership/emerging_markets.html#

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Table A1-19: Europe’s market share of global mobile phone shipments from 2008 to 2020 27 Western Europe26 Eastern Europe Year Feature phones Smartphones Feature phones Smartphones 2008 13% 23% 8% 5% 2009 14% 26% 7% 4% 2010 9% 29% 7% 4% 2011* 5% 26% 7% 4% 2012* 5% 20% 7% 5% 2013* 4% 17% 6% 6% 2014* 4% 15% 6% 6% 2015* 4% 12% 6% 6% 2016* 3% 12% 6% 6% 2017* 3% 11% 6% 6% 2018* 2% 10% 6% 6% 2019* 2% 10% 6% 6% 2020* 1% 9% 7% 6%

Jefferies & Company have also provided forecasts for the shipments (units) of feature phones and smartphones into Europe until 2020, Table A1-20. In Europe shipments of feature phones from 2014 to 2020 are predicted to decrease by 47%, whilst in the same period smartphones will increase by 140%. This trend is witnessed in both regions of Europe but to varying degrees.

Feature phone shipments to Western Europe in 2020 will have dropped by 90% from 2014 figures to 4.7 million units, whilst smartphones will account for 98% of mobile phone shipments (230 million), equating to an increase of 49% from 2014.

Within Eastern Europe the drop in feature phone shipments is less dramatic, at 43% from 2014 levels to 38.6 million units in 2020. Smartphones make up 80% of all mobile phone shipments in the region at 154.2 million, representing an increase of 152%.

26 Jefferies & Company (2011): Western Europe's market share of global feature phone and smartphone shipments from 2008 to 2020. Statista website. Available at http://www.statista.com/statistics/225483/2/market-share-of-the-western-europe-region-in-global- feature-phone-and-smartphone-shipments/ on 14 March 2014. 27 Jefferies & Company (2011): Eastern Europe's market share of global feature phone and smartphone shipments from 2008 to 2020. Statista website. Available at http://www.statista.com/statistics/225451/eastern-european-market-share-in-global-feature-phone-and- smartphone-shipments/ on 14 March 2014.

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Table A1-20: Forecast – shipments of feature phones and smartphones in Europe (units in millions)28 Europe Western Europe Eastern Europe Year Feature Feature Feature Smartphones Proportion Smartphones Proportion Proportion Smartphones Proportion phones phones phones 2014* 113.40 215.20 46.0 23% 153.9 77% 67.4 52% 61.3 48% 2015* 97.30 244.60 36.7 18% 167.3 82% 60.6 44% 77.3 56% 2016* 85.40 270.80 29.1 14% 178.9 86% 56.3 38% 91.9 62% 2017* 75.80 294.70 23.3 11% 188.2 89% 52.5 33% 106.5 67% 2018* 65.20 323.20 17.4 8% 200.2 92% 47.8 28% 123.0 72% 2019* 53.40 357.80 11.4 5% 217.2 95% 42.0 23% 140.6 77% 2020* 43.30 384.20 4.7 2% 230.0 98% 38.6 20% 154.2 80%

28 Jeffries & Company (2014): Predictions of shipments of feature phones and smartphones in Europe. Statista website. Available at http://www.statista.com/

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The variation in the shipments of mobile phones between the regions of Europe is possibly a result of lower smartphone market penetration in Eastern Europe as shown in Table A1-21.

Table A1-21: Smartphone penetration per capita from 2008 to 2015 30 Year Western Europe29 Eastern Europe 2008 12% 3% 2009 18% 4% 2010 30% 6% 2011* 46% 8% 2012* 62% 11% 2013* 77% 15% 2014* 90% 18% 2015* 100% 21%

Imports and Exports

Figures for imports and exports have been accessed using Euro Stat Prod Com for the product code ‘Telephones for cellular networks or for other wireless networks’. Whilst this can contain other devices such as VoIP telephones, these comprise a small proportion and therefore serves as an approximation for mobile phones.

Imports of mobile phones units into the EU27 from 2008 to 2012 (Table A1-22) increased by 9%; however there is substantial variation between the case study countries. Most noticeable is the 592% increase of units imported into Slovakia. Significant changes were also experienced in Germany with a 48% increase and Finland with a 78% decrease in units imported. During this period the number of units exported has increased remarkably in some countries, in particular Slovakia which has witnessed an increase of 2,829% but also Poland by 138% and Spain by 112%. Some countries have experienced a decrease, most noticeably Finland with a drop of 88%. A possible explanation for the reduced imports and exports in Finland may be the closure of the handset production facility in June 201231.

29 Credit Suisse (2010): Smartphone penetration per capita in Western Europe from 2002 to 2015. Statista website. Available at: http://www.statista.com/statistics/203722/smartphone-penetration-per-capita-in- western-europe-since-2000/ on 14 March 2014. 30 Credit Suisse (2010): Smartphone penetration per capita in Eastern Europe from 2005 to 2015. Statista website. Available at: http://www.statista.com/statistics/203722/smartphone-penetration-per-capita-in- western-europe-since-2000/ on 14 March 2014. 31 Smart Company (2012): Mobile phone production in Western Europe ends as Nokia officially closes Salo plant: 780 jobs cut. Smart Company website. Available at http://www.smartcompany.com.au/information-technology/050967-mobile-phone-production-in- western-europe-ends-as-nokia-officially-closes-salo-plant-780-jobs-cut-4.html on 14 March 2014.

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Table A1-22: Imports and exports (units) of telephones for cellular networks or for other wireless networks (units in thousands)32 Imports Exports Overall Overall Country 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 change change EU27 214,374 205,468 213,441 202,081 231,368 90,296 64,764 71,109 75,314 56,812 -4% 4% -5% 14% 8% -28% 10% 6% -25% -37% United 43,504 46,731 49,849 45,273 44,229 7,430 9,534 11,492 13,141 10,824 Kingdom 7% 7% -9% -2% 2% 28% 21% 14% -18% 46% Germany 39,821 38,404 59,192 65,008 59,789 18,341 13,977 34,039 38,804 34,664 -4% 54% 10% -8% 50% -24% 144% 14% -11% 89% Poland 10,588 10,814 11,010 10,937 10,869 1,342 1,483 1,666 1,710 3,284 2% 2% -1% -1% 3% 11% 12% 3% 92% 145% Spain 21,515 25,549 25,884 24,378 21,898 1,713 2,162 2,767 2,714 3,710 19% 1% -6% -10% 2% 26% 28% -2% 37% 117% Italy 23,721 21,970 25,462 27,731 27,913 3,145 2,534 3,969 3,078 2,933 -7% 16% 9% 1% 18% -19% 57% -22% -5% -7% France 35,791 35,208 37,505 34,972 36,187 9,759 7,730 10,732 10,845 12,776 -2% 7% -7% 3% 1% -21% 39% 1% 18% 31% Finland 23,760 9,742 3,622 3,062 5,124 32,143 15,205 10,467 6,474 4,003 -59% -63% -15% 67% -78% -53% -31% -38% -38% -88% Portugal 6,014 5,633 6,084 5,166 5,056 1,314 1,158 602 713 903 -6% 8% -15% -2% -16% -12% -48% 18% 27% -31% Netherlands 42,408 35,873 42,701 42,023 48,973 29,819 22,943 30,289 29,810 40,490 -15% 19% -2% 17% 15% -23% 32% -2% 36% 36% Slovakia 3,026 1,721 2,984 34,170 21,316 623 669 5,846 10,255 22,175 -43% 73% 1,045% -38% 604% 7% 774% 75% 116% 3,459%

32 Eurostat (2014): Prod Com NACE Rev. 2. Eurostat website Available at http://epp.eurostat.ec.europa.eu/portal/page/portal/prodcom/data/database on 14 March 2014.

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Reviewing the imports and exports by value (Euros) reveals unexpected results for some of the case study countries, Table A1-23. As expected the value of imports and exports in Slovakia have increased by a significant margin, 575% and 1,280% respectively. In some countries the magnitude of change for the imports and exports by value is far greater than expected in relation to the change in units. In some cases a decrease in units corresponded to an increase in value, for example exports by units for Portugal decreased by 31%, however, the exports by value increased by 47%, Figure A1- 4, please note Slovakia has not included due to the degree of change. This disparity may result from the increasing unit price of mobile phones during this period as smartphones accounted for a growing proportion of mobile phone sales. As manufacturers are set to bring out increasing numbers of ‘budget’ smartphones to cater for the emerging markets, the value of imports and exports may begin to drop.

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Table A1-23: Value of imports and exports of telephones for cellular networks or for other wireless networks (millions Euros)33 Imports Exports Overall Overall Country 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 change change EU27 15,254 14,171 16,366 19,784 27,485 9,382 6,197 8,329 10,713 9,745 -7% 15% 21% 39% 80% -34% 34% 29% -9% 4% United 4,113 4,480 6,146 6,524 7,886 803 1,247 1,498 2,022 1,757 Kingdom 9% 37% 6% 21% 92% 55% 20% 35% -13% 119% Germany 3,263 3,341 4,648 6,248 7,824 1,614 1,293 2,473 3,021 3,844 2% 39% 34% 25% 140% -20% 91% 22% 27% 138% Poland 1,210 1,033 1,002 1,037 1,164 135 171 167 253 857 -15% -3% 3% 12% -4% 27% -2% 51% 239% 535% Spain 2,022 2,045 2,247 2,557 2,456 86 94 109 132 260 1% 10% 14% -4% 21% 9% 16% 21% 97% 202% Italy 2,333 2,084 2,218 2,725 3,297 445 459 742 725 512 -11% 6% 23% 21% 41% 3% 62% -2% -29% 15% France 3,247 3,515 4,214 4,156 4,963 541 541 768 866 1,461 8% 20% -1% 19% 53% 0% 42% 13% 69% 170% Finland 2,236 1,021 387 463 976 6,518 2,785 1,817 1,430 851 -54% -62% 20% 111% -56% -57% -35% -21% -40% -87% Portugal 466 370 380 334 371 45 58 44 52 67 -21% 3% -12% 11% -20% 29% -24% 18% 29% 49% Netherlands 4,288 3,836 5,622 5,997 8,347 3,847 3,977 6,524 7,176 11,858 -11% 47% 7% 39% 95% 3% 64% 10% 65% 208% Slovakia 377 274 460 1,371 2,519 156 129 611 1,175 2,150 -27% 68% 198% 84% 568% -17% 374% 92% 83% 1278%

33 Eurostat (2014): Prod Com NACE Rev. 2. Eurostat website Available at http://epp.eurostat.ec.europa.eu/portal/page/portal/prodcom/data/database on 14 March 2014.

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Figure A1-4: Overall percentage change of imports and exports within EU 27 and case study countries from 2008 to 2012

Charging requirements

Compliance with the MoU

In 2009 a MoU to harmonise chargers of data-enabled phones sold within the EU was established. Table A1-24 shows the types of charger used for smartphones for the signatories of the MoU and other dominant manufacturers from 2008 to 2013.

Of the signatories, Qualcomm, Texas Instruments and Atmel only manufacturer components for smartphone, and are therefore absent from this analysis. Emblaze mobile will also be excluded as they have not released a data enabled mobile phone since 2009. According to the Phone Arena website, NEC has manufactured just a single smartphone since 2005, released in June 2013, which uses a Micro-USB charger.

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Table A1-24: Smartphone charger by manufacturer from 2008 to 2013 Manufacturer 2008 2009 2010 2011 2012 2013 Apple Proprietary Proprietary Proprietary Proprietary Proprietary Proprietary Mini-USB & Micro-USB Micro-USB Micro-USB Micro-USB Micro-USB Blackberry Micro-USB Mini-USB & Mini-USB & Mini-USB Micro-USB Micro-USB Micro-USB HTC Micro-USB Micro-USB Huawei n/a ? Micro-USB Micro-USB Micro-USB Micro-USB Lenovo n/a n/a n/a n/a Micro-USB Micro-USB LG n/a Micro-USB Micro-USB Micro-USB Micro-USB Micro-USB Mini-USB & Micro-USB Micro-USB Micro-USB Micro-USB Micro-USB Motorola Micro-USB Mini-USB & Micro-USB Micro-USB Micro-USB Micro-USB Micro-USB Nokia Micro-USB Proprietary Proprietary & Micro- & Micro- Micro-USB Micro-USB Micro-USB Micro-USB Samsung USB USB Proprietary Mini-USB & Micro- Micro-USB Micro-USB Micro-USB Micro-USB Sony USB TCL Communications n/a n/a Micro-USB Micro-USB Micro-USB Micro-USB (Alcatel) ZTE n/a n/a n/a Micro-USB Micro-USB Micro-USB

In 2008, before the MoU was signed, manufacturers of smartphones used a mixture of chargers, including Mini-USB, Micro-USB and proprietary. In 2009, the year of signature, there was already a shift to the exclusive use of Micro-USB chargers, for example, Blackberry, Motorola and Nokia. In 2010, with the exception of Apple and HTC, all new smartphone models were sold with a Micro-USB charger and by 2011 all signatories were in compliance with the MoU. Whilst Apple has continued to supply a proprietary charger with smartphones, it has developed a Micro-USB adaptor, both for the 30 pin and lightning connectors, which is in keeping with the MoU. The MoU’s success reaches further as there the majority of non-signatory manufacturers also supply Micro-USB chargers.

As far as can be discerned, the majority of smartphones are supplied with a charger, although there are some notable exceptions. The UK network carrier, O2, has launched a “Charger out of the Box” initiative which means selected phones do not include the charging block, only a Micro-USB - USB data transfer cable34; similarly Virgin Media offers one phone model in the UK at a cheaper rate without a mains charger. The Fairphone, marketed as an eco-friendly smartphone, also does not come with a charger, data transfer cable or headphones35.

34 O2 (2013): Sony becomes third major manufacturer to join “Charger out of the Box” scheme. O2 website. Available at http://news.o2.co.uk/?press-release=sony-becomes-third-major-manufacturer-to-join- charger-out-of-the-box-scheme on 14 March 2014. 35 Fairphone (2014): General specifications. Fairphone website. Available at http://buy-a-phone-start-a- movement.fairphone.com/en/specs/ on 14 March 2014.

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Future developments

SuperSpeed USB (USB 3.0) is the latest USB technology, superseding Hi-Speed USB (USB 2.0), was developed to provide a source of power for higher-performing devices and faster data transfer36. In order to achieve SuperSpeed rates, the user requires a USB 3.0 enabled host, device and cable37. USB 3.0 is backwards compatible and supports previous connector technology, including USB 2.0.

USB 3.0 enabled small portable devices such as smartphones, tablets and digital cameras will use the Micro-USB 3.0 plug and receptacle. In September 2013, it was revealed that Samsung’s Galaxy Note III will be the first smartphone to utilise this charger.

The USB 3.0 cable allows for shorter charging times as it can draw up to 100 watts, compared to 7.5 watts from a USB 2.0, and the Micro-USB connector drawing up to 60 watts. As smartphones become more powerful, it is likely that the prevalence of USB 3.0 technology will increase, but may be limited to larger handsets owing to the size of the port. By 2017, it is expected that smartphones will be approximately 10 times more powerful than those available today, having similar requirements to a mid-range laptop38.

One of the reasons Apple has maintained the use of the proprietary charger is its ability to output audio to another device, such as a docking station, which is not possible with the Micro-USB 2.0. This has been addressed and the Micro-USB 3.0 technology now has an audio and video specification, which could enable new docking products to be developed39. Market structure

Handsets

There are a large number of handsets on offer at any one point in time. An overview of the number of smartphone models offered by some manufacturers is provided in Table A1-25.

36 PC World website (2012): Smartphones, tablets to recharge quicker with USB 3.0 cables, connectors. PC World website. Available at http://www.pcworld.com/article/262136/smartphones_tablets_to_recharge_quicker_with_usb_30_cables _connectors.html on 14 March 2014. 37 USB (2014): USB Info – Frequently Asked Questions. USB website. Available at http://www.usb.org/about/faq/ans1 on 14 March 2014. 38 European Commission (2012): The Smartphone of the Future – an Explosive Wealth of Possibilities. Library. European Commission website. Available at https://ec.europa.eu/digital- agenda/futurium/en/content/smartphone-future-–-explosive-wealth-possibilities on 14 March 2014. 39 PC World website (2012): Smartphones, tablets to recharge quicker with USB 3.0 cables, connectors. PC World website. Available at http://www.pcworld.com/article/262136/smartphones_tablets_to_recharge_quicker_with_usb_30_cables _connectors.html on 14 March 2014.

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Table A1-25: Smartphone manufactures offering largest number of smartphone models in the United states in June 201040 Manufacturer Number of smartphone models Samsung 38 LG 18 Motorola 15 Blackberry 13 HTC 12

Key manufacturers

There are a large number of manufacturers of smartphones in Europ, including SMEs; this section will focus on the ‘Top 10’ global manufacturers as reported by market analyst companies. Figure A1- 5 shows the market share of these manufacturers during 2011 and 2012 and adds further detail to those figures provided in earlier sections.

Figure A1-5: Worldwide market share of ‘Top 10’ smartphone manufacturers41

40 Federal Communications Commission (2010): Smartphone manufacturers offering largest number of smartphone models in the United States in June 2010. Statista website. Available at http://www.statista.com/statistics/184993/manufacturers-offering-largest-number-of-smartphone- models-in-the-us/ on 14 March 2014. 41 TomiAhonen Consulting (2013): Final Q4 Numbers and Full Year 2012 Stats for Smartphone Market Shares: Top 10 Manufacturers, Top OS Platforms, Top Installed Bases. Communities Dominate Brands website. Available at http://communities-dominate.blogs.com/brands/2013/02/final-q4-numbers-and-full-year- 2012-stats-for-smartphone-market-shares-top-10-manufacturers-top-os-p.html on 14 March 2014.

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Apple

Apple has continued to increase annual revenue from net sales year on year and in 2012 net income was approximately €31.3 million, Table A1-26.

Table A1-26: Apple financial data 2008 to 2012 (Euros in millions)42 Year Net sales Net income 2008 25,624 4,182 2009 30,832 5,918 2010 49,221 10,575 2011 77,898 18,654 2012 121,727 32,459

Detailed financial and sales information is provided in annual reports and is presented in Table A1- 27.

Table A1-27: Apple net sales 2010 to 2012 (dollars in millions and units in thousands)43 2010 2011 2012 Net sales by operating segment Americas 18,487 27,572 44,731 Europe 14,106 19,990 28,251 Japan 3,004 3,913 8,222 Asia-Pacific 6,230 16,258 25,879 Retail 7,394 10,166 14,644 49,221 77,898 121,727 Net sales by product Desktops (Mac) 4,680 4,634 4,698 Portables (Mac) 8,511 11,042 13,363 iPod 6,244 5,363 4,367 Other music related products and services 3,734 4,544 6,637 iPhone and related products and services 19,001 33,863 62,592 iPad and related products and services 3,742 14,650 25,218 Peripherals and other hardware 1,369 1,677 2,161 , service and other sales 1,942 2,126 2,690 49,221 77,898 121,727 Unit sales by product Desktops (Mac) 4,627 4,669 4,656 Portable (Mac) 9,035 12,066 13,502 iPod 50,312 42,620 35,165 iPhone 39,989 72,293 125,046 iPad 7,458 32,394 58,310

42 Apple Inc (2012): Apple Inc Annual Report. Available at http://investor.apple.com/secfiling.cfm?filingID=1193125-12-444068 on 14 March 2014. 43 Apple Inc (2012): Apple Inc Annual Report. Available at http://investor.apple.com/secfiling.cfm?filingID=1193125-12-444068 on 14 March 2014.

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Apple’s products are high-end and as the emerging markets, continue to account for a growing proportion of smartphone sales, they will account for a diminishing proportion of the market.

Market analysts had proposed that a low-cost model would help to address this issue and indeed, Apple released the lower-cost 5C model in September 2013, along with the latest iPhone 5S model. However, the 5C has a relatively high retail price compared to handsets from other manufacturers, which represents a significant proportion of the average monthly wage of consumer of emerging markets and can be considered mid-range at best.

Blackberry

Blackberry has experienced a 37% drop in sales since 2011, accounting for just 3% of units sold in between October and December 2012. Market analysts expected an increase in sales following the release of a new operating system and two new smartphone models; however it does not feature in the top 5 for 2013 YTD.

HTC

On the whole sales of HTC smartphones have been decreasing, from 2011 to 2012 sales decreased by 30%, with the market share dropping to 3% at the end of December 2012.

Huawei

Huawei is a relatively new entrant to the top performing manufacturers; in 2012 it sold 32 million smartphones, an increase of 60% from 2011 and a 540% increase from the 5 million units in 2010.

Lenovo

Lenovo has recently entered into the smartphone market, taking a 3.3% share in 2012. Whilst the majority of sales are in China, it is due to start selling smartphones in Europe in the 2014 financial year in limited countries which are yet to be confirmed44.

LG

In 2012 sales grew 18% from 2011. Has experienced a drop in sales whilst using the Windows OS, but has now reverted to Android.

Nokia

At the end of 2010 Nokia was the market leader with a 29% share of the market, but has since experienced a huge drop in sales, mostly a result of a change to the operating system used on its smartphones. In the final quarter of 2012, Nokia smartphones accounted for just 3% of the units sold, with overall sales in 2012 decreasing by 55%.

44 Electronista (2013): Lenovo aims to sell smartphones in US and Europe within a year. Electronista website. Available at http://www.electronista.com/articles/13/05/27/smartphone.sales.are.new.opportunity.for.pc.manufactur er/ on 14 March 2014.

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Samsung

Financial data for 2010 to 2012 is provided in Table A1-28.

Table A1-28: Samsung financial data 2010 to 2012 (in billions of KRW)45 Year Sales Operating profit Net income 2010 154,630 17,297 16,147 2011 165,002 15,644 13,759 2012 201,104 29,049 23,845

Top global smartphone sales and market share (30.4%) in 2012 – 213 million units sold (IDC, Strategy Analytics)46.

In the first quarter of 2011, Samsung was the fifth largest smartphone manufacturer with 16% of the market. Since this period, sales have increased year on year and in 2012, the company had the majority share of worldwide smartphone sales, a trend which has continued into 2013.

Sony

Whilst Sony has experienced a drop in smartphone sales during the final quarter of 2012, sales have in fact increased by 42%, Table X.X (section 1.1.2).

ZTE

232% increase in sales from 2011 to 2012. ZTE is little known in the developed markets outside of China, which accounts for 65% of sales47.

Handset replacement cycle

Handset replacement drives the mobile phone industry and as such manufacturers, network carriers and software developers want this cycle to be as short as possible.

In 2010 Recon Analytics estimated the replacement cycle in 14 representative countries from across the world. The US had the shortest cycle of 21.7 months, followed by the United Kingdom and Canada, at 22.4 and 33 months respectively, Table A1-29.

45 Samsung (2012): Annual Report. Report by Samsung. Available at http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downloads/2013/S ECAR2012_Eng_Final. on 14 March 2014. 46 Samsung (2012): Samsung Electronics Annual Report. Report by Samsung. Available at http://www.samsung.com/us/aboutsamsung/investor_relations/financial_information/downloads/2013/S ECAR2012_Eng_Final.pdf on 14 March 2014. 47 News Factor (2013): Little-known ZTE now 4th in smartphones globally. News Factor website. Available at http://www.newsfactor.com/story.xhtml?story_id=88909 on 14 March 2014.

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Table A1-29: Handset replacement cycle (months)48 Year Prepaid Income Country 2007 2008 2009 2010 subscriber (PPP€) Brazil 51.5 74.2 70.4 80.8 80% 8,383 Canada 29.5 30.8 31.8 33.0 20% 29,133 Finland 41.8 58.1 74.5 74.5 14% 25,798 France 28.5 28.8 29.9 30.8 30% 25,419 Germany 43.7 55.8 49.5 45.7 55% 26,878 India 322.1 144.0 185.6 93.6 96% 2,491 Israel 67.1 56.1 67.0 76.5 53% 22,028 Italy 53.3 43.1 42.9 51.5 87% 21,924 Japan 25.6 35.2 43.0 46.3 1% 25,216 Korea 27.3 25.1 24.2 26.9 0% 22,255 Mexico 48.6 41.7 42.9 39.6 86% 10,764 South Africa 52.3 118.6 46.3 38.2 8% 7,831 United Kingdom 24.5 24.4 26.4 22.4 54% 26,048 United States 18.7 19.6 21.1 21.7 22% 35,270

There are three factors which can influence the length of the cycle; payment method i.e. pre-pay or post-pay, the level of income and the availability of network carrier subsidies. Recon Analytics showed that it is in fact the level of handset subsidisation, or in the case of many countries, the absence of a subsidy, which has the most influence on the cycle. This subsidy is effectively a loan to the consumer, allowing them to purchase or upgrade their handset at a reduced price, with the costs be recouped during the term of the contract. As expected the replacement cycle is shortest in those countries which offer a higher subsidy. Recon Analytics calculated that for every €75 subsidised, the cycle is reduced by approximately 8.6 months.

Business Insider Australia reported that the length of the replacement cycle in the US has remained unchanged in 2013, and predicts it will lengthen as a result of market maturity49. Similar trends have also been witnessed in the developed markets of Europe and East Asia. Conversely, the replacement cycle will shorten in emerging markets as the cost of a smartphone drops and low-end smartphones have the same basic capabilities as high-end models. Pricing handsets close to or below €75 can create an image of disposability and foster frequent upgrades, even when the improvements are marginal.

There are several possible factors which are causing the replacement cycle to become longer in developed markets.

Innovations in smartphone technology are slowing and new models may not offer sufficient technological advancement and additional features for consumers to upgrade their handset, particularly if they are already tied into a contract.

48 Recon Analytics (2011): International Comparisons – The Handset Replacement Cycle. Report by Recon Analytics. Available at http://mobilefuture.org/wp-content/uploads/2013/02/mobile- future.publications.handset-replacement-cycle.pdf 49 Business Insider Australia (2013): Consumers are taking longer to upgrade their phones, another sign the smartphone revolution is maturing, accessed at http://www.businessinsider.com.au/the-smartphone- upgrade-cycle-2013-9

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Older handsets are often backwards compatible with upgraded operating system software, thereby negating the need for consumers to replace their handset in order to benefit.

Many operators are keen to move away from handset subsidies, particularly on high-end smartphones where it can take up to 2 years to re-coup costs and can result in profit loss. Operators have begun introducing finance plans as an alternative to subsidies; indeed this practice has already been adopted by 30 European operators since 200850. These plans allow consumers that purchase a smartphone at full price to spread the costs over 2 years, usually with a partner bank, alongside a contract-free service plan. In the short term operators may keep subsidies in place, albeit at a reduced level as high-tier smartphones drive greater data usage and require more expensive tariffs.

Within Spain, the 2 largest network carriers, Telefonia and Vodafone have dropped subsidies for new customers, however no. 3 French Telcom have kept subsidies to gain market share and created a somewhat uneven playing field51. New French network carrier, Iliad, launched its ‘Free Mobile’ scheme in January 2012 which involves no phone subsidies and no obligation plans52. Until recently Finland had banned mobile phone subsidies, hence the 74.5 month replacement cycle, however these have been reinstated.

With the complete removal of subsidies, the replacement cycle would undoubtedly increase as consumers are faced with paying the full price. By way of example, prices for the iPhone 5S released in September 2013 range from £549 - £709 without a contract compared to £20 - £260 or even free with a 24 month contract, depending on the internal memory storage capacity53. It is also quite possible that the sales of cheaper low-end smartphones would increase at the expense of high-end models.

Average Selling Price

Overall trend

IDC have reported that the ASP of smartphones in 2011 was €320; this has decreased to €280 in 2013, with predictions of it dropping to €230 by 201754. Strategy Analytics have provided alternative figures of €230 in 1Q2013, down from €255 and €250 in Q12011 and Q12012 respectively55.

There is an undeniable decrease in the ASP of smartphones over time. There are several reasons for a drop in the ASP, the main ones being:

50 Informa telecoms & media website: Handset-financing programs – Transparency, simplicity, flexibility are keys to success, accessed at https://commerce.informatm.com/reports/main/handset-financing- programs.html 51 GSMA Intelligence website: European operators look to cut smartphone subsidies to preserve data gains, accessed at https://gsmaintelligence.com/analysis/2012/03/european-operators-look-to-cut-smartphone- subsidies-to-preserve-data-gains/327/ 52 Wall Street Journal website: Iliad nabs 5.4% of France’s mobile market, accessed at http://online.wsj.com/news/articles/SB10000872396390444914904577622822655324242 53 Phones4U website: Apple – iPhone 5S, accessed at http://www.phones4u.co.uk/apple/iphone- 5s/?intcid=hero1_iphone_5s_20-09-2013 54 IDC website: Smartphones Expected to Grow 32.7% in 2013 Fuelled By Declining Prices and Strong Emerging Market Demand, accessed at http://www.idc.com/getdoc.jsp?containerId=prUS24143513 55 Asian new Network website: Business – Average smartphone now less than $300, accessed at http://www.asianewsnet.net/Average-smartphone-now-less-than-$300-48087.html

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 falling price of hardware components;  increased demand for budget or low-end smartphones, particularly in the emerging markets where they represent the most affordable way of computing; and  rising competition among manufacturers56.

Smartphones represent the most affordable means of internet access and computing in emerging markets. As the average income is lower, consumers favour cheaper low-end smartphones which will impact the ASP as emerging markets account for a growing proportion of sales. Indeed, a study by Informa Telecoms & Media reported that by 2017 low-end smartphones will make up 52% of sales and high-end handsets will account for 33%. Resultantly, many manufacturers have been forced to create smartphone computing experience for the low-end of the market. Samsung, Nokia and HTC have starting producing ‘affordable’ models to diversify their portfolio, although this is a risky strategy as the profit margins on such devices are often marginal.

Developed maturing markets are entering the second wave of smartphone adoption in the region. The first adopters of smartphones opted for devices which would meet their mobility needs and were willing to pay a premium for performance and user experience57. In the future those upgrading their feature phones will represent a growing proportion of smartphones sales. These consumers do not need or necessarily want a smartphone but when faced with the options available, in many cases they will choose a smartphone, albeit a low-end model58.

Simultaneously the market for high-end smartphones in developed markets will become increasingly saturated, with companies whose portfolio specialises in this range experiencing a drop in sales. Whereas companies manufacturing low-end smartphones will see increasing sales and market share as the emerging markets gain higher smartphone penetration. ABI Research has predicted that there will be more than 750 million shipments of smartphones under €148 in 201859.

Handset manufacturers are under pressure to keep operational costs down, in order to maintain competitive prices whilst simultaneously turning a profit, which may result in industry consolidation to some degree. Indeed, this has already begun, for example, in September 2013, it was reported that purchased Nokia’s mobile phone business.

In 2012, 80% of the world’s mobile phones were manufactured in China, with most being contract manufacturers, which generate a very small profit margin from handsets60. ZTE and Huawei have moved from away from this business plan and are trying to create a recognisable consumer brand. However there are aggressive pricing strategies for the low-tier smartphones which squeeze profit margins, it has been reported that ZTE made some losses manufacturing its own handsets in 2012. In order to gain long-term market stability, Chinese manufacturers will need to expand their portfolios to include mid and high-tier models, instead of relying on cost.

56 Global Innovation Center website: Smartphone Pricing War, accessed at http://innovationcenter.deteconusa.com/article/smartphone-pricing-war/ 57 IDC website: The Western European Mobile Phone Market Declines in 1Q13, Driven by the Smartphone Slowdown, says IDC, accessed at http://www.idc.com/getdoc.jsp?containerId=prUK24197413 58 Ibid. 59 ABI Research website: Sub-$200 Smartphone Shipments to Exceed 750 Million in 2018, accessed at https://www.abiresearch.com/press/sub-200-smartphone-shipments-to-exceed-750-million 60 Week in China website: Yes, it’s likely made in China, accessed at http://www.weekinchina.com/msingle/?mpage=15921

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The Global Innovation Center predicts that the smartphone market in the future will be divided into 2 zones; Feature War Zone and the Price War Zone61. Those competing in the Feature War Zone will be innovative, adding new features and high-performance components during each product cycle, going by the present standards, this will likely be , Samsung and Apple. Whilst companies competing in the Price War Zone will also provide innovations, there will be a battle to provide these at the lowest cost. This is the strategy which Huawei and ZTE have opted for and has proven successful as they continue to gain market share. Market analysts expect that companies whose portfolios are predominantly mid-tier smartphones such as Sony, Nokia, HTC and LG may struggle to maintain margins as the market polarises.

Specific manufacturers

Estimations have been derived from a figure published by Asymco showing the average selling price (ASP) of mobile phones from the largest manufacturers by sales volume, from Q2 of 2007 to Q2 of 2010, Table A1-30. Data is available for all manufacturers from 2008 to 2010, during which time the ASP remained fairly constant, increasing by around 4% from €178 to €189.

Table A1-30: Global average selling price of mobile phones (Euros)62 2007 2008 2009 2010 Manufacturer Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Apple 379 320 330 402 446 446 442 424 451 458 453 474 487 Blackberry 250 258 252 236 236 232 252 259 243 230 219 230 241 HTC 0 0 0 261 267 256 253 259 252 250 246 260 273 LG 93 74 90 89 109 133 176 144 122 93 94 95 94 Motorola 90 90 89 84 68 82 85 89 93 123 144 168 166 Nokia 86 86 74 70 70 65 53 55 57 57 55 66 72 Samsung 109 110 108 96 94 86 87 92 81 86 81 94 94 Sony 125 118 129 117 102 103 105 123 122 125 141 153 136 Average 142 132 134 169 174 175 182 180 178 178 179 193 195

Although the ASP for smartphones is declining, for mobile phones overall it has increased due to the increased proportion of smartphones. Key findings include:

 Motorola experienced a significant price rise of 79% due to a reduction in its portfolio, although at the cost of losing market share;  Apple ASP increased by 30% after a revenue sharing deal with AT&T ended in 2008; and  ASP for LG peaked at the end of 2008 due to increased sales of feature phones, although the prices subsequently dropped.

More recent prices and trends for smartphones specifically are summarised below.

In 2012, Apple sold 136 million iPhones at €66.1 billion, resulting in an average of €489 per unit63. In the 2nd quarter of 2013, the price had dropped below €450 for the first time since 2009 to €43364.

61 Global Innovation Center website: Smartphone Pricing War, accessed at http://innovationcenter.deteconusa.com/article/smartphone-pricing-war/ 62 Asymco website: The remarkable stability of pricing, accessed at http://www.asymco.com/2011/02/03/pricing-stability/

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This may be a result of network carrier subsidies or increased sales of older, cheaper models, possibly due to a lack of innovation with newer models.

In the second quarter of 2012, Blackberry smartphones were being sold for €158 on average, down from €191 and €222 in the previous quarters65.

In June 2012, Motorola smartphones had an average sale price of €323 and is reportedly declining66.

In January 2013, it was reported that the ASP of a Nokia smartphone was €18867 which fell to €157 as of July 201368. This is most likely a result of increased sales of cheaper models over flagship models.

The ASP of Samsung smartphones in the 2nd quarter of 2013 was €25269 and is expected to drop as a result of the growing sales of low and mid-range phones70.

Improved sales of flagship Xperia models have increased the ASP of Sony smartphones.

Although sale figures for ZTE handsets have not been identified, prices are expected to rise marginally in order to maintain a profit, and potentially move into the high-tier arena to compete with Apple and Samsung71.

Prevalence of smartphones

In 2012 there were 5.2 billion mobile phones in existence, 22% of which were smartphones72. This is expected to reach a third in 2013 and increase further to 50% by 201773.

63 Technology Review website: Smartphones are eating the world, accessed at http://www.technologyreview.com/photoessay/511791/smartphones-are-eating-the-world/ 64 New York Post website: Smartphone makers are paying the price, accessed at http://nypost.com/2013/07/27/smartphone-makers-are-pay-ing-the-price/ 65 Matt Richman website: Blackberry ASP falls almost 20 per cent, accessed at http://mattrichman.net/post/26107803759/blackberry-asp-falls-almost-20-percent 66 Tech thoughts website: The Google-Motorola Deal – Why Android will never be proprietary, accessed at http://www.tech-thoughts.net/2012/04/google-motorola-deal-why-android-will.html#.UkQF6D-HiYY 67 BBC News website: Samsung, Apple, Nokia and the smartphone dogfight, accessed at http://www.bbc.co.uk/news/technology-21194396 68 Phone arena website: News – Nokia sells a record 7.4 million Lumia smartphones in Q2, accessed at http://www.phonearena.com/news/Nokia-sells-a-record-7.4-million-Lumia-smartphones-in-Q2_id45442 69 New York Post website: Smartphone makers are paying the price, accessed at http://nypost.com/2013/07/27/smartphone-makers-are-pay-ing-the-price/ 70 The Wall Street Journal Online website: Samsung’s profit rises, but margins feel pressure, accessed at http://www.asianewsnet.net/Average-smartphone-now-less-than-$300-48087.html 71 Reuters website: China’s ZTE to sell 100 million smartphones a year by 2015, accessed at http://www.reuters.com/article/2012/04/23/us-zte-idUSBRE83M03A20120423 72 TomiAhonen Consulting Analysis April 2013, accessed at http://communities- dominate.blogs.com/brands/smartphone/ 73 eMarketer website: Press Releases, accessed at http://www.emarketer.com/Article/Smartphone- Adoption-Tips-Past-50-Major-Markets-Worldwide/1009923

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Smartphone penetration

The smartphone penetration rate, which shows the proportion of the population who own a smartphone, can be used to calculate an approximate number of smartphones in existence within each case study country. The previous sections show that there are a number of sources providing penetration rates for countries, each covering differing time periods.

In order to facilitate a meaningful comparison of the smartphone market in the case study countries, sources which include all or most of the countries will be used; these are Google’s Our Mobile Planet and eMarketer. The data behind Our Mobile Planet has been gathered by Ipsos MediaCT on behalf of Google in partnership with the Mobile Marketing Association and the Interactive Advertising Bureau. eMarketer compile statistics and produce reports themed around on digital marketing, media and commerce.

Using the web app for Our Mobile Planet it is possible to extract the smartphone penetration rates for the case study countries for 2011 to 2013, Table A1-31, the US and China have been included for comparison. What is immediately evident is the migration towards smartphones from feature phones in all countries to some degree. The top 3 countries remain the same over this period, these being the United Kingdom, Spain and the Netherlands.

Table A1-31: Smartphone penetration rates in case study countries from 2011 to 2013 (Our Mobile Planet)74 Country 2011 2012 2013 UK 30.2% 50.9% 62.2% Germany 18.3% 28.8% 39.8% France 27.0% 38.2% 42.3% Spain 33.3% 44.2% 55.4% Italy 24.1% 27.9% 41.3% Poland 23.6% 15.5% 35.0% Finland 28.8% 38.2% 45.5% Portugal - 17.7% 32.1% Netherlands 33.0% 43.4% 52.0% Slovakia - 13.5% 45.9% USA 31.0% 43.5% 56.4% China 35.4% 33.1% 46.9%

These rates are comparable to those from other sources, with the exception of Slovakia in 2013. Here there has been an increase of 32.4 percentage points to 45.9% in 2013 which seems unrealistic.

The digital market analysts eMarketer have given smartphone penetration rates for 2011 to 2013 and beyond to 2017 for many of the case study countries, Table A1-32. These figures are relatively close to those from Our Mobile Planet in most cases. The forecasts for 2014 to 2017 show that an increasing proportion of the population will own a smartphone in the future. Ownership is likely to be highest in the Netherlands at 92.6%, followed by Finland and the United Kingdom at 83.2% and 80.9% respectively.

74 Our Mobile Planet website, accessed at http://www.thinkwithgoogle.com/mobileplanet/en-gb/

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Table A1-32: Smartphone penetration rates in case study countries from 2011 to 2017 (eMarketer)75 Country 2011 2012 2013 2014 2015 2016 2017 United Kingdom 44.1% 52.5% 60.4% 66.7% 71.7% 76.6% 80.9% Germany 24.5% 33.0% 42.0% 52.0% 64.8% 73.0% 80.0% France 24.5% 33.0% 45.0% 58.0% 66.0% 72.0% 77.5% Spain 21.7% 35.5% 47.5% 57.7% 65.9% 70.0% 73.1% Italy 24.0% 31.4% 41.0% 50.9% 61.0% 66.5% 68.0% Finland 33.0% 40.5% 50.0% 59.5% 67.0% 75.5% 83.2% Netherlands 36.7% 44.2% 53.8% 64.8% 75.9% 84.5% 92.6% Central & Eastern 19.7% 29.4% 39.4% 50.5% 58.4% 65.0% 70.1% Europe (ex Russia) US 39.1% 50.1% 56.8% 63.8% 70.1% 75.3% 79.7% China 24.0% 39.0% 40.0% 43.0% 45.0% 47.0% 49.0% Worldwide 17.8% 27.0% 32.5% 38.6% 42.9% 46.4% 49.3%

Number of smartphones in circulation

The average 2013 smartphone penetration rate for each country is shown in Table A1-33. As a further check, the rates have been compared to those found from other sources mentioned in the country specific sections above. Where there are significant differences, the rate has been revised. Using these rates and the current population estimates, the number of smartphones in each country has been calculated.

Table A1-33: Estimated number of smartphones in case study countries in 2013 Average Revised rate (if Population (units No. smartphones Country penetration rate applicable) in millions)76, 77 (units in millions) United Kingdom 61.3% 61.7 37.8 Germany 40.9% 46.0% 82 37.7 France 43.7% 48.3% 64.3 31.1 Spain 51.5% 60.2% 45.8 27.6 Italy 41.2% 47.9% 60 28.7 Poland 35.0% 30.0% 38.1 11.4 Finland 47.8% 5.3 2.5 Portugal 32.1% 10.6 3.4 Netherlands 52.9% 57.0% 16.4 9.3 Slovakia 45.9% 24.7% 5.4 1.3 USA 56.6% 313.9 177.7 China 43.5% 1,350.7 587.6

Whilst these calculations give an approximate figure for the number of smartphones which are in circulation, when considering the proportion which comply with the MoU, it is important to bear in mind the average age of a handset and the frequency at which they are replaced.

75 eMarketer website: Press Release, accessed at http://www.emarketer.com/Article/Smartphone-Adoption- Tips-Past-50-Major-Markets-Worldwide/1009923 76 Europa website: Countries, accessed at http://europa.eu/about-eu/countries/ 77 The World Bank website: Data, accessed at http://data.worldbank.org/indicator/SP.POP.TOTL

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Case studies

The mobile phone market will be reviewed in each of the case study countries whereby key trends and the relative prevalence of smartphones will be identified. Where data is available the market share of manufacturers will also be included.

United Kingdom

At the end of 2012 the UK had 83 million mobile subscribers (equating to a market penetration of 130%); 36 million of which were smartphones. There is little opportunity for penetration to increase; therefore the UK will instead see a migration to smartphones at the expense of feature phones over the coming years, Table A1-34.

Table A1-34: UK mobile subscriptions by device type (units in millions)78 Year Mobile connections Smartphones Feature phones 2012 83 36 47 2013 83 44 39 2016 84 63 21

Based on a survey of 1,000 adults by Ipsos Media CT, it is estimated that 55% of UK residents owned a smartphone in September 2013, with Apple’s iPhone being the most popular model. Table A1-35 shows the gradual increase in smartphone penetration since 2010 and the dominant manufacturer.

Table A1-35: Smartphone penetration in UK from 2010 to present79 Period % of population iPhone Android Blackberry 1Q2010 13 7% 3Q2010 20 12% 4Q2010 22 13% 1Q2011 31 14% 10% 9% 2Q2011 29 13% 6% 10% 3Q2011 37 13% 9% 13% 4Q2011 39 15% 9% 13% 1Q2012 42 17% 10% 14% 2Q2012 45 19% 15% 11% 3Q2012 49 22% 15% 13% 4Q2012 50 23% 17% 13% 1Q2013 53 21% 20% 13% 2Q2013 52 26% 19% 7% 3Q2013 55 24% 23% 9% Due to rounding company market share may not equal % of population

78 Portio Research, accessed at http://www.newmediatrendwatch.com/markets-by-country/18-uk/154- mobile-devices 79 Ipsos Media CT: Tech Tracker Quarterly Release (various), accessed at http://www.ipsos- mori.com/researchspecialisms/ipsosmediact/customresearch/technology/techtracker.aspx

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The penetration rate for 2013 from eDigitalResearch and IMRG of 60% is realistic given the trend of increasing rates80. The Ofcom Communications Market Report 2013 provides a similar estimate of 51% for smartphone ownership in the UK at the start of 2013 and states that smartphones comprised 74% of handset sales in the 1st quarter of 201381.

However, there are a number of studies which have given higher rates, significantly so in some cases. Research conducted by YouGov gave a smartphone penetration rate of 67% in summer 201382. Similarly Nielsen estimated that in 2012, 61% of mobile phone subscribers owned a smartphone83. ComScore have also given a greater penetration rate of 64% for 4Q2012, with smartphones accounting for 82% of mobile phone sales in December 201284. The highest rate was found in a study carried out by Deloitte in May 2013 on 1,032 consumers of UK adults (aged 16 – 64), which revealed smartphone penetration to be 72%85.

Germany

In 2011, 43% of all phones sold in Germany were smartphones. However, the number of feature phones sold in 2011 compared to 2010 declined by 19% while there was an increase of 31% in the number of smartphones sold in 2011 compared to 201086. Smartphone sales are set to continue to increase and account for 80% of mobile phone sales in 2013, which equates to 28 million units and €8.8 billion of revenue87.

In a very recent statement that was published from the BITKOM association it has been estimated that 90% of all Germans above the age of 14 possess a mobile phone. This differs by age groups of which 68% of Germans above the age 65 own a mobile phone while it is 97% ownership for the younger and middle aged range of Germans. Only every tenth person does not own a mobile phone at all. The total amount of households with a mobile phone and the percentage are given in table A1-36 below.

80 eDigitalResearch (2013), accessed at http://www.edigitalresearch.com/news/item/nid/655462669 81 Ofcom (2013): Communications Market Report 2013, accessed at http://stakeholders.ofcom.org.uk/market-data-research/market-data/communications-market- reports/cmr12/downloads/ 82 YouGov website: News, accessed at http://yougov.co.uk/news/2013/09/05/phones-and-tablets-now- outstrip-consoles-gaming/ 83 Nielsen ( 2013): The Mobile Consumer – A Global Snapshot, accessed at http://www.nielseninsights.it/wp- content/uploads/2013/03/03.-global_mobile_report_02_25.pdf 84 comScore Data Mine, accessed at http://www.comscore.com/Insights/Presentations_and_Whitepapers/2013/2013_UK_Digital_Future_in_F ocus 85 Deloitte (2013): The Deloitte Consumer Review – Beyond the hype: The true potential of mobile, accessed at https://www.deloitte.com/assets/Dcom- UnitedKingdom/Local%20Assets/Documents/Industries/Consumer%20Business/uk-cb-consumer-review- edition-5.pdf 86 BITKOM (2012): Smartphone-Absatz steigt rasant, accessed at http://www.bitkom.org/files/documents/BITKOM-Presseinfo_Smartphone-Absatz_09_01_2012.pdf 87 EITO website: Press Releases 2013, accessed at http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF- 8&u=http%3A%2F%2Fwww.eito.com%2Fepages%2F63182014.sf%2Fen_GB%2F%3FObjectPath%3D%2FSho ps%2F63182014%2FCategories%2FPress%2FPress_Releases_2013%2FSmartphones_sorgen_fuer_96_Proze nt_des_HandyUmsatzes

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Table A1-36: Household equipped with consumer goods (information and Communication technology88 Year 2009 2010 2011 2012 Calculated households (1,000) 36,462 36521 36,640 36,701 Mobile telephones (share of households in % 86.7% 88.9% 90.0% 90.3% (level of equipment) Amount of goods (mobile telephones) per 156.9 160.9 165.7 165.6 100 households (equipment inventory)

In another survey looking at mobile phone usage and the ownership of a smart or standard phone the number of Germans who have access to or own a smart or standard phone for 2013 has been estimated at 55% for a smart phone and 56% for a standard phone89.

In addition it has been said that the trend goes towards a smart phone which means that 40% of all Germans above the age of 14 own a smart phone which has been at 34% in 2012. According to a prognosis of the EITO market research institute over 80% of all phones sold in 2013 have been a smartphone90.

ComScore have estimated that smartphone penetration in Germany was 51% for 4Q2012, which is slightly lower than other countries in Western Europe91 (Table A1-37). According to the Mobile Monitor report based on 2,000 online surveys, Samsung is the most popular manufacturer, holding 30% of the market, followed by Apple’s iPhone (25%), HTC (13%) and Nokia (12%)92. It would seem there is little change in the market share of smartphones manufacturers (by operating system), with the exception of Windows, which has gained an additional 6% of the market, mostly at the expense of ‘other’ operating systems, Table A1-38.

88 Statistisches Bundesamt (2014): Ausstattung mit Gebrauchsgütern, Ausstattung privater Haushalte mit Informations- und Kommunikationstechnik im Zeitvergleich Deutschland, accessed at https://www.destatis.de/DE/ZahlenFakten/GesellschaftStaat/EinkommenKonsumLebensbedingungen/Aus stattungGebrauchsguetern/Tabellen/A_Infotechnik_D_LWR.html 89 Deloitte (2013): Global Mobile Consumer Survey 2013, accessed at http://www.iabeurope.eu/files/1913/8574/2118/deloitte-nl-global-mobile-consumer-survey.pdf 90 Bundesverband Informationswirtschaft, Telekommunikation und neue Medien e.V. (BITKOM) (2013): 63 Millionen Handy-Besitzer in Deutschland, accessed at http://www.bitkom.org/files/documents/PI_BITKOM_Handy- Verbreitung_in_Deutschland_26_08_2013.pdf 91 comScore Data Mine, accessed at http://www.comscoredatamine.com/2013/03/smartphones-reach- majority-in-all-eu5-countries/ 92 Telecompaper website: Mobile & Wireless, accessed at http://www.telecompaper.com/news/german- smartphone-users-prefer-samsung-android-study--890871

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Table A1-37: Germany – smartphone device usage fourth quarter 201393 Manufacturer Usage device Samsung 15.4 million Apple 7.4 million .7 million HTC 3.3 million LG 1.5 million Huawei 0.6 million Blackberry 0.5 million Motorola 0.5 million Google 0.3 million Total 37 million Note: Calculations undertake by Comscore

able A1-38: Smartphones sales by Operating System in Germany (market share)94 Operating system 3Q 2012 3Q 2013 Percentage change Android 78.1 77.9 -0.2 Blackberry 1.6 0.9 -0.7 iOS 12.2 10.7 -1.5 Windows 2.5 8.5 6.0 Other 5.6 2.1 -3.5

The society for consumer and communication electronics (Gesellschaft für Unterhaltungs- und Kommunikationselektronik) publishes the Consumer Electronics Market Index for Germany (CEMIX)95 every year and the results for the sales of standard and smartphones for the years 2008 until the third quarter of 2013 are provided in the Table A1-39 below.

Table A1-39: Sales of standard phones and smart phones in Germany (thousands) Year Standard phone Smartphone 2008 20,809 (-13%) n/a 2009 16,550 (-201%) 2,947 2010 14,629 (-12%) 7,702 (161%) 2011 10,821 (-26%) 14,547 (89%) 2012 6,891 (-36%) 18,380 (26%) Q1-Q3 2013 3,304 (-37% compared to Q1-Q3 15,485 (24%) 2012)

93 Mobile-Studien (2014): Verkaufszahlen/Marktanteile Q4 2013, accessed at http://mobile- studien.de/marktanteile-endgeraete/verkaufszahlenmarktanteile-q4-2013/ 94 Saggiamente website: In Italia le vendite di Windows Phone superano quelle di iOS, accessed at http://www.saggiamente.com/2013/11/04/in-italia-le-vendite-di-windows-phone-superano-quelle-di-ios/ 95 Gesellschaft für Unterhaltungs- und Kommunikationselektronik mbH (2014): Consumer Electronics Marketindex Deutschland, accessed at http://www.gfu.de/home/marktzahlen/markt.xhtml

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France

Mediametrie estimated that at the end of September 2012, there were 24 million smartphone owners in France, which is equivalent to 46.6% of the population96. This rate is mirrored by the results of a study conducted by Deloitte in May 2012 involving more than 2,000 representative internet users which gave smartphone penetration at 41%97. However ComScore provide a higher rate of 53% for 4Q201298. A slightly later survey conducted by Deloitte in 2013 estimated smartphone penetration at 52%, with 54% of respondents indicating that they either use or have access to a standard mobile phone99.

Sales of smartphones have gradually increased from 3.6 million in 2008 to 7.7 million in 2010, and GfK/Simavelec estimated sales of 11.8 million in 2011100.

The most popular operating systems (OS), which can be used as a rough approximation for manufacturers, are presented in Table A1-40. As in other EU countries, Android is the most popular OS and Samsung is the main manufacturer of these devices. During 2013, Android and Windows phones (mostly Nokia) have gained in popularity, whereas Blackberry and other operating systems have lost market share. A list of the top 10 smartphone models sold in France in 2013 is given in Table A1-41. As shown in this Table, Samsung Galaxy S3 mini was the most popular smartphone model sold, followed by and Apple iPhone 5. The top mobile manufacturers in France by market penetration in Q4 2011 are given in Table A1-42.

Table A1-40: Smartphones sales by Operating System in France (market share) Operating system 3Q2012 3Q2013 Percentage change Android 62.3 68.2 5.9 Blackberry 7.4 4.7 -2.7 iOS 15.5 15.0 -0.5 Windows 5.2 10.7 5.5 Other 9.6 1.4 -8.2 Source: Saggiamente (2013)

96 Telecompaper website: Mobile & Wireless, accessed at http://www.telecompaper.com/news/smartphone- ownership-reaches-466-in-france--907183 97 Deloitte website: Press Releases, accessed at http://translate.google.co.uk/translate?hl=en&sl=fr&u=http://www.deloitte.com/view/fr_FR/fr/presse/co mmuniques-de- presse/73590c3aea8d9310VgnVCM2000003356f70aRCRD.htm&prev=/search%3Fq%3Dcombien%2Bde%2 Bpersonnes%2Bont%2Bun%2Bsmartphone%2Ben%2Bfrance%26client%3Dfirefox- a%26rls%3Dorg.mozilla:en-US:official%26channel%3Dnp%26biw%3D946%26bih%3D891 98 comScore Data Mine, accessed at http://www.comscoredatamine.com/2013/03/smartphones-reach- majority-in-all-eu5-countries/ 99 Deloitte (2013): Global Mobile Consumer Survey 2013, Addicted to Connectivity: the Dutch Mobile Consumer Perspective, available at http://www.iabeurope.eu/files/1913/8574/2118/deloitte-nl-global- mobile-consumer-survey.pdf 100 CNC (May 2011): CNC Dossiers/no 318, accessed at http://www.cnc.fr/c/document_library/get_file?uuid=4f5b549c-54dc-4f5b-84e3- 0bf1530309e1&groupId=22

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Figure A1-6: France Smartphone Market Share (Sales), Dec 2011 – Nov 2012 (Kantar Worldpanel & Analysis International, cited in Tech-Thoughts (2012)

Table A1-41: Top 10 Smartphone Models Sold in France in 2013 Position Model 1 Samsung Galaxy S3 mini 2 Samsung Galaxy S4 3 Apple iPhone 5 4 Samsung Galaxy S3 5 Samsung Galaxy note II 6 Apple iPhone 5s 7 Wiko Cink Peax 8 Apple iPhone 5c 9 Samsung Galaxy Trend 10 Z Source: Counterpoint, cited in eMarketer (2014) Note: includes all regional or minor hardware variations included in each mode.

Table A1-42: Top mobile manufacturers in France, by market penetration, Q4 2011 Manufacturer Market Share Samsung 37.9% Nokia 18.5% Apple 10.1% Other 33.5% Total 100% Source: MobiThinking (2013)

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Spain

There is a small level of production of mobile phones in Spain. The Company ‘Geeksphone’ is expected to increase production five-fold from 5,000 units a year101 . Another Spanish company planning to enter the Smartphone market is Be, who are known for manufacturing tablets and E- readers102. Figures on market penetration for 2011 show that Nokia was the most popular manufacturer in Spain at this time.

Table A1-43: Smartphone market penetration by manufacturer Q4 2011 Proportion of subscribers with a smartphone, Q4 2011 51% Top smartphone manufacturers, by market penetration, Q4 2011 Market Penetration Nokia 37.2% Samsung 17.9% Apple 11.5% Smartphone operating system market share, December 2011 Symbian 40.4% Android 32.1% IOS 11.5% Source: ComScore, cited in MobiThinking (2013). Global mobile statistics 2013 Part A: Mobile subscribers; handset market share; mobile operators, available at: http://mobithinking.com/mobile-marketing- tools/latest-mobile-stats/a#smartphonepenetration. These figures are based on the responses of a few thousand people in markets of 30-330 million mobile subscribers, and thus should only be considered as estimates of market penetration.

Between 2012 and 2013, statistics show a significant increase of specific makes (Samsung versus Nokia). The market share of the top sold 5 phones from September 2012 to August 2013 is as follows103:

1. Samsung Galaxy SIII – 30.4% 2. Apple iPhone 5- 15.2% 3. – 12.7% 4. Samsung Galaxy S4 - 8% 5. Apple iPhone 4S – 6.8%

In 2012, 81% of mobile phones sold were smartphones according to the Online Business School, with almost 4 million Spanish people now owning a smartphone104. In January 2013 the leading network

101 ABC Technologia website: Geeksphone prepara dos nuevos modelos para ampliar su mercaso, accessed at http://www.abc.es/tecnologia/20121123/rc-geeksphone-prepara-nuevos-modelos-201211231325.html 102 Android IS website: Bq Auuaris un doble núcleo de fabricación española, accessed at http://www.androidsis.com/bq-aquaris-un-doble-nucleo-de-fabricacion-espanola/ 103 Osorio V (2013): ¿Cuáles fueron los smartphones más vendidos en España en el último año?,Directivos.- Economía y empresa Expansión.com, accessed at http://www.expansion.com/2013/10/18/directivos/1382123205.html 104 EAE website: Present, accessed at http://translate.google.co.uk/translate?hl=en&sl=es&u=http://www.eae.es/news/2013/07/29/el-81-de- los-moviles-comprados-en-espana-en-2012-fueron- smartphones&prev=/search%3Fq%3Del%2Bn%25C3%25BAmero%2Bde%2Bpersonas%2Bespa%25C3%25B1

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carrier, Telefónica, estimated smartphone ownership at 63.2%105, whilst ComScore have given a smartphone penetration rate of 66% for 4Q2012106.

In Spain the Android operating system accounted for the majority of the smartphone sales in 2012 followed by Blackberry iOS, Table A1-44. There are several manufacturers which use the Android OS on handsets, including Samsung, HTC and LG, therefore this is a rough indication of the dominate manufacturer107. In 2013 Android has maintained its lead however, Apple has moved into second place, with Blackberry losing 4.7 percent.

Table A1-44: Smartphones sales by Operating System in Spain (market share)108 Operating system 3Q2012 3Q2013 Percentage change Android 84.3 90.0 5.7 Blackberry 5.0 0.3 -4.7 iOS 2.4 4.8 2.4 Windows 2.2 3.7 1.5 Other 6.0 1.3 -4.7

Although the mobile phone market began to contract globally in 2009, there was no such decline in Spain until 2011. In 2010, 22.3 million devices were sold while in 2012, 14 million devices were sold. It has been predicted that around 13 – 15 million smartphones will be sold in 2014.

There has been an increase in the sale of phones that are not associated with a mobile phone carrier. Indeed, this market now represents 24% of sales of new phones, a figure driven by the end of subsidies and the arrival of low-cost Chinese manufacturers. However, most sales are still retained by the larger companies with Samsung selling 46% of handsets, followed by Sony and LG both with 15% and Apple in fourth place with 6.5% of handset sales. Completing the top 5 is Huawei, with 4% of all handset sales. Chinese brands such as Huawei and ZTE have been growing because they offer consumer phones with high end technical features at a comparably lower cost.

olas%2Bposeen%2Bun%2Btel%25C3%25A9fono%2Binteligente%26client%3Dfirefox- a%26rls%3Dorg.mozilla:en-US:official%26channel%3Dnp%26biw%3D946%26bih%3D891 105 Telefonica Fundacion website: Present, accessed at http://translate.google.co.uk/translate?hl=en&sl=es&u=http://www.fundacion.telefonica.com/es/actualid ad/detalle/10_01_2013_esp_2430&prev=/search%3Fq%3Del%2Bn%25C3%25BAmero%2Bde%2Bpersonas %2Bespa%25C3%25B1olas%2Bposeen%2Bun%2Btel%25C3%25A9fono%2Binteligente%26client%3Dfirefox- a%26rls%3Dorg.mozilla:en-US:official%26channel%3Dnp%26biw%3D946%26bih%3D891 106 ComScore Data Mine, accessed at http://www.comscoredatamine.com/2013/03/smartphones-reach- majority-in-all-eu5-countries/ 107 Xatak Android website, accessed at http://translate.google.co.uk/translate?hl=en&sl=es&u=http://www.xatakandroid.com/mercado/el- dominio-de-android-perdura-en-espana-durante-el- 2012&prev=/search%3Fq%3Del%2Bn%25C3%25BAmero%2Bde%2Bpersonas%2Bespa%25C3%25B1olas%2 Bposeen%2Bun%2Bsmartphone%26start%3D20%26client%3Dfirefox- a%26sa%3DN%26rls%3Dorg.mozilla:en-US:official%26channel%3Dnp%26biw%3D946%26bih%3D891 108 Saggiamente website: In Italia le vendite di Windows Phone superano quelle di iOS, accessed at http://www.saggiamente.com/2013/11/04/in-italia-le-vendite-di-windows-phone-superano-quelle-di-ios/

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Italy

In February 2013, ComScore produced the Mobile Advisor Report, which provides an overview of mobile phone use within Italy109. The report estimated that 26.2 million people own a smartphone, which corresponds to about 54.6% of the population. Of newly acquired smart connected devices, smartphones made up almost 70% of sales. Table A1-45 gives the sales figures for all mobile phones and smartphones from 2010 to 2012. As expected the sales of smartphones have increased by 115% during this period, however the sales of all mobile phones have decreased by 7%. A probable reason could be market saturation, with almost all people owning a mobile phone and new sales being largely replacements.

In line with trends in other EU countries, the sales value of smartphones increased by 86 percent in this period to €2.3 billion.

Table A1-45: Number of smartphone and mobile phone sales in Italy from 2010 to 2012110 Number of sales Year Mobile phones Smartphones 2010 17,100,000 4,000,000 2011 18,300,000 5,300,000 2012 15,900,000 8,600,000 Source: Associazione Italiana Editori (2013)

Table A1-46 compares the market share of smartphones by operating system for the third quarter of 2012 and 2013. Comparing the periods, Android’s market share has increased by 10.4%. Windows smartphones have also increased their market share by 2.9%, although still only account for 13.7% of sales. By Q4 2013, it is reported that Windows Phone had made inroads to secure a strong position in the Italian market (with a 17.1% market share), and was ahead of Apple in terms of sales (12.8% market share)111. However, Android was still the market leader with a 66.2% share112. ComScore reported that of the Android smartphones sold in February 2013 more than half were Samsung (68.2%); others included LG (10.2%), Sony (6.4%) and HTC (2.9%). In a slightly older survey by ComScore (Q4 2011), Nokia was the top mobile phone manufacturer in Italy in terms of market penetration (holding 43.8% of the market), followed by Samsung (24.2%) and LG (7.2%) (Table A1- 47).

109 ComScore (2013), accessed at http://www.sensemakers.it/sites/sensemakers.it/files/files/comScore_Mobile_Advisor_Italy_201302.pdf 110 Associazione Italiana Editori (2013): Inside the e-book, accessed at http://translate.google.co.uk/translate?hl=en&sl=it&u=http://www.aie.it/&prev=/search%3Fq%3Dhttp:// www.aie.it/%26client%3Dfirefox-a%26hs%3DBsc%26rls%3Dorg.mozilla:en- US:official%26biw%3D942%26bih%3D871 111 Kantar Worldpanel, cited in Agence France-Presse (2014): More than 1 billion smartphones shipped in 2013, a third by Samsung: IDC, available at http://gadgets.ndtv.com/mobiles/news/more-than-1-billion- smartphones-shipped-in-2013-a-third-by-samsung-idc-476291 112 Kantar Worldpanel, cited in Agence France-Presse (2014): More than 1 billion smartphones shipped in 2013, a third by Samsung: IDC, available at http://gadgets.ndtv.com/mobiles/news/more-than-1-billion- smartphones-shipped-in-2013-a-third-by-samsung-idc-476291

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Table A1-46: Smartphones sales by Operating System in Italy (market share) Operating system 3Q2012 3Q2013 Percentage change Android 61.2 71.6 10.4 Blackberry 3.4 2.1 -1.3 iOS 14.2 10.2 -4.0 Windows 10.8 13.7 2.9 Other 10.3 2.4 -7.9 Source: Saggiamente (2013)

Table A1-47: Top mobile manufacturers in Italy, by market penetration, Q4 2011 Manufacturer Market Share Nokia 43.8% Samsung 24.2% LG 7.2% Other 24.8% Source: ComScore, cited in MobiThinking (2013)

Poland

Smartphone penetration in Poland was estimated to be 25% in February 2013 (Goal Europe, 2013).

16.3% of smartphone owners have a Windows phone, the higher than average market share is a result of a predisposition for Nokia phones, which heavily subsidise handsets and launched a marketing campaign in the region (Neowin, 2013).

Finland

Table A1-48 sets out information on the installed base of feature phones and smartphones in Finland from 2010 to 2013, together with a forecast for each market up to 2015. As indicated in the table, the number of smartphones in use in Finland is forecast to grow rapidly, while the number of feature phones is forecast to decline.

Table A1-48: Installed base of feature phones and smartphones in Finland, 2010-2015 (thousands) Year Feature phones Smartphones 2010 5,010 1,991 2011 4,402 2,598 2012 3,703 3,297 2013 2,905 4,095 2014 (f) 1,940 5,060 2015 (f) 1,453 5,599 2016 (f) 971 6,029 Source: Idean (2013) Notes: (f) forecast

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Since 2008 to 2012, the sales of feature phones have decreased by 46 percent and the sales of smartphones have increased by 268%, as presented in Table A1-50. From the figures for January to September 2013 it is probable the trend will continue.

What is also interesting is the value of the mobile phone market. In 2008 sales value was €365 million; this has increased by a staggering 87 percent to €682 million in 2012. Although the average selling price of both smartphones and feature phones has decreased to varying degrees. It is reported that the average price of a smartphone in Finland increased to €376 by Autumn 2013 (which is slightly higher than shown in the Table A4-49, Invest in Finland, 2013).

Table A1-49: Sales of Mobile Phones and Smartphones in Finland from 2008 to September 2013 Sales Sales Value (€1,000) Average Price (€) Year Mobile Mobile Mobile Smartphone Smartphone Smartphone Phone Phone Phone 2008 1,549,816 443,813 195,724 169,039 126 381 2009 1,496,310 454,690 172,169 157,672 115 347 2010 1,411,538 795,974 152,550 231,029 108 290 2011 1,198,234 1,262,900 130,395 417,941 109 331 2012 832,167 1,635,057 82,707 599,428 99 367 2013 (to 467,938 1,294,292 37,415 457,142 80 353 September) Source: Kotek (2013) Note: the category ‘mobile phone’ excludes smartphones

In terms of smartphone penetration rates, there has been an increase from 29% to 38% in 2012 according to Google113. In a 2013 survey conducted by Deloitte, smartphone penetration in Finland was estimated at 51%, with 60% of respondents indicating that they either use or have access to a standard mobile phone114. It is reported that in Q1 2013, 430,000 smartphones were sold in Finland (making Finland a relatively small market for mobile phones)115.

As in most places, the smartphone market in Finland is currently dominated by Samsung, who sold 43% of all smartphones in Q1 2013 (186,000 devices)116. In Q1 2013 Nokia sold around 100,000 smartphones, presumably mostly Lumia handsets. In Q1 2013, Nokia returned to second spot after losing it to Apple following the seasonal spike related to the iPhone 5. For a long time, Nokia was the most popular manufacturer of smartphones in Finland, holding a majority market share. This goes against the trend seen in most other EU countries and indeed worldwide, where Samsung and Apple were the leading manufacturers. Nokia is a Finnish company and this may well be attributable to this. The Windows operating system holds the majority share of the market (35%); Android and

113 Google (2012): Marketing of mobile apps and services, accessed at http://www.futurice.com/afterwork/app-analytics/jussi-luhtasela.pdf 114 Deloitte (2013): Global Mobile Consumer Survey 2013, Addicted to Connectivity: the Dutch Mobile Consumer Perspective, available at http://www.iabeurope.eu/files/1913/8574/2118/deloitte-nl-global- mobile-consumer-survey.pdf 115 IDC (2013): Nokia Lumia had around 23% smartphone market share in Finland in Q1 2013, available at http://wmpoweruser.com/nokia-lumia-had-around-23-smartphone-market-share-in-finland-in-q1-2013/ 116 IDC (2013): Nokia Lumia had around 23% smartphone market share in Finland in Q1 2013, available at http://wmpoweruser.com/nokia-lumia-had-around-23-smartphone-market-share-in-finland-in-q1-2013/

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Apple have marginally less, at 33% and 30% respectively117. This is most likely a result of the popularity of Nokia branded phones which use the Windows operating system.

Figure A1-7: Smartphone Sales Volume in Finland, Q1 2010 to Q1 2013118

In terms of mobile platforms, S40 is the leading platform overall in Finland and Android among smartphones. In 2016, Android is forecast to represent approximately half of the total mobile phone population in Finland (see Table A1-50).

Table A1-50: Mobile phone population in Finland by platform 2010–2016 (thousands)119 Platform 2010 2011 2012 2013 (f) 2014 (f) 2015 (f) 2016 (f) 865 622 693 647 422 446 365 Others 12.40% 8.90% 9.90% 9.20% 6% 6.40% 5.20% 875 680 420 315 158 71 32 Nokia OS 12.50% 9.70% 6% 4.50% 2.30% 1% 0.50% 3 270 3 100 2 590 1 943 1 360 884 574 S40 46.70% 44.30% 37% 27.80% 19.40% 12.60% 8.20% 1 820 1 800 1 470 1 029 720 360 180 Symbian 26% 25.70% 21% 14.70% 10.30% 5.10% 2.60% 94 282 497 646 775 930 977 iPhone 1.30% 4% 7.10% 9.20% 11.10% 13.30% 14%

117 Market-visio website: News/Market Vision, accessed http://translate.google.co.uk/translate?hl=en&sl=fi&u=http://www.marketvisio.fi/fi/ajankohtaista/uutiset- marketvisio/1703-windows-phone-noussut-suomen-johtavaksi- lypuhelinalustaksi&prev=/search%3Fq%3Dhttp://www.marketvisio.fi/fi/ajankohtaista/uutiset- marketvisio/1703-windows-phone-noussut-suomen-johtavaksi-lypuhelinalustaksi%26client%3Dfirefox- a%26hs%3D1Vb%26rls%3Dorg.mozilla:en-US:official 118 IDC (2013): Nokia Lumia had around 23% smartphone market share in Finland in Q1 2013, available at http://wmpoweruser.com/nokia-lumia-had-around-23-smartphone-market-share-in-finland-in-q1-2013/ 119 Idean (2013): Mobile content market in Finland, 2012-2016, available at http://www.teleforum-ry.fi/wp- content/uploads/2013/11/Mobile-content-market-in-Finland-2012-2016-desk-top.pdf

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Table A1-50: Mobile phone population in Finland by platform 2010–2016 (thousands)119 Platform 2010 2011 2012 2013 (f) 2014 (f) 2015 (f) 2016 (f) 17 55 455 933 1 259 1 196 1 136 Windows Phone 0.20% 0.80% 6.50% 13.30% 18% 17.10% 16.20% 61 462 875 1 488 2 306 3 113 3 735 Android 0.90% 6.60% 12.50% 21.30% 32.90% 44.50% 53.40% Source: Idean (2013) Notes: (f) forecast

Portugal

In the first quarter of 2013, the sales of all mobile phones fell by 9% compared to the quarter one of 2012. This fall can be attributed to a decline in the number of feature phones sold because the sale of smartphones increased by 29% over the same period. Indeed, the sale of smartphones is set to continue as IDC predicts that in 2014, nearly 2.5 billion smartphones will be sold, 12% more than in 2013.

Table A1-51 below shows the most popular manufacturers and their respective market shares in the first quarter of 2013120.

Table A1-51: Top Brands and Market Shares in Portugal - 1st Quarter 2013 - Total Market Sales 1Q2013 Market Share Sales 1Q2012 Market Share Change in Sales Manufacturer (mil) 1Q 2013 (mil) 1Q2012 1Q13 vs 1Q12 Samsung 378 42% 321 33% 18% Nokia 236 26% 318 32% -26% Apple 55 6% 35 4% 57% Others 230 23% 311 32% -26% Total 899 100% 985 100% -9% Source: IDC European Mobile Phone Tracker, May 2013

The sale of smartphones now represents 55% of all mobile phones sold in the domestic market. Android is by far the most popular operating system and Samsung the biggest manufacturer. For the first time, 2013 saw more smartphones sold than basic mobile phones in Portugal. The feat was achieved in the second quarter of the year. According to the European Research Area Director of Mobile Phones at IDC this trend will continue to widen in the coming quarters, since the dominant manufacturers will continue to release mobile phones at low prices, with the Android operating system, but with a superior user experience.

Smartphone sales will also be fuelled by businesses as it was reported that over 50% of organizations intend to increase investment in mobile solutions to increase investment in mobile solutions to support employees in order to increase productivity and provide greater flexibility and to support customers, with the goal of improving customer service121.

120 IDC Portugal, accessed at: http://www.idc.pt/press/pr_2013-06-24.jsp 121 IDC, IDC apresenta previsões para a evolução do setor das TIC em Portugal, accessed: http://www.idc.pt/press/pr_2014-02-10.jsp

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In a press release from the European Commission in August 2013, the penetration of smartphones is estimated to be around 58% in Portugal122. There is potential for growth as a second wave of consumers will consider buying a smartphone. Whereas the first phase of smartphone purchases was led by users requiring access to the functionalities of smartphones, this second phase will be led by users who do not need a smartphone (e.g. for work). Even without having the need to justify buying a smartphone, these new customers will opt for a smartphone due to several factors, among which are:

 a wide range of handsets;  the campaigns of discount operators;  perceived as a ‘must have’ item;  the popularity of ‘apps’; and  the steady decline in the average price of the terminals.

However, the profitability of these customers for operators will be less than the customer who purchased a smartphone by necessity, since the propensity to subscribe to a data plan with the terminal will be significantly reduced, and the Internet accesses made through WiFi networks.

In Portugal, the mass ownership of smartphones will continue to be strongly influenced by the average price of the handsets. In the first quarter of this year, smartphones that cost 130 euros accounted for 35% of total smartphone sales. This can be compared with the rest of Europe, where devices costing this much accounted for only 17% of handset sales.

The mobile operating system from Google reached in the second quarter of the year a share of 82% in Portugal, being by far the most popular software among smartphones.

Samsung dominates the Portuguese market having secured 36% share of the smartphone market. However, the largest manufacture is in fact Nokia. This can be attributed to the release of low cost mobile phones (Asha)123.

Netherlands

Following extensive surveying by the Telecompaper Consumer Panel, the Dutch Smartphone User Q2 2012 report gave smartphone penetration at 58%124. In the final quarter of 2012 this had risen to 61%, with the dominate brand being Samsung, with 41% of the market125. In another consumer survey the owners of feature phones as well as smartphones were asked which kind of device they are likely to purchase in the next twelve months. To this, 17% of feature phone users intended to buy a smartphone while only 12% intended to purchase a standard phone again. On the other hand,

122 Europa website: Press releases database, accessed at http://europa.eu/rapid/press-release_IP-13- 776_en.htm 123 Tek, Já se vendem mais smartphones do que telefones básicos em Portugal, 09/09/2013 http://tek.sapo.pt/noticias/negocios/ja_se_vendem_mais_smartphones_do_que_telefone_1336881.html 124 Telecompaper website: Mobile & Wireless, accessed at http://www.telecompaper.com/pressrelease/smartphone-penetration-increased-to-58--899740 125 Telecompaper website: Mobile & Wireless, accessed at http://www.telecompaper.com/research/dutch- smartphone-user-q4-2012--925888

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20% of the smartphone users intended to purchase a smartphone as compared to 6% who would buy a standard phone.126

The Dutch central office for statistics [Centraal Bureau voor de Statistiek] published a calculation on the ICT use of persons divided by personal characteristics such as gender127. The focus was not on internet usage but rather the kind of device with which internet has been accessed. The percentages for mobile phones are presented in the table below.

Table A1-52: ICT usage of persons divided by personal characteristics (gender) (% of all persons using their mobile phone) Sex 2008 2009 2010 2011 2012 2013 Male 24% 31% 40% 55% 65% 74% Female 19% 24% 32% 46% 58% 70%

In the study ‘global mobile consumer survey’ the ownership of standard mobile phones and smartphones has been equated along the popular brands128.

Table A1-53: Standard phone and Smartphone brands share in installed base (%) Brand Smartphone Standard phone Samsung 45% 34% % 47% Apple 21% ---- Other brands 29% 19%

The calculations for smartphones seem to match with the numbers provided by GfK which estimated the number of people’s who own a smart phone to have risen from 7 million to 8, 5 million. This means that 67% of people own a smartphone compared to a pc/desktop computer which 65% own.129

Slovakia

In 2011, smartphone penetration in Slovakia was estimated to be 9.3% by GfK130. Smartphones make up 17% of mobile phone sales131.

126 Deloitte (2013): Global Mobile Consumer Survey 2013, information accessed at http://www.iabeurope.eu/files/1913/8574/2118/deloitte-nl-global-mobile-consumer-survey.pdf 127 Centraal Bureau voor de Statistiek (2014): ICT gebruik van personen naar persoonskenmerken, information accessed at http://statline.cbs.nl/StatWeb/publication/?DM=SLNL&PA=71098ned&D1=44,51,58,63&D2=0- 2&D3=a&VW=T 128 Deloitte (2013): Global Mobile Consumer Survey 2013, information accessed at http://www.iabeurope.eu/files/1913/8574/2118/deloitte-nl-global-mobile-consumer-survey.pdf 129 GfK (2013): Aantal smartphones hoger dan aantal computers, information accessed at http://www.gfk.com/nl/news-and-events/press-room/press-releases/paginas/aantal-smartphones-hoger- dan-aantal-computers.aspx 130 GfK (2011), accessed at http://www.newmediatrendwatch.com/regional-overview/103-europe?start=4 131 The Boston Consulting Group (2012) Slovakia Online – How the Internet is Transforming the Slovak Economy, accessed at http://www.onlinesanca.sk/pdf/BCG_Google%20Slovakia%20Online_EN.pdf

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United States

Nielsen’s 2013 Mobile Consumer Report, based on surveys carried out in 2012, estimated that mobile phone ownership is 94%, with 53% owning a smartphone132. Smartphone ownership grew to 61% for March – May 2013, an increase of more than 10% since they passed the majority mark in early 2012133.

In terms of manufacturers, Apple dominates with a 40% share of the market, although Android is the most popular operating system with a 53% market share.

According to comScore 149.2 million people in the U.S. owned smartphones by October 2013. The biggest manufacturer of smartphones is Apple, with 40.6% of U.S. smartphone subscribers. The second biggest manufacturer is Samsung with a 25.4% market share. Motorola is the third biggest with 7%. The fourth and fifth are HTC and LG with 6.7 % and 6.6%134.

Samsung’s market share is growing at a much higher rate than Apple’s. By 2012 Samsung’s market share increased year-over-year by more than 100% and within two years increased by more than 400%135.

The total revenues of the US mobile phones market added up to $10.7 billion in 2010, with 126.9 million units sold. 136 In 2011 the total revenues of the market were $10.6 billion, with a total of 130.6 million units sold that year137.

In 2012, 97.7 million smartphones were sold in the US. Smartphones are replacing the basic feature phones as their additional functions are becoming more and more essential for personal and business communications and new, low-cost models make them more affordable for consumers138.

The US mobile phone industry is expected to worth $12.4 billion by the end of 2015,139 and $11.9 billion by the end of 2016.140

132 Nielsen ( 2013): The Mobile Consumer – A Global Snapshot, accessed at http://www.nielseninsights.it/wp- content/uploads/2013/03/03.-global_mobile_report_02_25.pdf 133 Nielsen Website: Newswire, accessed at http://www.nielsen.com/us/en/newswire/2013/mobile-majority-- u-s--smartphone-ownership-tops-60-.html 134 comScore website: comScore Reports October 2013 U.S. Smartphone Subscriber Market Share accessed at http://www.comscore.com/Insights/Press_Releases/2013/12/comScore_Reports_October_2013_US_Smar tphone_Subscriber_Market_Share 135 comScore: 2013 Mobile Future in Focus, accessed at http://www.comscore.com/Insights/Presentations_and_Whitepapers/2013/2013_Mobile_Future_in_Focu s 136 Reuters: Research and Markets: Mobile Phones Industry in the United States Expected To Increase to a Value of $12.4 Billion by End of 2015, accessed at http://www.reuters.com/article/2012/01/06/idUS33079+06-Jan-2012+BW20120106 137 Research and Markets website: Mobile Phones in the United States, accessed at http://www.researchandmarkets.com/research/0b3125/mobile_phones_in_t 138 Euromonitor International: Mobile Phones in the US, accessed at http://www.euromonitor.com/mobile- phones-in-the-us/report 139 Reuters: Research and Markets: Mobile Phones Industry in the United States Expected To Increase to a Value of $12.4 Billion by End of 2015, accessed at http://www.reuters.com/article/2012/01/06/idUS33079+06-Jan-2012+BW20120106

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Smartphones are expected to take over the mobile market in the future. According to the forecast of IDC by 2017, the total US smartphone shipments will reach 183 million units and will account for 96.5% of the mobile phone shipments, resulting in a CAGR of 8.8% for 2012–2017.141

China

In 2012, China accounted for the majority of smartphone shipments compared to any other country.

In the second quarter of 2013, 90 million mobile phones were sold, 85% of which were smartphones. This has been an increase of 36% from the previous year, however a slight drop from the preceding quarter142.

In Nielson’s 2013 Mobile Consumer report, based on surveys completed during 2012, mobile phone ownership stands at 89% of the population, with 66% owning a smartphone143. This is likely to be an overinflated figure and unrepresentative of the whole country as the surveying only took place in Cities. Canalys’ estimation for 2012 was 40% penetration, which they believe will reach 55% by the end of 2013. Kantar estimate that smartphone penetration was 42% at the start of 2013144.

According to a report published by the Chinese Ministry of Industry and Information Technology, as of November there were over 1.1 billion mobile phone users in China; 220 million out of them using 3G technology. This 220 million means an increase of 92 million from the beginning of 2012 to November. During the same period the 3G penetration of the cell phone market increased from 13% to 20%145.

Indian and Chinese brands are now substantial in their own markets and dominate in some cases. In the Chinese market the top manufacturers are Samsung, Lenovo, Yulong, ZTE, Huawei and Xiaomi, whilst in India, local brand Micromax is number two with 22% of the market compared to Samsung’s 26%, Karbonn of India is in third position146. and dual sim devices are popular in India, which Samsung and Apple do not cater for to a large degree. The success of the brands does not result from innovation and design but offering as much functionality as cheaply as possible; the cheapest Karbonn smartphone is around €40147.

140 Research and Markets website: Mobile Phones in the United States, accessed at http://www.researchandmarkets.com/research/0b3125/mobile_phones_in_t 141 IDC: U.S. Smartphone 2013–2017 Forecast and Analysis, accessed at http://www.idc.com/getdoc.jsp?containerId=240555 142 China Internet Watch website, accessed at http://www.chinainternetwatch.com/tag/smartphone/ 143 Nielsen ( 2013): The Mobile Consumer – A Global Snapshot, accessed at http://www.nielseninsights.it/wp- content/uploads/2013/03/03.-global_mobile_report_02_25.pdf 144 Mobile marketing watch website: Android now powers majority of smartphones in China, accessed at http://www.mobilemarketingwatch.com/android-now-powers-majority-of-smartphones-in-china-33047/ 145 Forbes: China Cell Phone Market and Market Shares, accessed at http://www.forbes.com/sites/chuckjones/2012/12/27/china-cell-phone-market-and-market-shares/ 146 Forbes website: The rising smartphones stars of China and India, accessed at http://www.forbes.com/sites/haydnshaughnessy/2013/09/02/the-rising-smartphone-stars-of-china-and- india/ 147 Forbes website: The rising smartphones stars of China and India, accessed at http://www.forbes.com/sites/haydnshaughnessy/2013/09/02/the-rising-smartphone-stars-of-china-and- india/

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China is the biggest market for mobile subscriptions. Out of a population of 1.351 billion, there were 1.218 billion mobile subscriptions in the second quarter of 2013, which is equal to 90.2% of the total population. China overtook the US as the largest market for smartphones sometime between the 3rd quarter of 2011 and the 1st quarter of 2012. The demand is the highest for Android devices that cost under $200 and prices are expected to fall further (even below $100) 148.

According to Counterpoint Research, in October 2013 due to the strong sales of the iPhone 5S Apple's share in China's smartphone market rose to 12% from just 3% the month before. Apple became the third-largest smartphone manufacturer in the mainland, rising from sixth place in September. Samsung and Lenovo holding the number one and two spots are still ahead of Apple but Chinese manufacturers such as Coolpad, Huawei and ZTE, are ranked in fourth, fifth and sixth position, respectively, with a market share of under 10%149.

In December 2013 Apple announced a deal with China Mobile, which is the biggest Chinese carrier with the largest wireless network in the world? This is expected to boost iPhone sales in the Chinese market at least initially, with a considerable impact on world-wide iPhone sales. However, in terms of the additional sales in the Chinese market, pricing is likely to be a key variable: Apple is the main player in the US and also a major player in the EU, but not in China, because Chinese customers are more price-sensitive and local manufacturers such as Huawei, Coolpad and ZTE, offer Android phones for less than $100150. Further to this, the timing of the deal does not favour boosting Apple sales as the Chinese market growth has already started to slow down151. However, Apple might not be seeking to boost its market share in China, but rather is aiming to strengthen its position vis-à-vis Samsung in the competition for the premium segment. By focusing only on those wealthy Chinese who can afford an iPhone at the current price level, Apple can maintain the company’s record profit ratio152.

In 2012 China accounted for 26.5% of the global smartphone sales. By 2016, China is expected to have 23% of the global smartphone sales. This means that the country remains the top market for smartphones, although market growth is expected to be higher in India, Indonesia, Russia and Brazil153.

South Korea

The South Korean market is one of the most advanced mobile phone markets in the world. By March 2012, the value of the Korean smartphone industry reached $5.4 billion. Around 96% of the

148 MobiThinking: Global mobile statistics 2013 Part A: Mobile subscribers; handset market share; mobile operators, accessed at http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a 149 CNBC: Apple's smartphone market share quadruples in China, accessed at http://www.cnbc.com/id/101266797 150 The New York Times: China Deal Gives Apple Big Market to Court, accessed at http://www.nytimes.com/2013/12/23/technology/apple-and-china-mobile-sign-iphone-deal.html?_r=0 151 USA Today: China smartphone war heats up as market cools, accessed at http://www.usatoday.com/story/tech/columnist/2013/12/26/apple-china-mobile-samsung-electronics- smartphone-war-new-tech-economy/4207057/ 152 Bloomberg: Apple Hurdles in Top Market Endure After China Mobile, accessed at http://www.bloomberg.com/news/2013-12-24/apple-hurdles-in-top-market-endure-after-china- mobile.html 153 MobiThinking: Global mobile statistics 2013 Part A: Mobile subscribers; handset market share; mobile operators, accessed at http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a

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sales value and 85% of the sales volume of the mobile phone market was accounted for by smartphones. Within the previous 12 months, 11 million smartphones were sold, representing an increase of more than 400,000 units from the year before. The industry’s value has increased by 129% and sales volume has grown by 55%154.

In Korea, consumers tend to favour phones with larger screen sizes. There is a great difference between Korean and Global demand for phablets: in Korea they account for 41% of the connected devices, while globally they are only 7%. At the same time, tablets only account for 4% of the connected devices. Since phablets are considered to be smartphones, the data in the figure below on “connected devices” can be used as an indicative guide for smartphone data for South Korea (with a marginal error in the region of 4%).

Figure A1-8: South Korea – Connected Devices

In August 2013 according to Flurry Analytics there were 33,527,534 connected devices (including tablets) in South Korea. The South Korean market is important for two reasons: firstly, South Korea is the first connected device market approaching saturation and secondly, it is the home market of Samsung, one of the few global key players. As the Figure A1-9 illustrates, in South Korea the trends in rising ownership ratio of connected devices started much earlier than it occurred globally. The current stagnation shows that the market is coming close to saturation, or has reached it already155.

154 ZDNet: S. Korea smartphone market worth US$5.4B, accessed at http://www.zdnet.com/s-korea- smartphone-market-worth-us5-4b-2062304138/ 155 Flurry: The South Korea Report: Device and App Trends in The First Saturated Device Market, accessed at http://blog.flurry.com/bid/101499/The-South-Korea-Report-Device-and-App-Trends-in-The-First- Saturated-Device-Market

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Figure A1-9: South Korean Market Saturated

Samsung has a lasting dominant position in the Korean market. Together with LG and , two more Korean vendors, local brands account for 85% for the market, which is unprecedented globally156.

Figure A1-10: Samsung Dominates South Korean Market

156 Flurry: The South Korea Report: Device and App Trends in The First Saturated Device Market

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Annex 2 Tablets

Introduction

A , or a tablet as they are commonly referred to, is a single unit mobile computer. Tablets are synonymous with touchscreens and typically have no externalities such as a mouse or keyboard, although some models can be ‘docked’ with a detachable keyboard. Most models have physical buttons for volume and power etc. and ports including USB, HDMI, SD card and headphone jack. Tablet computers became popular in 2010, although they were conceptualised in the mid-20th century.

Similarly to mobile phones, market research analysts release two figures in relation to sales of tablets, ‘Sales to end users’ and ‘Shipments’. Shipments

Worldwide

In the second quarter of 2011, the United States held the largest share of worldwide tablet market (36.7%); followed by Western Europe (27.3%), see Table A2-1. As the market reaches maturation, the proportion of the market these regions account for is expected to decrease, and be offset by increased sales in developing markets such as Asia.

Table A2-1: Regional share of the global tablet market in 2Q 2011157 Region Market share United States 36.7% Western Europe 27.3% Asia Pacific (ex. Japan) 23.1% CEMA 5.0% Latin America 3.2% Canada 2.5% Japan 2.3%

The latest press release for quarterly tablet shipments from IDC in January 2014 brought the worldwide total for tablet shipments in 2013 to 218.8 million units. Full year data on tablet shipments is available from 2011 to 2013, see Table A2-2. Shipments have increased year on year, however the rate has begun to drop, and from 2011 to 2012 there was a 97% increase, compared to a 70% increase from 2012 to 2013. Growth rates are expected to continue to slow beyond 2013, with IDC predicting that in 2014 shipments will increase by 22.2% to 270.5 million units and by 2017,

157 IDC Sep 2011, accessed at http://www.statista.com/statistics/214804/regional-media-tablet-market-share- worldwide-by-units/

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this will have dropped to less than 10% to 386.3 million units158. The slowdown in sales may represent the early signs of market maturation or a result of slowing product innovation.

Table A2-2: Worldwide shipments by manufacturer for tablets (units in millions)159 Year Manufacturer 2008 2009 2010 2011 2012 2013 Acer - - - - 1.7 2.6 - - - 3.9 9.0 7.6 Apple - - - 40.5 67.1 74.2 - - - 2.1 6.5 12.1 Barnes & Noble - - - 3.3 1.4 - Lenovo - - - - 2.6 7.2 Microsoft - - - - - 0.9 Samsung - - - 6.1 16.5 41.1 Others - - - 9.4 23.8 0 Total - - - 65.3 128.7 218.8 Note: 2012 and 2013 figures have been derived from quarterly figures

A key factor for the diminishing growth rate is the increasing popularity of larger phones, or phablets, which some consumers are opting for over smaller tablets. Market saturation in the US and Western Europe has also been considered in this revised forecast. Table A2-3 demonstrates the increasing popularity of smaller screened devices throughout the world. In a consumer study by Gartner in Brazil, China, France, Germany, Italy, UK, US and Japan, it was revealed that smaller sized tablets are preferred, with 47% of the 21,500 consumers surveyed owning a tablet which was 8 inches or smaller160.

Table A2-3 Worldwide tablet screen size forecast, 3Q 2013, shipments in millions161 Units (inscreen size (inches)) Year 7 < 8 8 < 11 11+ 2012 53.7 90.0 0.6 2013* 124.7 93.8 2.9 2017* 218.6 146.8 20.9

Globally, the average penetration rate of tablets was 5% in 2012. Although in some countries, this has already exceeded 15%, namely, Australia, France, Ireland the Netherlands and the US. By 2015, the average penetration rate is expected to increase to 13% overall, but reach up to 45% in France

158 IDC website: Worldwide Tablet Shipments Forecast to Slow to Single-Digit Growth Rates by 2017, According to IDC, accessed at http://www.idc.com/getdoc.jsp?containerId=prUS24461613 159 Various IDC press releases, accessed at http://www.idc.com/about/press.jsp 160 Gartner website: Gartner Says Worldwide PC, Tablet and Mobile Phone Shipments to Grow 4.5 Percent in 2013 as Lower-Priced Devices Drive Growth, accessed at http://www.gartner.com/newsroom/id/2610015 161 IDC website: Worldwide Tablet Shipments Forecast to Slow to Single-Digit Growth Rates by 2017, According to IDC, accessed at http://www.idc.com/getdoc.jsp?containerId=prUS24461613

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and 50% in Ireland162. Forecasts released by Forrester Research suggests that tablet ownership in Western Europe is likely to grow from 14% in 2012 (33 million) to 55% by 2017 (147 million)163.

The growth in tablets in the future will be driven by:

 The introduction of low-end devices opening the market to more consumers. It is possible that this could account for 60% of the total cumulative sales through 2016;  Consumers who currently own a tablet replacing their existing tablet with a newer model, contributing to an estimated 28% of tablet growth;  Around 6% of consumers purchasing a tablet to replace an existing laptop; and  Businesses beginning to adopt tablets (around 4%) as will the education sector (3%)164.

Apple was the dominant manufacturer on the global tablet market from 2010 to 2013, however over this period their market share decreased from 62% to 34%, see Table A2-4. Conversely the market share for Samsung increased from 9% in 2011 to 19% in 2013. Whilst Acer, Amazon, Asus and Lenovo feature in the top 5 quarterly shipment figures, they hold a relatively small proportion of the market. Other manufacturers are accounting for an increasingly large proportion of the market, 33% of the market in 2013; there is also a similar picture in the mobile phone market, demonstrating a high degree of competiveness.

Table A2-4: Market share by vendor of worldwide tablet shipments165 Year Manufacturer 2008 2009 2010 2011 2012 2013 Acer - - - - 1% 1% Amazon - - - 6% 7% 4% Apple - - - 62% 52% 34% Asus - - - 3% 5% 6% Barnes & Noble - - - 5% 1% - Lenovo - - - - 2% 3% Microsoft - - - - - 0.4% Samsung - - - 9% 13% 19% Others - - - 14% 19% 33% Note: 2012 and 2013 figures have been derived from quarterly figures

A brief overview of the leading tablet manufacturers is given below.

162 Press Release, ZenithOptimedia The ROI Agency, 11/02/2013, accessed at http://www.rudebaguette.com/2013/02/15/infrastructure-pays-why-europe-is-reaping-the-benefits-of-its- connectivity/ 163 Tech Crunch website: Forrester: Tablet Ownership in Europe to Rise 4x in 5 Years – 55% of Region’s Online Adults Will Own One By 2017, Up From 14% in 2012, accessed at http://techcrunch.com/2013/02/20/forrester-tablet-ownership-in-europe-to-rise-4x-in-5-years-55-of- regions-online-adults-will-own-one-by-2017-up-from-14-in-2012/ 164 McKinsey & Company (2012), Cyber boom: Why tablet domination has only just begun, accessed at http://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/high%20tech//cyber- boom_and_the_domination_of_tablets_april_2012.ashx 165 Various IDC press releases, accessed at http://www.idc.com/about/press.jsp

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Acer Inc.

Based in Taiwan, Acer is predominantly a manufacturer of inexpensive laptops and desktops. In 2010 its first tablet was launched, and has since released a number of models of varying size, on both the Android and Windows operating system. The company intends to shift focus to mobile devices and Chromebooks as shipments of PCs have fallen by 45% in 2013 to date166.

Amazon

Following on from the success of the Kindle e-reader, Amazon released the Kindle Fire tablet in 2011, followed by the Kindle Fire HD in September 2012 and most recently the Kindle Fire HDX in September 2013167. Worldwide sales of the Kindle Fire reached 5.5 million units in 2011 and are predicted to hit 27.8 million in 2014168.

Apple

In 2010 Apple launched the iPad, of which there are several generations and a ‘mini’ version and has been attributed with the current success of the tablet. Since the launch, sales have increased from 7.5 million units in 2010 to 58 million in 2012, and for the first half of 2013 sales stood at 57 million units169. However, during this period its market share has decreased from 76.2% to 62.5% in 2012170.

Asus

Involved in the manufacture of electronic computing devices and components, Asus has a range of tablets and is also responsible for manufacturing the for Google. Working with Microsoft, Asus have developed tablets which simultaneously run the Android and Windows operating systems.

Barnes and Noble

Similarly to Amazon’s Kindle Fire, the Nook HD and HD+ tablets were born on the success of e- readers. Future forays in the tablet market are unclear. In the 2013 annual report, losses of €119 million were reported; this is an increase from the €51 million of losses in 2012171.

Blackberry

Originally a manufacturer of smartphones, in April 2011, Blackberry released the ‘PlayBook’. Following disappointing sales and a subsequent price reduction, some 2.5 million units had been

166 The Inquirer website: Acer to shift focus to Android as Windows PC shipments dwindle, accessed at http://www.theinquirer.net/inquirer/news/2287962/acer-to-shift-focus-to-android-as-windows-pc- shipments-dwindle 167 Wikipedia website: , accessed at http://en.wikipedia.org/wiki/Amazon_Kindle 168 eMarketer Jan 2012, accessed at http://www.statista.com/statistics/215766/amazon-kindle-fire-tablet- sales-forecast-since-2011/ 169 Apple Jul 2013, accessed at http://www.statista.com/statistics/253725/iphone-ipad-and-ipod-sales- comparison/ 170 IDC Jun 2012, accessed at http://www.statista.com/statistics/234775/global-market-share-of-apple-ios- tablets--since-2010/ 171 Barnes & Noble (2013): 2013 Annual Report, accessed at http://www.barnesandnobleinc.com/for_investors/annual_reports/2013_bn_annual_report.pdf

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sold by June 2013172. In 2012, Gartner estimated that global sales to end users in 2011 was 0.8 million units, and predicted this to rise to 6 million in 2013 and 17.8 million in 2016173.

Lenovo

In 2012, Lenovo was named as the world’s second largest computer manufacturer174.

Microsoft

Renowned for dominance in the software market, in June 2012 Microsoft announced the launch of the ‘Surface’ tablet. Worldwide sales are expected to reach 4.9 million units in 2012 and rise to 43.6 million in 2016175. Sales to end users

Worldwide

Gartner reported that, in terms of sales to end users, 195.4 million units were sold in 2013, a 64% increase from the previous year.

A press release from Gartner in April 2012 provided sale figures for tablets by operating system (OS), which can be used as an approximation for those manufacturers which use a proprietary OS, namely Apple (iOS), Blackberry (QNX) and Microsoft, see Table A2-5. Since the popularisation of tablets Apple has dominated the market; in 2011 accounted for 62% of sales to end users, followed by Android based tablets, which includes Acer, Amazon, Asus, Samsung and Sony. Apple has gradually lost market share, however it is expected to still remain dominant in 2016. Microsoft tablets are expected to gradually gain popularity although the market share will be relatively small. Blackberry appears to have limited success in the tablet market and is expected to achieve 5% of the market in 2016.

Table A2-5: Worldwide tablet sales to end users by operating system (units in millions)176 Operating system Year Total iOS Android Microsoft QNX Others 2011 40.0 17.3 0.0 0.8 1.9 60.0 2012* 73.0 37.9 4.9 2.6 0.5 118.9 2013* 99.6 61.7 14.5 6.0 0.6 182.5 2016* 169.7 137.7 43.6 17.8 0.5 369.3

172 Various Financial Documents, accessed at http://uk.blackberry.com/company/investors/documents.html 173 Gartner Apr 2012, accessed at http://www.statista.com/statistics/233318/unit-sales-of-qnx-tablet-pcs- worldwide/ 174 Gartner website: Gartner says declining worldwide PC shipments in fourth quarter of 2012 signal structura; shift of PC market, accessed at http://www.gartner.com/newsroom/id/2301715 175 Gartner Apr 2012, accessed at http://www.statista.com/statistics/233317/unit-sales-of-microsoft-tablet- pcs-worldwide/ 176 Gartner website: Press Release, accessed at http://www.gartner.com/newsroom/id/1980115

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In April 2010, Apple released the iPad, to which the current success of tablets has been attributed and of which there are currently several generations and a ‘mini’ version. Sales figures released by Apple for 2010 to 2013 are shown in Table A2-6. Whilst sales in the year of release were modest, 2011 saw an increase of 334% to over 30 million units. Sales in 2013 fiscal year, which ended at the end of September, reached 71 thousand units, which is in line with predictions from Gartner, who estimated that 100 million iPads would be sold in 2013 (calendar year)177.

Table A2-6 Worldwide sales of Apple iPad from 2010 to 2013 (Fiscal years)178 Year Units 2010 7,500 2011 32,400 2012 58,300 2013 71,000

Increasing sales of tablets is expected to be at the expense of PCs, both desktop and notebooks, sales of which will have decreased by 23% and 27% respectively in 2017 from 2012 levels179.

Europe

As tablets became popular in 2010, the US accounted for 53% of sales, followed by Western Europe at 20%. As the tablet market matures in these developed markets, the market share will gradually drop with compensation in the emerging markets of Asia and elsewhere in the world, Figure A2-1. By 2017, market analysts, IDC, estimate that developed markets will account for 49% of sales, down from 61% in 2012180.

177 Computing website: Netbook dies as Asus and Acer end production, accessed at http://www.computing.co.uk/ctg/analysis/2233421/netbook-dies-as-asus-and-acer-end-production 178 Apple (September 2013), Form 10-K (Annual Report), accessed at http://files.shareholder.com/downloads/AAPL/3187386542x0xS1193125-13-416534/320193/filing.pdf 179 The Next Web website: Announcement, accessed at http://thenextweb.com/insider/2013/06/11/canalys- almost-half-a-billion-pcs-to-ship-in-2013-as-desktops-and-laptops-dip-but-tablets-grow-59-to-182-5m/ 180 IDC website: Press Releases, accessed at http://www.idc.com/getdoc.jsp?containerId=prUS24291713

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Figure A2-1: Distribution of worldwide tablet sales from 2011 to 2015181

Charging requirements

Historic and current

In order to review the charging requirements of tablets, a sample of models released from 2010 to 2013 by a range of manufacturers, including leading manufacturers was selected. Information was predominantly sourced from product reviews and manuals, and included, the type of charger, release date and screen size. It should be noted that there are many models which have not been reviewed; however efforts have been made to ensure the sample is representative of the market.

Table A2-7 shows the type of chargers provided with tablets produced by the leading manufacturers182 and those MoU signatories which also manufacture tablets.

181 Morgan (Mar 2012), accessed at http://www.statista.com/statistics/183427/forecasted-sales-of- tablet-pcs-by-region/ 182 ‘Top 5’ press releases from market analysts IDC

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Table A2-7: Charging requirements of tablets (year released) Type of charger Manufacturer 2010 2011 2012 2013 Leading manufacturers Acer Proprietary Proprietary Proprietary and Proprietary and Micro-USB Micro-USB Amazon Micro-USB (no Micro-USB (no Micro-USB (no power power unit power unit unit supplied) supplied) supplied) Apple Proprietary Proprietary Proprietary Proprietary Asus Proprietary Proprietary Micro-USB Barnes & Noble Micro-USB Proprietary Lenovo Proprietary and Proprietary and Micro-USB Micro-USB Micro-USB Microsoft Proprietary Proprietary Samsung Proprietary Proprietary and Proprietary and Micro-USB Micro-USB Micro-USB Manufacturer Other manufacturers (MOU signatories) Blackberry Micro-USB

HTC Proprietary

Huawei Proprietary Proprietary Micro-USB

LG Proprietary and Micro-USB Micro-USB Micro-USB Motorola Proprietary & Micro-USB Sony Proprietary Proprietary Micro-USB

ZTE Micro-USB Micro-USB Proprietary Proprietary and Micro-USB

Of the signatories, Blackberry, Huawei, Lenovo, LG, Motorola, Samsung, Sony and ZTE provide a Micro-USB charger with all or some of their tablets.

Within the sample of tablets, 69% are supplied with a proprietary charger; this includes a Micro- USB/MHL183 port, 30 pin charger or barrel charger. Just over a quarter (27%) are supplied with a Micro-USB charger and 4% require a Mini-USB charger. HTC is the only manufacturer to use the Mobile High-Definition Link (MHL) port on its devices, which supports HD video and digital audio whilst simultaneously providing power to the device. The connection is backwards compatible for Micro-USB chargers. It should be noted that whilst a manufacturer may supply a proprietary charger and recommend its use for optimal charging, the device may also support Micro-USB charging, albeit at a much slower rate, for example ’s ‘Toughpad’.

Proprietary chargers are commonly supplied with tablets, predominantly as a result of their greater energy demands and the fact that Micro-USB 2.0 chargers are limited to 2.5-7.5W. Analysis of the sample shows that the type of charger is loosely linked to the screen size. Figure A2-2 shows that

183 Mobile High-Definition Link

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the use of Micro-USB chargers is most common in smaller screened devices, typically in the range of 7 – 8.9 inches. Micro-USB is occasionally used in larger tablets; however in this instance the charging will be very slow, as noted by several product reviews184,185. Of those companies which don’t provide a Micro-USB charger for smaller screened devices, most are older models (only 3 were released post 2013) and lesser known brands.

Figure A2-2: Charger type Vs. tablet screen size

Whether a tablet is convertible i.e. can be docked into a keyboard to resemble a conventional laptop, also bears an influence on the type of charger. In the sample, all convertible tablets required a proprietary charger and had screens in excess of 10 inches.

A range of adaptors are available to purchase which allow tablets which require a proprietary charger, including Samsung, Apple and Sony, to be charged using a Micro-USB charger, see Table A2- 8 .

184 Ubergizmo website: Samsung Galaxy Tab 3 10.1 Review, accessed at http://www.ubergizmo.com/2013/08/samsung-galaxy-tab-3-10-1-review/ 185 Tech radar website: review, accessed at www.techradar.com/reviews/pc- mac/tablets/sony-xperia-tablet-z-1133193/review

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Table A2-8: Adaptors available for tablets with a proprietary charger

Adapter Data transfer Price Available Device Source description and charger from All Samsung PortaPow Micro Charging £6.99 Nov http://www.amazon.co.uk/Port Galaxy USB Charging only, not 2012 aPow-Charging-Adapter- tablets Adapter / suitable for Converter- Converter for data transfer Samsung/dp/B009ZQKMDA#pr Samsung Galaxy oductDetails Tab or Note Galaxy Tab Siig CE-AD0012-S1; Unknown £21.40 Jan 2012 http://www.amazon.co.uk/CE- 7.0 male/female; USB; AD0012-S1-female- Plus/7.7/8.9/ Black; White; FCC; Connectivity-Adapter- 10.1 CE; RoHS; 4-in-1 Tablets/dp/B00A6TPVSQ/ref=sr Connectivity _1_45?ie=UTF8&qid=14029942 Adapter for Galaxy 06&sr=8- Tablets 45&keywords=tablet+Micro- USB+adapter#productDetails Samsung Micro USB Female Charging £1.79 Oct 2012 http://www.amazon.co.uk/Micr Galaxy Tab 30 Pin Adapter for only, not o-Female-Adapter-Samsung- 7500 7510 Samsung Galaxy suitable for Galaxy/dp/B009YBT4RQ/ref=pd Tab 7500 7510 data transfer _rhf_se_s_cp_2_N36D?ie=UTF8 &refRID=0PAJAC4W8YEFD2YK3 KBB Can select eKit 4-in-1 Unknown £6.49 Dec 2011 http://www.amazon.co.uk/Con either Apple Connection Kit with nection-MicroUSB-Compatible- or Samsung MicroUSB Samsung- 30 pin Compatible with Galaxy/dp/B006I31SHC/ref=sr_ Samsung Galaxy 1_58?ie=UTF8&qid=140299484 S2/S3/S4/Note, 0&sr=8- Samsung Galaxy 58&keywords=mobile+phone+ Note 2/Note Micro-USB+adapter 3/Note 8.0/Note 10.1 and Samsung Galaxy Tab 3 7.0/Tab 3 8.0/Tab 3 10.1 - Black Sony experia Magnetic To Micro Charging £0.99 http://www.ebay.co.uk/itm/Ma Z2 Tablet USB Charger Cable only, not gnetic-To-Micro-USB-Charger- Adapter For Sony suitable for Cable-Adapter-For-Sony-Xperia- Xperia Z2 Tablet data transfer Z2-Tablet-SGP511-t5- SGP511 t5 /331181688553?pt=UK_Mobile Phones_MobilePhoneAccesorie s_MobilePhoneDataCables_JN& hash=item4d1bf786e9

Galaxy Tab / Micro USB Adapter Unknown Wholes http://www.sunsky- P1000 Converter for ale: online.com/view/232254.htm /Galaxy Tab Samsung Galaxy £0.36 8.0 / N5100 / Tab / P1000 each Galaxy Tab 2 /Galaxy Tab 8.0 / (case / P3100 / N5100 / Galaxy Tab of Galaxy Tab 2 / P3100 / Galaxy 1,000

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Table A2-8: Adaptors available for tablets with a proprietary charger

8.9 / P7300 / Tab 8.9 / P7300 / units Galaxy Tab Galaxy Tab 10.1 / 10.1 / P7500 P7500 / P6200 / / P6200 / P6800(Black) P6800(Black) Sony Xperia Estone Micro USB Charging £2.99 April http://www.amazon.co.uk/Esto Z1 L39H To Magnetic only, not 2014 ne-Magnetic-Charger- Charger Port suitable for Converter- Converter Adapter data transfer Adapter/dp/B00K0EDCTC/ref=s For r_1_8?s=electronics&ie=UTF8& L39H qid=1402992558&sr=1- 8&keywords=micro++chargi ng+adapter Sony Xperia Micro USB to Charging http://www.ebay.co.uk/itm/Mi Z1 L39h Z Magnetic Charge only, not cro-USB-to-Magnetic-Charge- Ultra XL39h Adapter Cable For suitable for Adapter-Cable-For-Sony-Xperia- Sony Xperia Z1 data transfer Z1-L39h-Z-Ultra-XL39h- L39h Z Ultra XL39h /331190223260?pt=UK_Mobile Phones_MobilePhoneAccesorie s_MobilePhoneDataCables_JN& hash=item4d1c79c19c Sony Xperia Magnector X ] High Charging £10.99 May http://www.amazon.co.uk/Mag Z1 & Z2 Performance Sony only, not 2014 nector-Performance-Xperia- Xperia Z1 & Z2 suitable for Charging- Charging Adapter data transfer Adapter/dp/B00H2EE5ZS/ref=sr for Micro USB Cable _1_16?s=electronics&ie=UTF8& - Enhanced qid=1402992558&sr=1- Magnetic 16&keywords=micro+usb+char Connection and ging+adapter Charging Speed For Experia Charging £24.99 http://www.sonymobile.com/g Z1 compacte Magnetic Charging only, not b/products/accessories/magnet Dock DK32 suitable for ic-charging-dock-dk32/ Official Sony data transfer Convert Micro USB Unknown £3.98 http://www.ebay.co.uk/itm/Co Ultra XL39H To Magnetic nvert-Micro-USB-To-Magnetic- Z2 Charger Adapter Charger-Adapter-For-Sony- For Sony Xperia Z Xperia-Z-Ultra-XL39H-Z2- Ultra XL39H Z2 /221435365455

Future developments

The USB Implementers Forum has released the USB Power Delivery specification with the first consumer products released towards the end of 2014. USB Power Delivery ports and cables are capable of delivering up to 100 watts, with the Micro connector delivering up to 60 watts. The USB Implementers Forum expects that the USB Power Delivery specification will become more common in tablets and lead to harmonisation in the future.

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Market structure

Since their popularisation in 2010, the number of companies which manufacture tablets has increased dramatically, ‘Find the Best’ website lists more than 60 manufacturers186. Global revenue from the sale of tablets in 2011 was €28 billion and is expected to rise to €59 billion in 2013 and €75 billion in 2014187.

One of the main choices a consumer must make when purchasing a tablet is the screen size. The first tablets on the market were in the range of 8 – 11 inches, although in 2013 and in the future, it is expected that devices with a screen size of less than 8 inches will be most popular, see Table A2-9.

Table A2-9: Worldwide tablet market share by screen size band in 2011 - 2018188 Year <8” 8” – 11” 11” + 2011 27% 73% 0% 2013 55% 43% 2% 2017 57% 37% 6%

Indeed, in the upcoming year, the installed base of ‘compact’ tablets (devices that have screens smaller than 8.5 inches) will exceed the installed base of the ‘classic’ tablet (devices with a screen 8.5 inches and larger). By the end of the first quarter of 2014, compact tablets are expected to number around 165 million units compared with 160 million classic units. Compact units are likely to be market leaders (within the diversifying sector of tablets) after around 18 months of them reaching the market (sales are estimated to be in the region of five million units)189.

Compact tablets are typically marketed at a lower price and as such, have a different market strategy to vendors of classic tablets. Retailer-branded models are likely to be sold near to cost, with profits driven by subsequent product sales generated by the device. One estimate suggests that Kindle (tablet and e-reader) owners spend $1,233 per year on Amazon compared to $790 per year for Amazon shoppers who own an e-reader or tablet manufactured by another company190.

The lower price tablet induces customers to purchase the device and in some cases, encourages ownership of a second device. Interestingly, lower priced models tend to have a comparatively lower average battery life but a low replacement rate whereas higher priced models have a large battery life but far higher replacement rate191.

186 Find The Best website, accessed at http://smartphones.findthebest.com/ 187 J.P. Morgan/IDC March 2013, accessed at http://www.statista.com/statistics/182422/forecast-of- worldwide-media-tablet-spendings-since-2010/ 188 IDC website: Press Release, accessed at http://www.idc.com/getdoc.jsp?containerId=prUS24129713 189 Deloitte, One become many: the tablet market stratifies, accessed at http://www2.deloitte.com/global/en/pages/technology-media-and- telecommunications/articles/2014prediction-the-tablet-market-stratifies.html 190 Deloitte, One become many: the tablet market stratifies, accessed at http://www2.deloitte.com/global/en/pages/technology-media-and- telecommunications/articles/2014prediction-the-tablet-market-stratifies.html 191 Deloitte, One become many: the tablet market stratifies, accessed at http://www2.deloitte.com/global/en/pages/technology-media-and- telecommunications/articles/2014prediction-the-tablet-market-stratifies.html

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Average selling price

Tablets are becoming increasingly capable of performing the functions of desktops and laptops and in 2013, sales of tablets are expected to exceed portable PCs and indeed total PC sales in 2015. This is predominantly a result of the falling average selling price (ASP) of tablets compared to PCs, which in 2013 was expected to be €288 and €480 respectively192.

Increased diversity in the tablet market and the popularity of cheaper smaller screened models has resulted in the ASP decreasing year on year; Gartner’s predicted prices until 2015 are shown in Table A2-10.

Table A2-10: Average sale price of tablets193 Year Price (Euros) 2010 411 2011 304 2012 268 2013* 227 2014* 211 2015* 199

More specifically in the UK, the ASP dropped by 23% in 2012194 and similarly in France prices dropped by 20% and were expected to drop a further 20% to reach €264 in 2013195. In Europe as a whole, the ASP of tablets in the first quarter of 2013 was €283, a drop of more than €100 compared to second quarter of 2012196. Case studies

EU5 countries

Western Europe holds a significant share of the worldwide tablet market; eMarketer have analysed the prevalence of tablets in the EU5 countries; France, Germany Italy, Spain and the UK.

Firstly, the penetration rate, which is a measure of the proportion of the population which own a tablet, has gradually increased in each country and is expected to continue to do so until 2017, Table A2-11. In 2012, the United Kingdom had the highest rate at 22.3% which is expected to remain the case until 2016 when it will reach 52.4%. The UK also has one of the highest smartphone

192 IDC website: Press Release, accessed at http://www.idc.com/getdoc.jsp?containerId=prUS24129713 193 Gartner (2011): IT spending forecast, 1Q11 update – Media tablets boost outlook, accessed at http://www.gartner.com/it/content/1577900/1577914/april_5_it_spending_forecast_1q11_update_rgord on.pdf 194 GfK Website: Press Releases, accessed at http://www.gfk.com/uk/news-and-events/press-room/press- releases/pages/uk-tablets-and-accessories-boost-market-sales.aspx 195 Rude Baguette website: More tablets will be sold that laptop PCS in France this year, accessed at http://www.rudebaguette.com/2013/02/08/sales-of-tablets-to-surpass-pc-sales-for-the-first-time-in-2013/ 196 Channel Nomics website: Tablet sales triple in Q1, accessed at http://channelnomics.com/2013/04/22/context-tablet-sales-triple-q1/

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penetration rates in Europe. In 2017, penetration rates in the EU5 will average 41%, marginally less than half of the population. Spain and Italy were among the hardest hit by the economic crisis and resultantly have comparatively lower penetration rates.

Table A2-11: Penetration rate of tablet PCs in the EU5 from 2010 to 2016197 Year UK Spain Germany France Italy 2010 2.8% 3.0% 2.0% 1.8% 2.4% 2011 8.5% 6.2% 4.8% 4.9% 4.9% 2012 22.3% 20.9% 17.8% 17.0% 16.4% 2013* 30.9% 24.9% 25.9% 24.0% 19.6% 2014* 37.9% 28.4% 32.6% 30.0% 22.6% 2015* 43.3% 30.9% 37.5% 34.5% 24.9% 2016* 48.3% 32.4% 42.1% 38.9% 26.7% 2017* 52.4% 34.7% 45.9% 42.5% 29.1%

Unlike smartphones, tablets can be shared between family members or those living together, negating the need for a device for every person198. For this reason it is likely that the penetration rate of tablets will remain low compared to other devices such as smartphones. Although, it has been noted that sharing may be less common in countries with higher income levels such as Germany and the UK.

Table A2-12 shows the tablet user growth rates in the EU5, which have decreased from an average of 133.5% in 2011 to 43.3% in 2013 and are, expected to drop further to 12.3% in 2016. This demonstrates the maturation of the market and the slowing of sales over the coming years.

Table A2-12: Tablet user growth rates in the EU5199 Year UK Spain Germany France Italy 2011 132.1% 108.8% 144.7% 173.4% 109.4% 2012 140.0% 106.4% 149.1% 129.4% 108.5% 2013* 36.8% 56.3% 38.1% 27.2% 56.1% 2014* 27.6% 27.9% 27.6% 29.7% 28.2% 2015* 19.3% 16.3% 21.5% 20.3% 19.9% 2016* 13.3% 11.1% 14.7% 12.1% 9.9%

In terms of actual tablets in each of the EU5 countries, the figures follow the penetration rate and increase from the starting point of 2010 until 2016, although the rate of increase does diminish over time, Table A2-13.

197 eMarketer Sep 2013, accessed at http://www.statista.com/statistics 198 eMarketer website: UK tablet use sees robust growth, accessed at http://www.emarketer.com/Article/UK- Tablet-Use-Sees-Robust-Growth/1009857 199 eMarketer website: UK, Germany dominate the tablet market in EU-5, accessed at http://www.emarketer.com/Article/UK-Germany-Dominate-Tablet-Market-EU-5/1009502

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Table A2-13: Number of tablets in the EU5200 Year UK Spain Germany France Italy 2010 1.8 1.4 1.6 1.2 1.4 2011 4.1 2.9 3.9 3.2 3.0 2012 9.8 6.0 9.7 7.3 6.3 2013* 13.4 9.3 13.4 10.8 9.8 2014* 17.1 11.9 17.1 14.0 12.6 2015* 20.5 13.9 20.8 16.8 15.1 2016* 23.2 15.4 23.8 18.8 16.5

United Kingdom

In the UK, tablet ownership has steadily grown since 2010; Ipsos estimate that in the third quarter of 2013 ownership was 30%, with Apple’s iPad holding the majority share201.

In February 2013, the volume and value of the tablet market had increased by 234% and 145% respectively year-on-year, with 7 inch tablets accounting for 62% of sales202. The tablet market has diversified, with over 50% more brands and a 126% increase in available models from 2011 to 2012203.

The introduction of lower priced compact tablets has meant that around 18% of consumers in the UK own both a large and compact tablet. By the end of January 2014, over 50% of UK consumers will own or have access to a tablet of some kind. This is predicated on the lower average selling price of tablets, which resulted in some 12 million tablets being sold in 2013204.

Germany

In 2013, Germany was expected to have 13.4 million tablet users (eMarketer, 2013).

Sales of tablets in Germany were up 171% in the first quarter of 2013 (Yirrell, 2013), with sales for the full year expected to be more than 5 million (EITO, 2013). The Society for Consumer and Communication Electronics has calculated the sales figures of tablets, laptops and desktop computers, see Table A2-14205.

200 eMarketer website: In Germany, tablet surge in 2013, accessed at http://www.emarketer.com/Article/Germany-Tablet-Use-Will-Surge-2013/1009739 201 Ipsos Media CT: Tech Tracker Quarterly Release (various), accessed at http://www.ipsos- mori.com/researchspecialisms/ipsosmediact/customresearch/technology/techtracker.aspx 202 GfK Website: Press Releases, accessed at http://www.gfk.com/uk/news-and-events/news/pages/7-inch- tablets-continue-to-grow.aspx 203 GfK website: Press Releases, accessed at http://www.gfk.com/uk/news-and- events/news/pages/december-confirms-2012-was-the-year-of-the-tablet.aspx 204 Deloitte analyses top technology trends for 2014, http://www.deloitte.com/view/en_GB/uk/news/news- releases/d83c361a76b83410VgnVCM2000003356f70aRCRD.htm 205 Gesellschaft für Unterhaltungs- und Kommunikationselektronik mbH (2014): Consumer Electronics Marketindex Deutschland, accessed at http://www.gfu.de/home/marktzahlen/markt.xhtml

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Table A2-14: Sales of tablets compared to desktop computers and laptops (units in thousands) Year Desktop computer Laptop Tablet 2008 1,350 (-4.0%) 4,433 (47.3%) n/a 2009 1,531 (13.5%) 6,322 (42.6%) n/a 2010 1,581 (3.2%) 7,097 (12.3%)/ 6.661 436 2011 1,444 (-8.7%) 7,123 1,434 (229.0%) 2012 1,258 (-12.9%) 5,688 (-20.2%) 3,327 (131.9%) Q1-Q3 2013 895 3,526 3,503

Apple and Samsung were the most popular manufacturers in 2012, however in 2013, sales of Samsung tablets overtook Apple, with 142% more sales, see Table A2-15.

Table A2-15: Tablets sold by brands in the year 2012 and 2013206 Brand 2012 2013 Apple 300,000 279,000 Samsung 300,000 395,000 Asus 30,000 95,000 Acer 29,000 34,000

The value of the tablet market in 2012 grew by 84% to €2.1 billion (EITO, 2013b). For the year 2013 the number of tablets sold was estimated to be 8 million, an increase of 59% compared to 5 million in 2012207.

France

The market penetration rate for tablets has increased over recent years, from just 1.8% in 2010 to over 11% by 2012, see Table A2-16. A Deloitte study released in 2012 gave tablet ownership at 15%208 and a later survey undertaken in 2013 estimated tablet ownership at 30%209. This implies that the market for tablets is growing far quicker than previously predicted (quicker than indicated in table A2-15).

206 Tabtech (2014): Grafik: Tablet-Verkaufszahlen aus Deutschland im Überblick, accessed at http://www.tabtech.de/sonstiges/grafik-tablet-verkaufszahlen-aus-deutschland-im-ueberblick 207 Mobile-Studien (2013): Tablet-Markt Deutschland: Bitkom verschätzt sich erneut, accessed at http://mobile-studien.de/2013/10/tablet-markt-deutschland-bitkom-verschaetzt-sich-erneut/, BITKOM (2013): Boom bei Tablet Computern hält an, accessed at http://www.bitkom.org/de/markt_statistik/64050_77571.aspx 208 Deloitte website: Press Releases, accessed at http://translate.google.co.uk/translate?hl=en&sl=fr&u=http://www.deloitte.com/view/fr_FR/fr/presse/co mmuniques-de- presse/73590c3aea8d9310VgnVCM2000003356f70aRCRD.htm&prev=/search%3Fq%3Dcombien%2Bde%2 Bpersonnes%2Bont%2Bun%2Bsmartphone%2Ben%2Bfrance%26client%3Dfirefox- a%26rls%3Dorg.mozilla:en-US:official%26channel%3Dnp%26biw%3D946%26bih%3D891 209 Deloitte (2013): Global Mobile Consumer Survey 2013, Addicted to Connectivity: the Dutch Mobile Consumer Perspective, available at http://www.iabeurope.eu/files/1913/8574/2118/deloitte-nl-global- mobile-consumer-survey.pdf

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Table A2-16: Penetration rate of tablet PCs in France from 2010 to 2016210 Year Penetration Rate 2010 1.8% 2011 4.9% 2012 11.2% 2013 (f) 16.4% 2014 (f) 21.2% 2015 (f) 25.4% 2016 (f) 28.3% Notes: (f) forecast

According to GfK, 3.6 million tablets were sold in 2012, representing an increase of 140% from 1.5 million in 2011 (Meyer, 2013). It also predicts sales will continue to rise to 5.1 million units in 2013. Sales of tablets in France were up 286% in the first quarter of 2013 (Yirrell, 2013). As witnessed at a global, European and Member State level, tablets sales are increasing at the expense of other devices, most notably laptops and desktop PCs. Since the 2010, tablets have accounted for an increasing proportion of the market for smart connected devices. In 2013 tablets accounted for more than 50% of all sales of smart connected devices in France, see Figure A2-3.

6000 1450 3600 Tablet 450 1260 1160 Netbook 680 270 Notebook PC 3850 4150

3850 3900 Number sold (hundred thousand) 1460 1240 900 750 2010 2011 2012 2013

Figure A2-3: Sales of smart connected devices in France from 2010 to 2013

210 Channel Nomics website: Tablet sales triple in Q1, accessed at http://channelnomics.com/2013/04/22/context-tablet-sales-triple-q1/

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Spain

A study completed by the Online Business School reported that 20.9% of households in Spain had a tablet in 2012 (Ferreras, 2012) and sales in 2011 reached an estimated 693,000 units. Figure A2-4 depicts the forecasted tablet user penetration in Spain from 2010 until 2017 (Statista, 2014b).

Figure A2-4: Tablet user penetration rate in Spain from 2010 to 2017 Source: Statista (2014b)

At the end of 2012, it was anticipated that growth of tablet sales would have remained largely unchanged from the previous year, and would increase by around 56% in 2013211. This will give rise to the number of tablet users increasing from 6 million to 9.3 million in 2013. In the first half of 2013, sales of tablets had increased by 193%212 and estimations by IDC, give sales of tablets in Spain during 2013 at 4 million213.

Samsung and Apple are the tablet market leaders in Spain, holding first and second place respectively however there a number of other firms that produce cheaper devices and becoming increasingly popular (Tablet Zona, 2013). Indeed, the Spanish manufacturer ‘BQ’ markets tablets in Spain and the book retailer ‘Fnac’ also sells its own brand tablets.

211 Puro Marketing website: La Crisis frena las ventas de tablets en España e Italie, accessed at http://www.puromarketing.com/12/14634/crisis-frena-ventas-tablets-espana-italia.html 212 Suona Comunicación website: Sin Responsive Design no se puede conectar con los consumidores actuals, accessed at http://www.suonacomunicacion.com/noticias/139-sin-responsive-design-no-se-puede- conectar-con-los-consumidores-actuales.html 213 Silicon Week website: Smartphones y tabletas tiran del carro de las ventas, accessed at http://www.siliconweek.es/noticias/smartphones-y-tablets-tiran-del-carro-de-las-ventas-51781

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Table A2-17: Sales of tablets in Spain in Q2 2013214 Manufacturer Sales (market share) Sales Samsung 21% 97,230 Apple 18% 83,340 BQ 7% 32,410 Szenio 6% 27,780 Woxter 6% 27,780 Wolder 4% 18,520 Sunstech 6% 27,780 ASUS 4% 18,520 I-Joy 4% 18,520 Acer 3% 13,890 HP 1% 4,630 Sony 1% 4,630 Energy Sistem 1% 4,630 NVSBL 1% 4,630 2% 9,260 Others 15% 69,450 Total 463,000

Italy

In a survey by Deloitte which polled 2,000 people, it was revealed that 85% use a PC, 72% use a smartphone and 38% use a tablet, 31% use all three devices215. Table A2-18 shows the penetration rate of tablets in Italy from 2010 to 2016, which has increased from 2.4% in 2010 to 10.2% in 2012 and is forecast to grow to more than 26% by 2016. This coincides with information from Channel Nomics website, which shows that sales of tablets in Italy were up 166% in the first quarter of 2013216.

Table A2-18: Penetration rate of tablet PCs in Italy from 2010 to 2016217 Year Penetration Rate 2010 2.4% 2011 4.9% 2012 10.2% 2013 (f) 15.9% 2014 (f) 20.4% 2015 (f) 24.3% 2016 (f) 26.7% Notes: (f) forecast

214 Movil Zona website: Samsung, lider de ventas de tablets en España junto a Apple, accessed at http://www.movilzona.es/2013/09/10/samsung-lider-de-ventas-de-tablets-en-espana-junto-apple/ 215 Telecompaper website: 31% of Italians use PC, smartphones and tablet, accessed at http://www.telecompaper.com/news/31-of-italians-use-pc-smartphone-and-tablet--968355 216 Channel Nomics website: Tablet sales triple in Q1, accessed at http://channelnomics.com/2013/04/22/context-tablet-sales-triple-q1/ 217 Statistica (2014): Penetration rate of tablet PCs in selected countries in Europe from 2010 to 2016, accessed at http://www.statista.com/statistics/271001/penetration-rate-of-tablets/

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In 2010, 428,500 tablets were sold; increasing by 100% in 2011 to 858,000, see Table A2-19. According to the Associazione Italiana Editori and Sirmi218 just over 2 million tablets were sold in 2012 with a turnover of approximately €800 million.

Table A2-19: Sales of tablets in Italy from 2010 to 2012219 Year Number sales Value of sales (€) Average selling price (€) 2010 428,570 210,000,000 490 2011 858,000 472,000,000 550 2012 2,052,000 798,000,000 389

It was anticipated that tablet ownership would reach 9.8 million in 2013220, a figure corroborated by IDC, who reported that approximately 3 million tablets were shipped to Italy in 2013221.

The most popular tablet manufacturer is Samsung, followed by Apple and Mediacom. Growing in popularity, are the home grown tablet manufacturers such as Olivetti, who released the OliPad 100222 in 2011 and also Ekoore223, renowned for its ability to run three operating systems simultaneously.

Poland

As with other countries, there has been significant growth in the sales of tablets, with sales reaching 1.4 million in 2013, a 100% increase from the previous year, see Table A2-20.

Table A2-20: Sales of tablets in Poland from 2011 to 2013 Year Sales 2011 170,000 2012 700,000 2013 1,400,000

218 Ilsore24ore website: Tablet, anche in Italia è boom. Ma Crollano le vendite di pc, accessed at http://www.ilsole24ore.com/art/tecnologie/2013-02-07/tablet-anche-italia-boom- 194249.shtml?uuid=Abk1PHSH 219 Associazione Italiana Editori (2013): Dentro all’e-book: le cifre, accessed at http://translate.googleusercontent.com/translate_c?depth=1&hl=en&prev=/search%3Fq%3DQuota%2Bdi %2Bmercato%2BeReader%26client%3Dfirefox-a%26hs%3DhYv%26rls%3Dorg.mozilla:en- GB:official&rurl=translate.google.co.uk&sl=it&u=http://www.aie.it/Portals/_default/Skede/Allegati/Skeda1 0-94- 2013.6.18/Pillole_2013.pdf%3FIDUNI%3D41ouafy2ithikjmkf1ix2gfp818&usg=ALkJrhjAD7wj1LXKvEawiZCMz z6dtAmsgw 220 Puro Marketing website: La Crisis frena las ventas de tablets en España e Italie, accessed at http://www.puromarketing.com/12/14634/crisis-frena-ventas-tablets-espana-italia.html 221 Ispazia website: In Italia smartphone e tablet Samsung superano le vendite di iPhone e iPad, accessed at http://www.ispazio.net/452091/in-italia-smartphone-e-tablet-samsung-superano-le-vendite-di-iphone-e- ipad 222 Gizmag website: Olivetti announces Italy’s first Android Tablet: the OliPad 100, accessed at http://www.gizmag.com/olivetti-releases-olipad-android-tablet/18095/ 223 .com website: Italian Tablet PC Runs Ubuntu Linux, accessed at https://www.linux.com/news/embedded-mobile/netbooks/296669-italian-tablet-pc-runs-ubuntu-linux

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The growth in the tablet market is expected to continue into 2014 where sales of 2 million devices are expected. The market value over this period will also increase from around €230 million to €260 million224.

Low-end tablets account for the majority of sales in Poland; in the third quarter of 2012 over 50% of all tablets sold were sold for less than €140. Domestic manufacturers such as Mata, GoClever, Pentagram and Lark cumulatively accounted for 36% of the market during this period, Figure A2-5. The success of Polish manufacturers can be attributed to a competitive price at which the products are offered. Indeed, the average retail price of tablets has dropped from €161 in 2013 to €129 in 2014225. The growth of cheaper models can also be attributed to Chinese producers, which provide low-end models to budget retailers such as Biedronka and Carrefour226.

12.1%

Manta 30.1% 9.8% GoClever Prestigio Asus Lenovo 9.5% Pentagram Apple 6.4% Lark 9.2% Others 6.6% 8.1% 8.3%

Figure A2-5: Market share of main tablet manufacturers in Poland from 2011 - 2013

224 PMR, Polish hardware producers sell more tablets and smartphones, 19 December 2013, accessed at http://www.ceeitandtelecom.com/news/201580/polish-hardware-producers-sell-more-tablets-and- smartphones 225 PMR, Polish hardware producers sell more tablets and smartphones, 19 December 2013, accessed at http://www.ceeitandtelecom.com/news/201580/polish-hardware-producers-sell-more-tablets-and- smartphones 226 Low prices drive surge in tablet sales, 21 January 2013, http://www.wbj.pl/article-61616-low-prices-drive- surge-in-tablet-sales.html

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Finland

Sales of tablets have boomed in Finland in recent years; the total installed base in 2013 has been estimated at approximately 885,000 devices, see Table A2-21. Forecasts suggest that by 2016, around 1,570,000 tablet devices will be installed in Finland.

Table A2-21: Installed base of tablets in Finland, 2010-2016 Year Number of Tablets 2010 13,000 2011 143,000 2012 429,000 2013 885,000 (f) 2014 1,237,000 (f) 2015 1,453,000 (f) 2016 1,570,000 (f) Source: Idean (2013) Notes: (f) forecast

According to market research firm Taloustutkimus Oy—Finland, just 5% of people in Finland aged 15 to 79 used a tablet device in 2011 (eMarketer, 2013b). By 2012, this proportion had increased to 12%.

Apple’s iPad remains the most popular tablet in Finland, however, recent forecasts suggest that tablets using the Android OS will surpass the iPad by 2015, see Table A2-22.

Table A2-22: Forecast base of tablets in Finland, 2013-2016 (thousands) Operating System (OS) Year Apple Android Windows 2012 345,000 84,000 - 2013 617,000 258,000 10,000 2014 (f) 732,000 464,000 41,000 2015 (f) 653,000 720,000 80,000 2016 (f) 537,000 914,000 119,000 Source: Idean (2013) Notes: (f) forecast

The average price of a tablet in Finland increased by €100 to €559 in 2013 (Invest in Finland, 2013).

Portugal

In May 2011, IDC reported that the growth in tablet sales from 2010 to 2011 exceeded 800%, increasing from 35,000 to 322,000. This exceptionally high growth was attributed to the delayed release of Apple’s iPad, which did not hit the market until late 2010. Predictions by the Advisor227

227 Computer world website: Vendas de tablets e smartphones “absorvem” queda nos PC, accessed at http://www.computerworld.com.pt/2013/12/06/vendas-de-tablets-e-smartphones-absorvem-queda-nos- pc/

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put sales of tablets in 2013 at 650,000, representing a 79% increase from approximately 360,000 sales in 2012. According to IDC, tablet sales in Portugal were worth €1.3 billion.

Acer was the number one selling manufacturer of tablets in Portugal in the third quarter of 2013, followed by Samsung, Asus and Apple (previously second)228.

Netherlands

In 2012 1.8 million tablets were sold in the Netherlands, double the number sold in 2011229. In a study conducted in 2012, tablet ownership was estimated to be 22% in the second quarter of 2012 in households with inhabitants aged 15 to 65. The number of households has been estimated at 1.4 million with 4% owning more than one tablet. Apple is the market leader with 770,000 iPads sold in the second quarter of 2012, followed by Samsung with 182,000 Galaxy Tabs sold, see Table A2-23.

Table A2-23: Number of tablets sold by manufacturer (2Q 2012)230 Manufacturer Number of tablets sold in the Netherlands Apple 770,000 Samsung 182,000 ,000 Acer 56,000 Asus 54,000 Sony 31,000 Yarvik 29,000 HP 23,000 HTC 18,000 17,000

United States

At the beginning of 2013, it was estimated that there were more than 70 million tablets in the US and more than 50% of the tablet sales in 2013 would occur here231. It has been reported that growth of sales in the fourth quarter of 2013 had slowed down as the US market becomes increasingly saturated232. At the end of 2013 tablets accounted for over 22% of all personal computing device sold in the US233.

228 IDC website: Tablets e Smartphones estimulam a procura de Smart Connected Devices em Portugal, accessed at http://www.idc.pt/press/pr_2013-12-06.jsp 229 henQ Committed capital, Report ABN AMRO: Online software sector sees the Netherlands as the stepping stone to international success, accessed at http://www.henq.nl/2013/06/10/abn-amro-online- softwaresector-ziet-nederland-als-de-springplank-naar-internationaal-succes/ 230 Ibid. 231 Onbile website: Tablet penetration by country, accessed at http://www.onbile.com/info/tablet- penetration-by-country/ 232 Bloomberg Technology: Apple Facing Slowing Tablet Growth as U.S. Market Gets Saturated, accessed at: http://www.bloomberg.com/news/2014-01-29/apple-facing-slowing-tablet-growth-as-u-s-market-gets- saturated.html 233 NPD Group: U.S. Commercial Channel Computing Device Sales Set to End 2013 with Double-Digit Growth, According to NPD, accessed at: https://www.npd.com/wps/portal/npd/us/news/press-releases/u-s- commercial-channel-computing-device-sales-set-to-end-2013-with-double-digit-growth-according-to-npd/

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iGR forecasts US tablet sales to reach approximately 45.3 million by 2016. According to their projections, Apple will sell approximately 27.3 million tablets, while Android-based tablet sales will reach around 13.9 million units234.

Data from Chitika Insights, which measures individual tablet users loading a webpage containing an ad code, can be used as an approximation for the market share of tablets by manufacturer, see Table A2-24.

Table A2-24: Web usage share (%) by tablet manufacturer235 Type Jan 2013 Jan 2014 Android tablet 0.6% 0.2% iPad 0.1% 0.2% Windows tablet 0.4% 0.3% 0.5% 0.3% Acer 0.7% 0.5% Asus 0.8% 0.6% Other 1.0% 0.7% Barnes & Noble 1.1% 1.5% Microsoft 0.4% 1.7% Google 1.7% 1.9% Samsung 3.9% 6.1% Amazon 7.7% 7.7% Apple 81.0% 78.2%

Pew Research Centre’s poll, carried out between 18 July and 20 September 2013, found that ownership of tablets amongst Americans aged 16 and older has grown to 35%236, see Table A2-25.

234 iGR: U.S. Tablet Sales Forecast: 2011-2016, accessed at https://igr- inc.com/Advisory_And_Subscription_Services/Wireless_And_Mobile_Landscape/us_tablet_forecast_2016. asp 235 Chitika Insights: First Quarter 2014 Tablet Update: Major Tablet Brands See Biggest Year-over-Year Gains, accessed at http://cdn2.hubspot.net/hub/239330/file-481676760-pdf/ChitikaInsights-2014- TabletUpdate.pdf 236 Pew Research Center: Tablet and E-reader Ownership Update, accessed at: http://pewinternet.org/~/media//Files/Reports/2013/PIP_Tablets%20and%20e- readers%20update_101813.pdf

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Table A2-25: American adults aged 18 and older who own a tablet (%)237 Date Tablet owners 2010 (May) 3% 2011 (May) 8% 2011 (Dec) 10% 2012 (Nov) 24% 2013 (Sep) 34% 2014 (Jan) 42%

China

Similarly to the rest of the world, in China the penetration of tablets is much lower than smartphones. Tablet users represent 21% percent of the total iOS market and only 4% of the total Android OS market238.

According to a Bloomberg news article dated 21 August 2013, the iPad’s initial dominance is eroding. In 2012, Apple had 49% of the Chinese tablet market, but this was down to 28% by the second quarter of 2013. During this period, Samsung had the second largest market share with 11% and Lenovo was third with 8%. In terms of shipments, Apple’s iPad increased by 28% to 1.48 million units, Samsung’s rose more than fourfold to 571,000 units and Lenovo’s doubled to 413,000239. Local manufacturers such as Ramos and Teclast are gaining market share at the expense of the market leaders.

Only three months later Reuters’ headline reports “Apple is king” in the Chinese tablet market. According to Reuters, in the third quarter of 2013, 2.6 million tablets were sold in China, which is a 62.5% rise compared to the same period in2012. Apple accounted for 71.4% of the 2.6 million sales, while Lenovo was the second largest player with 10.5%. Ereneben, a Chinese manufacturer, ranked third accounting for 3.6% of the sales in the third quarter of 2013240.

Within a quarter the shape of the tablet market changed completely, with sales of Apple’s tablet in China nearly doubled between the second and the third quarter of 2013. In July 2013, Apple settled a long dispute over the iPad trademark name that threatened to ban the device from store shelves

237 A TabTimes executive summary: The State of the Tablet Market, accessed at http://tabtimes.com/resources/the-state-of-the-tablet-market 238 BlueCloud Solutions: Analysis of the Smart Phone and Tablet Market in China, accessed at http://www.bluecloudsolutions.com/articles/analysis-smart-phone-tablet-market-china/ 239 Bloomberg: IPad’s China Market Share Plunges as Domestic Tablet Makers Gain, accessed at http://www.bloomberg.com/news/2013-08-21/apple-ipad-s-china-market-share-slumps-as-samsung- tablets-gain.html 240 Reuters: China's tablet market grows 63 percent in third quarter; Apple is king, accessed at http://www.reuters.com/article/2012/11/28/us-china-tablet-market-idUSBRE8AR04K20121128

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in the country which is a possible reason for this dramatic change to the market241. China’s tablet market is forecast to grow in the future at the CAGR of around 53.81%242.

South Korea

Tablet penetration doubled between 2011 and 2012 in South Korea, although it remained small compared to smartphones. In 2011, 3.1% of the total population were tablet users, which grew to 7.5% by 2012243. Between November 2010 (when official sales started in Korea) and February 2012, Apple sold 1 million iPads in South Korea, 700,000 in 2011 alone. This equates to approximately a 70-80% share of the South Korean tablet market during this period. Since the earliest customers bought iPad before the product was formally available in the country, the real number of iPad owners may be considerably larger. Samsung has gradually increased its market share and as of January 2014, Samsung had a 45% share of the tablet market, while Apple had a 44.3% share244.

Tablet sales peaked in 2011 and have started to gradually decline. This is mostly attributed to the emergence of phablets, which are hugely popular in South Korea. Phablets combine the functionality of tablets and mobile telephones, and are typically slightly smaller than small tablets. Therefore consumers who own a may have no need for a tablet. Unless tablets can incorporate features and functions which make them more akin to a phablet, the trend of decreasing sales is likely to continue further245.

241 Computerworld: Apple's iPad shipments for China nearly double, after trademark dispute, accessed at http://www.computerworld.com/s/article/9233743/Apple_39_s_iPad_shipments_for_China_nearly_doubl e_after_trademark_dispute 242 Research and Markets: China - Tablet PC Market Forecast & Opportunities, 2016, accessed at http://www.reuters.com/article/2012/01/25/idUS13318+25-Jan-2012+BW20120125 243 eMarketer: Smart Device User Penetration Explodes in South Korea, accessed at http://www.emarketer.com/Article/Smart-Device-User-Penetration-Explodes-South-Korea/1009696 244 Digitimes Research: Korea tablet market being impacted by phablet products, accessed at http://www.digitimes.com/news/a20131230PD208.html 245 Digitimes Research: Korea tablet market being impacted by phablet products, accessed at http://www.digitimes.com/news/a20131230PD208.html

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Annex 3 E-readers

Introduction

E-readers, also called electronic readers or e-book readers, are devices for reading electronic written content, such as e-books, newspapers and other documents (Techtarget, nd). Some devices may have additional functionalities but their primary purpose is the reading of electronic documents. This differentiates them from tablets, which can read e-books but primarily serve a range of other purposes, such as web browsing, etc. (The--Reader.Com, nd). Sales

E-readers Available on the EU Market

Table A3-1 below provides an overview of e-readers currently available on the EU market. Please note that some e-readers may be represented more than once as there appear to be several private label manufacturers, and some products may be sold under different brand names in different countries. In addition, re-branding appears to be quite common. For example, Carrefour has recently launched two e-book readers which are rebrands of existing models (Hoffelder, 2013). Another example is provided by the Hanlin e-reader, which has been sold under a number of brand names: Bebook, Walkbook, lBook, Iscriptum, Papyre, EZ Reader, Koobe and ECO Reader (Mobile Read, 2009).

Please also note that the e-reader models currently sold by major manufacturers are, in many cases, not first generation models but rather the second or third generation of e-reading devices.

Table A3-1: E-readers Available on the EU Market Manufacturer Model(s) Price Aluratek Libre Pro, Libre Colour €60-65 Kindle (Kindle 2, Kindle 3, Kindle Amazon Touch, Kindle Fire, Kindle €60-300246 Paperwhite, etc.) Archos Arnova GBook247 €50 Nook, , Nook Barnes & Noble €70-120 Colour, Nook Glowlight Binatone ReadMe Classic, Daily, Colour €30-35 Bookeen Odyssey, Cybook Orizon €140-205 BQ Cervantes Touch (&Light) €110-130248 eXceL, Omnia, essence, Illumina, e- DistriRead b.v. / ICARUS €60-385 ink ECTACO Jetbook (Monochrome, Colour) €455-480

246 Price data from a large number of sources. 247 This is a cross-over between a tablet and an e-book reader. Android authority, Cheap Archos Arnova Gbook unveiled. Does it combine the best of a tablet with the best of an e-reader?, accessed, http://www.androidauthority.com/archos-arnova-gbook-price-specs-features-119934/ 248 Bq, E-readers, accessed, http://www.bqreaders.com/gb/ereaders-ebooks.html

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Table A3-1: E-readers Available on the EU Market Manufacturer Model(s) Price Eelo EBook Reader €65 Elonex 705eb €70 Energy Sistem Energy €65-70 Iriver Story (&HD) €235249 Arc (several models), Aura (several Kobo €55-470 models), Glo, Mini Kolporter Info SA E-Clicto €120250 (several models) €145-385 Pro (several models), Touch €95-285 (several models), Basic, Color Lux, Pocketbook International etc. Reader (PRS-350, PRS-T1, PRS-T2, €85-165 Sony PRS-T3) Hanlin (but rebranded and sold Older model: €70 under other names, e.g. Tianjin Jinke Electronics Bebook251) Papyrus (several models), E-book €49252-150 TrekStor Reader 30.0, Liro Color Txtr Beagle €59 (€10 if subsidised)253 Wexler254 Flex One255, Book (several models) €unknown Note: Unless indicated otherwise, information on prices sourced from www.amazon.co.uk

The table above shows that at least 22 companies currently offer e-readers in the EU, with most companies offering more than one model. Unsubsidised prices range from around €30 to around €480.

Size of the Market

The market for e-readers has undergone rapid growth over the past five or six years but the increasing competition from tablet computers has recently started eroding its market share. The reasons for this include the shrinking price and size of tablets as well as a limited demand for new

249 Rakuten play.com, iRiver story ebook e-reader, 04/12/2009, accessed: http://www.play.com/Electronics/Electronics/4-/13007635/600315869/- /ListingDetails.html?_%24ja=tsid:13315%7Ccat:13007635%7Cprd:13007635&$$ja=cgid:7111954377|tsid:4 8121|cid:130773177|lid:54119194617|nw:g|crid:22715959617|rnd:16892315331544367025|dvc:c|adp:1 o1|mt: 250 eClicto, e-booki, audiobooki, accessed, http://www.eclicto.pl/0,123,URZADZENIA-MOBILNE.html 251 Wikipedia, Hanlin eReader, accessed: http://en.wikipedia.org/wiki/Hanlin_eReader 252 The digital reader, Txtr Beagle now on sale, 09/07/2013, accessed: http://www.the-digital- reader.com/2013/07/09/txtr-beagle-is-now-on-sale-e19-99/ 253 Gigaom, Txtr’s e-reader now on sale in Europe for €59; company says its close to a subsidized deal, accessed: http://gigaom.com/2013/04/24/txtrs-e-reader-goes-on-sale-in-europe-but-hasnt-found-mobile- carriers-to-subsidize-it-yet/ 254 There are indications that Wexler products were sold in the EU but it has not been possible to confirm this. 255 Whilst the Flex One is still listed among Wexler’s products on their website. However, it appears that Flex One has been discontinued. Goodreader, Wexler Flex One discontinued, 7th March, accessed, http://goodereader.com/blog/electronic-readers/wexler-flex-one-discontinued

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products from existing e-reader owners (Bensinger, 2013). Table A3-2 and Figure A3-1 show global e-reader shipments between 2010 and 2015.

Table A3-2: Worldwide E-reader Shipments (million units) Research & Markets Year IHS iSuppli Research IDC (2011) 2010 10 2011 23.3 27.7 (26.4*) - 2012 14.9 19.9 (18.2*) - 2013 11 - - 2014 8.7 - 50 2015 7.8 - - Sources: Bensinger (2013); *IDC(2013), Research & Markets (2011)

Figure A3-1: Worldwide E-reader Shipments from 2010 to 2015, million units (Source: Bensinger, 2013)

Looking at the above, it appears that the e-reader market has peaked in 2011 and it is expected to decline over the medium term. For example, IDC (2013) expects a modest growth of e-reader shipments in 2013 and 2014, before embarking on a “gradual and permanent decline” starting in 2015. On the other hand, Research & Markets forecasted in 2011 that global e-reader sales would reach 50 million units by 2014, representing revenues of over €4.5 billion. It was further expected that the European share in the e-reader market would grow from 2% in 2010 to 16% in 2014, amounting to 8 million units/€700 million. However, this estimate was published in 2011 when e- reader sales were booming, thus encouraging optimistic forecasts.

However, as noted by Bensinger (2013), dedicated e-readers enjoy some advantages over competing devices. On average, they are lighter than tablets and use display technologies that give them a longer battery life, meaning that consumers do not have to charge them as often as tablets. For example, Bensinger (2013) notes that Nook Simple Touch can last up to two months between battery charges, compared with ten hours’ reading time of the Nook HD tablet. In addition, e- readers may be cheaper than tablets.

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Interestingly, e-reader sales are affected by other factors, including the availability of titles to purchase in electronic format (this is said to depend on publishers), consumer preference for hard copy books (e.g. in Germany), etc. (Enders Analysis, 2012). The availability of e-books may be a significant market determinant as (unlike tablets which are capable of running the software required to read books provided by different platforms), e-readers can only access books provided by the relevant platform, thus meaning that consumers must stick to one provider of e-books (Enders Analysis, 2012; McNamee, 2013). In this respect, it is of interest that O’Grady (2013) reports that Europe is expected to become the largest e-book market in the world by 2017. It can therefore be argued that there is a certain degree of correlation between total e-book and e-reader sales as, quite simply, the bigger the e-reader stock, the greater the sales of e-books (Enders Analysis, 2012). Where data on the sales of e-readers are not available, it may therefore be possible to use data on the sales of e-books as a proxy for the size of the e-reader market. However, it is important to bear in mind that this is an imperfect proxy as e-books can also be read on PCs/laptops, smartphones and tablets (Perfect Reader, 2012). Charging Requirements

Ports used by e-readers for charging are summarised in the table below. Table A3-3 shows that virtually all rechargeable e-readers use USB ports for charging. Approximately one half of e-reader manufacturers rely on Micro-USB, 40% use Mini-USB, and at least one manufacturer uses full-size USB. One e-reader (Txtr Beagle) uses disposable batteries and does not allow for in-device recharging.

Table A3-3: E-Readers Available on the Market (Charging Ports) Manufacturer Model(s) Charging Port Aluratek Libre Pro, Libre Colour Mini-USB256 Kindle (Kindle 2, Kindle 3, Kindle Amazon Touch, Kindle Fire, Kindle Micro-USB Paperwhite, etc.) Archos Arnova GBook Micro-USB257. Micro-USB but Nook Colour uses Nook, Nook Simple Touch, Nook Barnes & Noble special connector for faster Colour, Nook Glowlight charging258 Binatone ReadMe Classic, Daily, Colour Mini-USB259

256 AEBKO1FS Libre Pro instruction manual, accessed, http://aluratek.com/media/uploads/AEBK01FS- AEBK01WFS_Manual.pdf and YouTube, Aluratek Libre eBook Reader Pro, 18/11/2009, accessed, http://www.youtube.com/watch?v=e2WoVRsap9Q and Aluratek, accessed, http://aluratek.com/libre- color-ebook-reader-with-7-color-lcd 257 A search was conducted on ebay, accessed, http://www.ebay.co.uk/ 258 Barnes & Noble, Nook Colour charger uses special micro-USB connection, 03/07/2011, accessed, http://bookclubs.barnesandnoble.com/t5/NOOK-Talk/Nook-Color-charger-uses-special-micro-USB- connector/td-p/1093812, Barnes & Noble, Barnes and Noble NOOK Micro USB Charging Cable, accessed, http://www.barnesandnoble.com/p/barnes-and-noble-nook-micro-usb-charging-cable-includes-cleaning- blower-brush/1107907726 259 Binatone, accessed, http://www.binatonetelecom.com/binaries/content/assets/binatone/products/ebook- readers/readme-colour/binatone-readme-colour.pdf, http://www.binatonetelecom.com/binaries/content/assets/binatone/products/ebook-readers/readme- daily/pdf/ebook_readme_daily_en_100906.pdf, Amazon, accessed, http://www.amazon.co.uk/BINATONE- READER-CLASSIC-EREADER-CHARGER/dp/B00B4JAP8S, Binatone, accessed,

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Table A3-3: E-Readers Available on the Market (Charging Ports) Manufacturer Model(s) Charging Port Bookeen Cybook Odyssey, Cybook Orizon Micro-USB260 BQ Cervantes Touch (&Light) Micro-USB261 eXceL, Omnia, essence, Illumina, e- DistriRead b.v. / ICARUS Mini-USB262 ink ECTACO Jetbook (Monochrome, Colour) Mini-USB263 Eelo EBook Reader Full-size USB Elonex 705eb Mini-USB264 Energy Sistem Energy Mini-USB265 Iriver Story (&HD) Mini-USB266 Arc (several models), Aura (several Kobo Micro-USB267 models), Glo, Mini

http://www.binatonetelecom.com/binaries/content/assets/binatone/products/ebook-readers/readme- classic/ebook-readme_classic_en_100827.pdf, The accessory vault, accessed, http://theaccessoryvault.com/index.php/ereader-tablet/binatone-1/readme-classic/uk-3-pin-mains-house- charger.html 260 Amazon, Car Charger in Vehicle Cable Lead for Micro USB Bookeen E-Readers accessed, http://www.amazon.co.uk/Charger-Vehicle-E-Readers-Description- Compatible/dp/B004NZZOV8/ref=sr_1_3?ie=UTF8&qid=1383730233&sr=8-3&keywords=bokeen, Amazon, Bookeen ODYSSEY Edition 2013 eBook, accessed, http://www.amazon.co.uk/Bookeen-ODYSSEY-Edition- 2013-eBook/dp/B00AP0DGCE/ref=sr_1_5?ie=UTF8&qid=1383730863&sr=8-5&keywords=bookeen+cybook 261 Cervantes Touch Manual, accessed, http://static-bqreaders.s3.amazonaws.com/file/Cervantes- touch/Manual_Cervantes_Touch.pdf, Cervantes Touch Light Manual, accessed, http://static- bqreaders.s3.amazonaws.com/file/Cervantes-touch-light/Manual_Cervantes_Touch_Light_4.1.3.pdf 262 Icarus Excel 9-7 inch e-Reader, 02/10/2012, accessed, http://www.youtube.com/watch?v=2WOLuP6Y2kI, Icarus essence Manual, accessed, http://www.totalereaders.com/icarus/files/E602BK_Man_ICARUS_essence_user_manual_English.pdf, Icarus Illumina HD eReader, 3rd October, accessed, http://goodereader.com/blog/electronic- readers/review-of-the-icarus-illumina-hd-ereader 263 ECTACO jetBook user manual, accessed, http://images.jetbook.net/manual/jetBook_manual_Eng.pdf 264 Amazon, Elonex 705eb 7’ ultra slim colour Ebook (reader), accessed, http://www.amazon.co.uk/Elonex- 705eb-Ultra-Colour-Reader/dp/0857571923/ref=sr_1_2?s=electronics&ie=UTF8&qid=1383912988&sr=1- 2&keywords=elonex+reader 265 Energy Sistem Manual, accessed, http://storage.energysistem.com/archivos/documentacion_adicional/eocohoofhibb.pdf, http://storage.energysistem.com/archivos/documentacion_adicional/llpegdkcmiol_UserManualColorBook 2074EN.pdf, Amazon, Ebook Reader EnergyTM colour eReader, C7 and Touch titanium Grey, accessed, http://www.amazon.co.uk/EnergyTM-Color-C7-Touch- Titanium/dp/B0087DX0NQ/ref=sr_1_21?s=electronics&ie=UTF8&qid=1383739835&sr=1- 21&keywords=energy+sistem, Amazon, Energy Sistem® Libro Electrónico EnergyTM Color eReader C8+ Touch Titanium Grey, accessed, http://www.amazon.co.uk/Energy-Electr%C3%B3nico-Color-C8- Touch/dp/B0089WEBLU/ref=sr_1_8?s=electronics&ie=UTF8&qid=1383739978&sr=1- 8&keywords=energy+sistem 266 GoodEReader, Full review of the iRiver story HD eReader, 29 July, accessed, http://goodereader.com/blog/electronic-readers/full-review-of-the-iriver-story-hd-e-reader, Trusted reviews, iRiver Story eBook Reader review, accessed, http://www.trustedreviews.com/iRiver-Story-eBook- Reader_Peripheral_review 267 Tech radar, Good value, fast working 7-inch Android tablet with apps, 04/07/2013, accessed, http://www.techradar.com/reviews/gadgets/portable-video/portable-media-players-recorders/kobo-arc- 1094905/review, Kobo, accessed, http://www.kobo.com/

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Table A3-3: E-Readers Available on the Market (Charging Ports) Manufacturer Model(s) Charging Port Kolporter Info SA E-Clicto Mini-USB268 Onyx Boox (several models) Mini-USB269 Pro (several models), Touch Micro-USB270 (several models), Basic, Color Lux, Pocketbook International etc. Reader (PRS-350, PRS-T1, PRS-T2, Micro-USB271 Sony PRS-T3) Hanlin (but rebranded and sold Newer Bebook models (Touch, under other names, e.g. Pure) appear to use Micro-USB Tianjin Jinke Electronics Bebook272) Papyrus (several models), E-book Micro-USB273 TrekStor Reader 30.0, Liro Color Beagle NOT RECHARGEABLE, USES Txtr DISPOSABLE BATERIES274 Flex One275, Book (several models) Most models use Micro-USB for charging (it is not clear whether T7206 uses Micro-USB or full-size Wexler USB)276

Overall, e-readers tend to have a relatively long battery life which means that charging is infrequent, with many e-readers lasting up to eight weeks between charges (E-book Reader, nd). Manufacturers appear to be routinely supplying mains chargers or at least USB cables with their products, and it is therefore assumed that most e-readers are not supplied without a cable/charger. In this respect, it is of interest that the cost of a replacement USB – Micro-USB cable appears to be lower than the

268 Boox i62A Manual, Version 1.7, accessed, https://onyx-boox.com/wp-content/uploads/2013/05/onyx- boox-i62-manual1.pdf, Boox i62 Manual, version 1.6, accessed, https://onyx-boox.com/wp- content/uploads/2013/05/onyx-boox-i62ML-manual.pdf, Boox M92 Manual, Version 1.6, accessed, https://onyx-boox.com/wp-content/uploads/2013/05/onyx-boox-m92-manual.pdf 269 ZoeBlogShop, Introducing a tablet/eReader Hybrid – Onyx Boox eReader!, accessed at http://zoeblogshop.wordpress.com/2013/09/11/introducing-a-tabletereader-hybrid-onyx-boox-ereader/ 270 ZoeBlogShop, Introducing a tablet/eReader Hybrid – Onyx Boox eReader!, accessed, http://www.pocketbook-int.com/us/products, PocketBook, Colour Lux Manual, accessed, http://download.pocketbook-int.com/801/User_Guide_PocketBook_Color%20Lux_EN_.pdf, PocketBook, mini, Manual, accessed, http://download.pocketbook- int.com/515/ug/ww/User_Guide_PocketBook_515_ww(EN).pdf 271 Amazon, Micro USB Mains Charger For Sony Ebook PRS-350 PRS-650 Reader PRS-T1, accessed, http://www.amazon.co.uk/Charger-PRS-350-PRS-650-Reader-E-READER/dp/B0057PKRLA, Sony Digital Book Reader, Manual, accessed, http://pdf.crse.com/manuals/4470508411.pdf, E-reader, PRS-T2 Manual, https://docs.sony.com/release/PRST2.pdf 272 Wikipedia, Hanlin eReader, accessed, http://en.wikipedia.org/wiki/Hanlin_eReader 273 Trekstor, Ebook Reader, accessed, http://www.trekstor.co.uk/ebook-reader-en.html 274 GoodEReader, Txtr Beagle review, accessed, http://goodereader.com/blog/electronic-readers/txtr-beagle- review 275 Whilst the Flex One is still listed among Wexler’s products on their website. However, it appears that Flex One has been discontinued. Goodreader, Wexler Flex One discontinued, 7th March, accessed, http://goodereader.com/blog/electronic-readers/wexler-flex-one-discontinued 276 Wexler, accessed, http://wexler-global.com/products/79

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cost of a mains charger277 and it is therefore assumed that manufacturers can accrue cost savings by supplying a USB cable only. A preliminary analysis of a sample of replacement chargers sold on http://www.amazon.co.uk suggests prices of about €6 to €11. This suggests that manufacturers of cheaper e-readers may potentially accrue benefits from not supplying chargers with their products. In addition, considering that consumers only charge their e-readers every few weeks or even less frequently, it is reasonable to assume that consumers wouldn’t mind using their phone charger to charge their e-book reader. Structure of the Sector

Companies currently active in the e-book market, as well as those that have recently withdrawn from this market, are given in Table A3-4 below. 22 manufacturers that sell their products in the EU have been identified; approximately one half of these are headquartered in the EU. In addition, several companies have been identified that have withdrawn from the market since 2008.

Table A3-4: E-Reader Companies Currently active? Active in the past? (Year Company Country (HQ) Ceased Activity) Aluratek US Yes Amazon US Yes Archos FR Yes Barnes & Noble US Yes Binatone HK/UK Yes Bookeen FR Yes BQ ES Yes DistriRead b.v. / ICARUS NL Yes ECTACO (JetBook) US Yes Eelo UK Yes Elonex UK Yes Energy Sistem ES Yes iRex NL No Yes (2010 - iLiad)278 Iriver KR Yes Kobo CA Yes Kolporter Info SA PL Yes Mobiwire (Sagem FR No Yes (2011279 – Binder) OnyxWireless) CN Yes Pocketbook CH Yes SonyInternational JP Yes Tianjin Jinke Electronics CN Yes TrekStorCo. GmbH & Co. DE Yes txtrKG GmbH DE Yes

277 See, for example: http://www.amazon.co.uk/s/ref=nb_sb_noss?url=search-alias%3Daps&field- keywords=bokeen 278 Brafado (2010) 279 Enders Analysis (2012)

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Table A3-4: E-Reader Companies Currently active? Active in the past? (Year Company Country (HQ) Ceased Activity) Wexler US/RU Yes

Market Trends

As noted above, the market for e-readers may be past its peak and is expected to decline, mainly due to the increasing market shares of tablets and smartphones.

The most popular method of charging e-readers is via Micro-USB. However, it is difficult to determine whether this can in any way be attributed to the MoU. Companies active in this sector tend not to produce mobile phones and they continue to supply chargers or at least USB cables with their devices. Determining the relative impacts of endogenous market developments and those stemming from the MoU depends on subjective judgements. For example, iRex’s iLiad was seen as a casualty of the introduction of the iPad in 2010 (Brafado, 2010) and it is reasonable to assume that other market changes in the period after the adoption of the MoU would also have happened in the absence of the MoU. E-reader Sample

An extensive sample of e-readers was created which included 125 models from 29 manufacturers and covered eReader models released onto the market from 2009 to 2014. The sample recorded the release date (year) of the model and the particular charging connector used (Micro-USB, Mini- USB, proprietary or other). Data from the sample is presented in Table A3-5 below. It illustrates that e-readers have increasingly used the Micro-USB connector on models released from 2009 to 2013. The Table clearly shows that Mini-USB was the most common charging and data transfer connector used in specific eReader models released in 2009, 2010, and also in 2011, with over 50% of models released in these years using Mini-USB. However, the use of Micro-USB in eReader models increased steadily from 2009 to 2012, where it was present in 64% of models released. When looking specifically at models released in 2013 from the sample, it is estimated that as many as 96% of models released to the market were equipped with the Micro-USB connector and were, therefore, MoU compliant.

Table A3-5: MoU Compliant E-Reader Models 2009-2013 Year Micro-USB Mini-USB Other 2009 14% 57% 29% 2010 38% 54% 8% 2011 45% 55% 0% 2012 64% 31% 5% 2013 96% 4% 0%

Use of the Mini-USB connector decreased from 2011 when it accounted for half of eReader models released to the market. Indeed, in 2011, Micro-USB and Mini-USB each accounted for approximately half of the models released to the market. After 2011, use of the Mini-USB connector on eReader models decreased while the Micro-USB began to be used more commonly on models released, as illustrated in the Figure overleaf.

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Figure A3-2: Use of Micro-USB and Mini-USB connectors on eReader Models 2009-2013

Case Studies

As noted above, e-book sales can, to a certain extent, be used as a proxy for the e-reader market. In this respect, it is of interest that Enders Analysis (2012) notes that eBook sales represent 31% in USA and 15% in UK vs 2% in Germany, 3% in France or 0,5% in Spain (quoted in CreamBooks, 2012).

Finland

In a recent Finnish survey, 3.4% of people said they owned an e-reader (Bookboon, 2013).

France

Wischenbart (2012) cites a study by GfK which predicted that e-book sales in France were to grow by 80% in 2012, with the main driver of this increase being the sales of reading devices, with sales of e- ink readers up from 145,000 in 2011 to 300,000 in 2012, and sales of tablets reaching three million in 2012, up from one million in 2011. Wischenbart (2012) further notes that the end of 2011 saw the launch of Amazon’s French and the expansion of Kobo into the French market. Hoffelder (2013) notes that Carrefour has recently entered the e-book market in France and is selling an e-reader device under its own brand name (NolimBook)280. The French e-book market is dominated by Amazon, Kobo and Apple, which together account for 85% of the market.

Italy

According to the Italian publishers’ association AIE, as of the end of 2011, Italy had an installed base of 533,000 e-readers and 858,000 tablet devices (Editoria Italiana, 2012 cited in Wischenbart, 2013). In terms of reading devices, Italian readers greatly prefer tablet computers over dedicated e-readers,

280 This is said to be a rebranded device designed by Bookeen, The Digital Reader, Carrefour Launches Nolim eBookstore, Nolimbook eReader in France, 11/10/2013, accessed, http://www.the-digital- reader.com/2013/10/11/carrefour-launches-nolim-ebookstore-ereader-france/#.UycY3oXamUk

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which may add momentum to e-book evolution, as all major players (e.g. Amazon, Apple, Google) roll out new, cheaper devices (Editoria Italiana (2012), cited in Wischenbart, 2013).

Portugal

It is likely that there was a decline in the number of e-readers sold in Portugal in 2013 following a dramatic increase in sales over previous years. There is indicative evidence that there is a relatively low penetration from one of the leading online shops. Within the Romance category, there are over 12,000 titles available compared with only 700 e-reader titles (i.e. just over 5%)281.

Spain

Wischenbart (2012) noted that in 2011 e-readers (particularly those of local retail chains Casa del Libro and Fnac) and tablets enjoyed more or less equal market shares. There were approximately 5 million e-readers in Spain (at the end of 2012) – which includes dedicated e-reader devices as well as other devices (e.g. tablets offering e-book capabilities) (Libertad Digital, 2011).

The e-reader is a well-developed product in Spain, indeed the average price has reduced from €281 during the Christmas period of 2009 to €134 in 2011 (Pemán, 2012). Spain is the second country in Europe (after the United Kingdom) which has sold the most e-readers, with 335,000 sold in 2011 (120% higher than the previous year) (Pemán, 2012). According to a study by Teléfonica (2010/11), 2.2% of middle-high class households have an e-reader compared to 0.6% of low-middle households. The sales in 2012 are estimated at around 800,000, with an increase of more than 100%.

Table A3-6: Sales of E-Book Readers in Spain 2008-2012 Year Sales E-Readers Sales E-Books (units) 2009 100,000? n/d 2010 n/d n/d 2011 280,000/335,000 190,000 2012 800,000 Sources: 2009 – Baquia, La venta de e-books creció un 500% en España en 2009, 14/01/2009, accesed, http://www.baquia.com/posts/la-venta-de-e-books-crecio-un-500-en-espana-en-2009 2011 – Libertad Digital Internet, En España no se vende ni un libro electrónico por cada , 24/11/2011, accessed, http://www.libertaddigital.com/internet/2011-11-24/en-espana-no-se-vende-ni-un-libro- electronico-por-cada-lector-1276442387/ 2012 – Actualidad permanente, Las ventas de e-readers superan las de e-books en España, 08/01/2013, http://actualidadpermanente.wordpress.com/2013/01/08/las-ventas-de-e-readers-superan-las-de-e-books- en-espana/

The vast majority of consumers in Spain will choose either the Amazon Kindle or the , although other choices include the Tagus from Casa del Libro and Fnac e-book. The Amazon Kindle basic is the most competitively priced tablet (€79). However, there are a number of more advanced models such as Kindle PaperWhite (€129), Kindle PaperWhite 3G (€189) and Kindle 3G (€79). Kindle Fire is a direct competitor of the Apple iPad.

281 Ler , O fim do crescimento do mercado de ebooks?, 0602/2014, accessed, https://lerebooks.wordpress.com/tag/mercado-de-ebooks/

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The Sony Reader has a range of price points which helps broaden the number of potential consumers (PRS-T1 (€160), PRS-650 Touch Edition (€209) and PRS-350 Pocket Edition (€149)).

Slovakia

The Slovak Association of Electronic Commerce Market reported that sales of e-readers grew by around one-third in 2012, compared to 2011 figures. Moreover, the market is not yet saturated and sales will continue to increase over the coming years. Of course, growth is likely to be limited as sales of e-readers are not driven by consumer trends or innovations to the same extent as in the smartphone, tablet and laptop markets. However, colour screens and a decline in prices may further encourage sales282.

United Kingdom

Wischenbart (2012) notes that in 2012 dedicated e-readers still held a significant market share, with one-third of UK residents having a dedicated e-reader. Furthermore, in early 2012, 40% of e-book readers owned a Kindle while 12% read books on a tablet (Wischenbart, 2012).

United States

The US used to be the largest e-reader market. According to the IDC, in 2010 the US represented 72.4% of the global e-reader shipments, which added up to 10.8 million units283.

A study carried out by PwC estimated that “around 30 percent of adults had at least one portable reading device [an e-reader or tablet] in the first quarter of 2012” (Hazard Owen, 2012).

Table A3-7: E-reader ownership in the United States in 2012, by device type284 Device Share Kindle 62% Nook 22% Sony Reader 2% Pandigital 2% Kobo Reader 1% Other 3% Don’t know 9%

Pew Research Center’s poll, carried out between 18 July and 20 September 2013, finds that the ratio of Americans aged 16 and older who own e-reading devices like Kindles and Nooks has risen to

282 Ekonomika, Predaj čítačiek elektronických kníh vlani stúpol asi o tretinu, accessed, http://ekonomika.sme.sk/c/6720369/predaj-citaciek-elektronickych-knih-vlani-stupol-asi-o-tretinu 283 IDC: Worldwide Quarterly Media Tablet and eReader Tracker Makes Its Debut, Projects Nearly 17 Million Media Tablets Shipped Worldwide in 2010, accessed at http://www.idc.com/about/viewpressrelease.jsp?containerId=prUS22660011§ionId=null&elementId= null&pageType=SYNOPSIS 284 Statista website: What kind of e-readinfg device do you own?, accessed at http://www.statista.com/statistics/223101/e-reader-ownership-in-the-us-by-device-type/

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24%285. In 2013, more people who read e-books owned an Amazon Kindle dedicated e-reader than an iPad or other tablets; however, this may change as more people buy tablets than e-readers286.

Figure A3-3: Market share of E-reader by manufacturer

While e-book sales are growing, e-reader sales are decreasing. According to a Pew Research Center report, 23% of Americans read e-books in 2012, compared with 16% in 2011.287 In contrast, according to Forrester Research in the United States, manufacturers sold 9 million e-book readers in 2012, down from 15.5 million in 2011. The forecast for 2014 is that the number of units sold will drop to 5.3 million and sales numbers are expected to keep falling. With lower and lower tablet prices, the price gap between e-readers and tablets are shrinking, and due to the additional functions of a tablet, the average consumer is likely to go for the latter. This is likely to be the primary reason behind the drop in e-reader sales288.

China

According to data from the 3rd quarter of 2011, there are two big players in the Chinese e-reader market: Hanvon Technology with a market share of 59.6% and SNDA Bambook with a considerably lower 19.6% share. The market shares of the next 9 biggest competitors vary between 2.3% and 0.4%. While the e-reader market flourished world-wide, it stagnated in China. Indeed, in the first

285 Pew Research Center: Tablet and E-reader Ownership Update, accessed at: http://pewinternet.org/~/media//Files/Reports/2013/PIP_Tablets%20and%20e- readers%20update_101813.pdf 286 Forbes: Kindle Most Popular Device For Ebooks, Beating Out iPad; Tablets On The Rise, accessed at http://www.forbes.com/sites/jeremygreenfield/2013/10/30/kindle-most-popular-device-for-ebooks- beating-out-ipad-tablets-on-the-rise/ 287 The Wall Street Journal: The E-Reader Revolution: Over Just as It Has Begun?, accessed at http://online.wsj.com/news/articles/SB10001424127887323874204578219834160573010 288 E-Reader Market Shrinks Faster Than Many Predicted, accessed at http://bits.blogs.nytimes.com/2012/12/20/e-book-reader-tablets- cannibalized/?_php=true&_type=blogs&_r=0

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quarter of 2010, 243,800 devices have been sold, with sales peaking within the 4th quarter of 2010 with 317,800 units. However, by the 3rd quarter of 2011, this number had fallen to 295,200289.

In June 2013, the Kindle was released for sale, becoming the first non-Chinese e-reader offered in China290 . Amazon, the supplier of Kindle, failed to attract additional business (content sales are a key part of Amazon’s business model) in China as Chinese consumers are not accustomed to paying for e-books. Moreover, there were also Chinese competitors selling e-readers cheaper than Kindle, with pre-loaded, rights-free Chinese classics. It would seem that Amazon cannot successfully compete with these market players291. Indeed, content availability is a key feature that defines the e-reader market, with Chinese consumers favouring local products. For example, there are around 25,000 Chinese-language e-books available to Kindle readers while local e-book developers such as Dangdang offer a total of 100,000 e-books292.

A further issue is that many of the consumers find smartphones adequate for reading electronic content293. This is likely to be the reason why dedicated e-readers that are so popular in the western world did not became so popular in China. Since smartphones and tablets are expected to reach more and more Chinese customers, the future of the e-book reader market is not promising294.

South Korea

Korea has one of the highest ratios of e-book sales over paper book sales295.

E-books only started to become popular in 2011. Whereas in other countries people started reading e-books on e-readers, with consumers migrating to tablets and smartphones, in Korea the e-reader phase has been leapfrogged, and people started reading e-books straight on their tablets and smartphones296.

Smartphones are the most popular reading devices in South Korea. In the e-reader market, Kyobo is the major player with 15% market share297.

In November 2011, South Korean manufacturer Kyobo came out with Mirasol screen, which is a different technology than e-ink and allows colour display without emitting light. Although the

289 China E-Reader Sales Down Thanks To Lack Of Content, accessed at http://paidcontent.org/2011/12/16/419-china-e-reader-sales-down-thanks-to-lack-of-content/ 290 Global Times: Kindle e-readers on sale in China market, accessed at http://www.globaltimes.cn/content/787694.shtml#.UvpPzLQeqZR 291 USA Today: Amazon faces hurdles in Chinese e-reader market, accessed at http://www.usatoday.com/story/tech/2013/06/11/amazon-china-kindle-yahoo-tmall/2411259/ 292 Global Times: Kindle e-readers on sale in China market, accessed at http://www.globaltimes.cn/content/787694.shtml#.UvpPzLQeqZR 293 USA Today: Amazon faces hurdles in Chinese e-reader market, accessed at http://www.usatoday.com/story/tech/2013/06/11/amazon-china-kindle-yahoo-tmall/2411259/ 294 E-books: Black, White and E-read All Over, accessed at http://knowledge.ckgsb.edu.cn/2014/01/29/technology/e-books-black-white-and-e-read-all-over/ 295 Melville House: South Korean bookseller sets new standard for rock-bottom ebook prices, accessed at http://www.mhpbooks.com/south-korean-bookseller-sets-new-standard-for-rock-bottom-ebook-prices/ 296 The Hankyoreh: E-book craze hits S.Korea, accessed at http://www.hani.co.kr/arti/english_edition/e_national/478936.html 297 The Digital Reader: Bowker – Amazon Dominates the World eBook Market, accessed at http://www.the- digital-reader.com/2012/03/20/bowker-amazon-dominates-the-world-ebook-market/#.Uwy4A4UeqZQ

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technology received attention at the time of release, the 70% price reduction within a year suggests that it has failed to gain popularity298.

298 The Digital Reader: Kyobo Mirasol eReader Now on Clearance – 71% Off, accessed at http://www.the- digital-reader.com/2012/07/06/kyobo-mirasol-ereader-now-on-clearance-71-off/#.UwzLnYUeqZQ

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Annex 4 Laptops (Including Netbooks)

Introduction

This section of the report provides an overview of the market for laptops, which includes netbooks. Whilst netbooks belong to the larger family of laptops, for the purpose of this study a distinction is made between them and larger laptops. Netbooks can be defined as “small, light, low-power299 notebook computers that have less processing power than a full-size laptop” (Techtarget, nd). Some analyst sources use terms such as “sub-notebooks” or “mini notebooks”, which appear to be similar in their specifications to netbooks. A more recent type of laptop is the “Ultrabook” (based on ’s brand name), which is a high-end sub-notebook designed to be less bulky than full-size laptops while still providing a high level of performance and battery life. All other laptops are referred to as “notebooks”, ‘full-size” or “large” laptops. References to ‘laptops’ in this study are to be construed as covering both netbooks and all other laptops.

In the absence of concrete definitions it can be difficult to determine the thresholds which distinguish netbooks and other laptops. For example, given their smaller size, it would be reasonable to assume that the chargers of netbooks have a lower output. However this is not necessarily the case, a charger for an Advent 4211C netbook can charge at up to 65W300 while a charger for a Samsung NP-R519 full-size laptop operates at 60W301.

Please note that this section of the report is not concerned with markets for tablets or tablet-like hybrid devices (i.e. tablets with a detachable keyboard); these are considered elsewhere in this report. Sales

Worldwide

Laptop sales have begun to suffer due to the increased popularity of tablet computers. According to Gothard (2013), “netbooks suffered from slow processing performance, low battery life, a tiny keyboard and the lack of an operating system that truly suited them – Windows reduced battery life exponentially and tailored, power-saving Linux builds proved under-featured.” McAllister (2012) notes that whilst netbooks had low-end specs they initially enjoyed a price advantage over larger laptops but lost this advantage as the prices of larger laptops declined. At the same time, demand for devices for web browsing became increasingly focused on tablets. This resulted in the netbook market dwindling and most major manufacturers ceasing production.

299 Netbooks used low-power Intel processors (McAllister, 2012). 300 Amazon, For advent 4213, 4214, 4211C Netbook charger AC adapter, accessed, http://www.amazon.co.uk/ADVENT-4211C-NETBOOK-CHARGER- ADAPTER/dp/B003T0ALEI/ref=tag_stp_s2_edpp_url 301 Amazon, SAMSUNG NP-R519 AD-6019R LAPTOP CHARGER AC ADAPTER 19V 3.15A 60W, accessed, http://www.amazon.co.uk/SAMSUNG-NP-R519-AD-6019R-CHARGER- INCLUDES/dp/B005Q9PSIO/ref=sr_1_1?s=computers&ie=UTF8&qid=1389353021&sr=1- 1&keywords=samsung+laptop+charger

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In the first quarter of 2010, over nine million netbooks were sold globally but in the last quarter of 2011, sales plummeted to 6.5 million netbooks (Gothard, 2013). Additionally, in 2010 Morgan Stanley estimated annual sales of 42.7 million netbooks until 2012 but subsequently cut this estimate to 36 million units in response to the launch of the iPad (Gothard, 2013).

In 2011, global laptop shipments were expected to reach 211 million units, with this being a 10% increase on 2010 (Smith, 2011b). Protalinski (2013b) provides data for global notebook sales, which reached 234 million units in 2012 and projected sales of 205.6 million units in 2013 and 171.9 million units in 2017 (). This appears to be supported by a sharp decline in laptop shipments in mid-2013, with laptop shipments in Q2 of 2013 decreasing by almost 14% (Protalinski, 2013). Table A4-1 provides an overview of actual and expected shipments of all laptops and netbooks on a global scale between 2008 and 2017.

Table A4-1: Global Shipments of Laptops and Netbooks Netbook shipments (million Year Laptop shipments (million units) units) 2008 - - 2009 - - 2010 189.9 36.0 2011 211.0 26.0 2012 234.0 36.0 2013 (f) 205.6 2014 (f) 197.2 2015 (f) 188.8 2016 (f) 180.3 2017 (f) 171.9 Sources: Gothard (2013), Smith (2011b), Protalinski (2013b), study team projection based on Protalinski (2013b) (f) - forecast

At the global level, the research firm IDC, predicts that tablet sales will exceed all laptops in 2013 and the entire PC market by 2015. In addition, it is estimated that tablet shipments will grow 50% in 2013, reaching up to 229.3 million units (LeClair, 2013). Europe

Within Europe, sales of notebooks have declined, following a similar pattern to global shipments. Importantly however, sales have remained largely static in Eastern Europe and are expected to continue to do so into 2014. Forecasts of the sales of notebooks in Europe are presented in Table A4-2 below.

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Table A4-2: Notebook sales forecast for Europe from 2011 to 2014 Year Western Europe Eastern Europe 2011 40,512,000 28,720,000 2012 37,400,000 31,697,000 2013 36,928,000 29,800,000 2014 35,544,000 30,879,000 Source: Statista (2013); Statista (2013b)

Charging Requirements

Proprietary chargers are most commonly used for charging laptops, having a range of power outputs and connectors. For example, a preliminary overview of replacement chargers available from online shops suggests that the power outputs can include 65W (18.5V, 3.5A or 19.5V, 3.34A), 90W (19.5V 4.7A) and 75W (19V 3.95A). Indeed, a universal laptop charger is available with multiple connectors and capable of delivering up to 120W302.

In October 2013, HP and Google released the new Chromebook laptop which is one of the first laptops to offer charging via Micro-USB. The Chromebook is a low price notebook which aims to fill the gap left in the market by netbooks. The technical specifications of the Chromebook charger give an output of 5.25V,3A resulting in 15.75W Although Micro-USB chargers designed for mobile phones can charge the Chromebook, it will only be at the power level supported by the charger. For a quicker charge a more powerful charger is required (Weintraub, 2013). The Chromebook does not support the USB Power Delivery specification, designed to deliver up to 60W over Micro-USB (Shimpi, 2013). Structure of the Sector

The main manufacturers of laptops in Europe have remained largely unchanged from 2009 to 2013, these are HP, Acer, Asus, Dell, Lenovo and Apple, Figure A4-1.

302 See for example: www.amazon.co.uk

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Figure A4-1: Shipments of PCs in Western Europe by Vendor Source: Statista, 2013c

There is no dominant manufacturer in terms of market share in Europe; this is also the case at a global level, where the leading manufacturers are also HP, Lenovo, Dell, Acer and ASUS, Figure A4-2.

Figure A4-2: Market share of the main manufacturers of the global PC sector in 2012 Source (King, 2013)

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According to McAllister (2012), as of late 2012, Acer and Asus were the only hardware manufacturers still producing netbooks (mainly for South American and Southeast Asian markets).Acer had no intention of developing any new netbook products and Asus were preparing to discontinue netbook production by the end of 2012. Other major hardware producers, including HP, Samsung, Sony and Toshiba, are also said to have ceased producing netbooks (McAllister, 2012). Howley (2011) reports that Dell exited the netbook market in 2011. However, Dell still offers small laptops marketed as Ultrabooks (PC World, 2013). Similarly, Smith (2011) reported that Samsung was to withdraw from the netbook market in 2012 and refocus on Ultrabooks.

Towards the end of 2012 the only company “actively marketing” a product similar to a netbook was Google with its Chromebook (manufactured by Acer, Samsung and HP) with sales expected to be low (McAllister, 2012). Smith (2011c) expected Chromebooks to reach five digit sales figures in 2011, compared with over 210 million laptops sold globally. However, a large retailer in the UK expected that in 2012 the market share of Chromebooks was going to rise to 10% (McCaskill, 2011). Similarly, Womack (2013) reports that Chromebooks now occupy a significant share of the US market for cheap laptops. Market Trends

Overall sales of laptop computers, including netbooks, are decreasing with market viability being corroded by the increasing popularity of tablet devices. Other trends such as the extended lifetime of PCs and a lack of innovation in the laptop market are also cited as explanations for the maturing of the PC market and reducing sales (Arthur, 2012).

Although the market for netbooks has effectively ceased to exist with manufacturers conceding defeat to the tablet market, the market for laptops has not disappeared entirely, as there are consumers which continue to require devices with greater storage and processing power than tablets can provide. Ultrabooks are a relatively new type of laptop, combines the portability of netbooks with the capability of larger notebooks.

There is expected to be a degree of cross over between segments as the ‘touch’ trend extends into the notebook market. Following consultation with manufacturers of laptops it is predicted that there will be a ‘shipment surge’ of up to 48% in touchscreen notebooks 2013 as this is what is increasingly expected by consumers. Touchscreen technology is expected to be particularly prevalent among Ultrabooks, in part to recoup some market share from tablets (Wilcox, 2013).

Indeed, as shown in Figure A4-3, shipments of notebooks without touch capability are expected to decrease between 2012 and 2017, while shipments of both notebooks with touch capability and tablets are expected to experience increased shipments.

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Figure: A4-3: Forecast of shipments of Tablet PCs and Notebooks 2012 – 2017 (Source: Wilcox, 2013)

Case Studies

Finland

According to Statistics Finland, 67% of Finish households had a laptop computer in 2011 (Statistics Finland, 2011).

France

According to data from Statista (2014), 69% of France’s population either owned or used a laptop computer in 2012 (Statista, 2014). The shipments of PCs, which also includes desktop computers, have been decreasing from the final quarter of 2008 until the end of 2013, Figure A4-4. The main manufacturers are also those which dominate at a global level.

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Figure A4-4: PC manufacturer shipments in France from 4th quarter 2008 to 4th quarter 2013 Source: Statista (2014c) Note: Data includes desk-based PCs.

PC shipments in France totalled just over 2 million units in the first quarter of 2013, a fall of over 25% from the corresponding period of 2012 and the third consecutive quarterly decline in France's PC market , see Table A4-3. In the first quarter of 2013, laptops accounted for 62% of PC shipments in France as volumes decreased by 26%.

Table A4-3: PC Vendor Unit Shipment Estimates for 1Q13 in France (Thousands of Units) 1Q13 1Q12 1Q13 1Q12 1Q12-1Q13 Manufacturer Market Share Market Share Shipments Shipments Growth (%) (%) (%) HP 415 21% 676 25% -39% Acer 333 16% 460 17% -28% Asus 245 12% 369 14% -34% Dell 211 10% 256 9% -18% Lenovo 187 9% 187 7% 0% Others 632 31% 760 28% -17% Total 2,023 2,708 -25% Source: Gartner (2013) Note: Data includes desk-based PCs and mobile PCs. Media tablets are excluded

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Germany

Following the trend at a global and European level, sales of netbooks in Germany are being eroded by increasing sales of tablets and smartphones. In 2009, nearly two million netbooks were sold in Germany, this number had dropped to 190,000 units by 2013 (EITO, 2013c).

Italy

According to data from Statista (2014d), 80% of the population of Italy either owned or used a laptop computer in 2012.

Spain

Laptop sales fell by around 40% in the first quarter of 2013, with HP holding the largest market share at19.4%, followed by ACER and Toshiba who had a market share of 15.7% and 15.5% respectively and Asus with a 12% share of the laptop market. More recently, ultra-thin laptops have become increasingly popular, representing around 20% of the total laptop market towards the end of 2013.

United Kingdom

Smith (2012) reports that UK retail sales data published by GfK showed a decrease in monthly netbook sales of 65% between April 2011 and April 2012. It is further reported that in April 2012 notebooks accounted for 36% of the UK market for IT products but in April 2011, this was over 42%.

The penetration of laptops within the UK population has gradually increased from 47% in 2009 to 62% in 2013; this is most likely a result of the falling average selling price of laptops, Table A4-4

Table A4-4: Laptop Penetration in the United Kingdom (UK) from 2009 to 2012 Year Percentage of Population 2009 47% 2010 52% 2011 59% 2012 62% Source: Statista (2013d)

United States

Laptop sales in the US were just over 49 million in 2011; this decreased to 44.9 million in 2013 and is expected to remain fairly constant in 2014 at around 45 million, Table A4-5.

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Table A4-5: Notebook sales forecast for North America from 2011 to 2014 (units) Year Sales 2011 49,094,000 2012 44,651,000 2013 44,891,000 2014 45,006,000 Source: Statista (2013f)

According to 2012-13 sales figures, the main players of the US laptop market are HP, Dell, Apple, Lenovo and Toshiba (descending market share), Table A4-6.

Table A4-6: Market share by manufacturer of US notebook sales in 3Q2012 and 3Q2013303 Gartner IDC Manufacturer 2012 (Q3) 2013 (Q3) 2012 (Q3) 2013 (Q3) HP 26.6% 26.9% 26.1% 27% Dell 21% 21% 20.7% 21.2% Apple 14.2% 13.4% 13% 11.6% Lenovo 8.7% 10.5% 8.3% 10.5% Toshiba 6.4% 7% 6% 6.8%

The US PC market as a whole has been declining in recent years, and from the third quarter of 2012 to the same period in 2013, PC shipments (which also includes desktops) decreased by 7%, see Table A4-7.

Table A4-7: Preliminary US PC Vendor Unit Shipment Estimates for 4Q13 4Q13 4Q12 4Q13 Market 4Q12 Market 4Q13-4Q12 Company Shipments Shipments Share Share Growth (%) (thousands) (thousands)

HP 4,179 26% 4,657 27% -10% Dell 3,602 23% 3,355 20% 7% Apple 2,168 14% 1,688 10% 28% Lenovo 1,526 10% 1,474 9% 4% Toshiba 1,143 7% 1,327 8% -14% Others 3,178 20% 4,567 27% -30% Total 15,795 17,068 -7% Note: Data includes desk-based PCs and mobile PCs, including mini-notebooks but not media tablets such as the iPad. Data is based on the shipments selling into channels.

Source: Gartner, Gartner Says Worldwide PC Shipments Declined 6.9 Percent in Fourth Quarter of 2013, 09/01/2014, accessed at: http://www.gartner.com/newsroom/id/2647517

303 Apple Insider website: Mac shipments continue to shrink as Apple loses ground in US PC market, accessed at http://appleinsider.com/articles/13/10/09/mac-shipments-continue-to-shrink-as-apple-loses-ground-in- us-pc-market

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In 2012, the value of the US laptop market reached $78.6 billion304 and is expected to reach $125 billion by 2017305. The growth is supported by the emergence of ultrabooks, laptops that are smaller, lighter and have an extended battery capacity, but are free from the performance compromise which characterised netbooks306. In 2013, Apple dominated the ultrabook sub-market with the MacBook Air, with a 56% share, the remaining 44% being comprised of a number of manufacturers307.

China

IDC reported that sales of PCs to China exceeded those to the US in the second quarter of 2011 and are expected to reach 85.1 million in 2012, compared to 76.6 million in the US308.

In contrast to the global trend, the PC market in China is currently evenly split between desktops and laptops. China is expected to follow the global trend with, IHS expecting Chinese demand to mirror the developed markets by 2014, predicting a desktop-to-laptop ratio of 36-64%. Demand for laptops is also expected to rise further as the Chinese government, invest heavily in computers309.

According to data from Statista (taken from the National Bureau of Statistics of China), the number of notebooks produced in China between 2009 and 2011 increased significantly. Indeed, in 2009 some 150 million notebooks were produced in China and by 2011 this figure had increased to almost 240 million (Statista, 2013e). According to the data of the Ministry of Industry and Information Technology (MIIT), in 2011 the total laptop output in China's added up to 244 million, of which 230 million were exported310.

According to IBISWord’s estimate (August 2013) revenue for the Chinese computer industry (which includes desktops) is set to grow 11.3% in 2013 to $236.5 billion. From 2008 to 2013, the revenue has been growing at an annualised rate of 7.7%. The concentration of the industry has increased in recent years despite the growing competition. More specifically, the top four industry participants are forecast to account for 58.4% of the market while the top 10 firms within the industry has been estimated to generate about 75.9% of total industry revenue in 2013.

304 Companies and Markets: US laptop market threatened by tablet PCs such as the iPad, accessed at http://www.companiesandmarkets.com/News/Retail/US-laptop-market-threatened-by-tablet-PCs-such-as- the-iPad/NI6432 305 The Retail Market for Laptop Computers in the US - Industry Market Research Report, accessed at http://www.companiesandmarkets.com/Market/Retail/Market-Research/The-Retail-Market-for-Laptop- Computers-in-the-US-Industry-Market-Research-Report/RPT1133572?aCode=b665b089-afc2-4102-9abd- a47c38e3ae3c 306 IBISWorld: The Retail Market for Laptop Computers in the US, accessed at http://www.prweb.com/releases/2013/1/prweb10314317.htm 307 CNet: MacBook Air rules thin-and-light laptop market, says NPD, accessed at http://news.cnet.com/8301- 13579_3-57591652-37/macbook-air-rules-thin-and-light-laptop-market-says-npd/ 308 The Wall Street Journal: China Passes U.S. as World's Biggest PC Market, accessed at http://online.wsj.com/news/articles/SB10001424053111903461304576525852486131230 309 BBC: China becomes biggest PC market in 2012 - IHS report, accessed at http://www.bbc.co.uk/news/business-22346821 310 Global and China Laptop and Tablet PC Industry Report, 2011-2012, accessed at http://www.prnewswire.com/news-releases/global-and-china-laptop-and-tablet-pc-industry-report-2011- 2012-152524185.html

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Annex 5 Compact Digital Cameras and Camcorders

Introduction

The market for digital cameras is diverse with a wide range of products to suit different consumer budgets and needs. The main categories of digital cameras currently available are:

 Compact digital cameras: small, pocket-sized cameras that do not have detachable lenses They are user-friendly and used for most general-purpose photography;  Bridge cameras: cameras that ‘bridge’ the gap between compact digital cameras and more advanced options. They are still relatively user-friendly but offer more powerful wide-angle lenses and better zooms311;  Compact system cameras: cameras that offer many of the same qualities and interchangeable lenses as digital SLRs but are mirrorless and are therefore lighter and more portable; and  Digital SLR cameras: cameras that are more advanced and offer professional results. They come with interchangeable lenses.

Compact digital cameras, or ‘point-and-shoot’ cameras, are small, pocket-sized cameras that do not have detachable lenses. They are considered to be the most user-friendly type of digital camera, and are widely suitable for most general-purpose photography (Demolder, 2013). Compact digital cameras are available for use with disposal batteries; however, most are now produced in a rechargeable form. The market for compact digital cameras has peaked; it is now being eroded by the ever-improving functionality of smartphones and this trend is expected to continue. In spite of this, sales of more advanced digital cameras, such as digital SLR cameras and compact system cameras are increasing as consumers look for the ability to take better photographs than the smartphone camera can offer.

Concerning digital camcorders, there are two main types: the traditional-style digital camcorders and pocket camcorders. The traditional-style digital camcorders are larger than pocket camcorders and record in higher quality. Pocket camcorders have the advantage of often being cheaper and are generally easier to use. A recent trend in the development of pocket camcorders has been the introduction of a sub-sector known as ‘action cameras’. ‘Action cameras’ are cameras which are aimed at consumers who want to record themselves/their surroundings whilst doing high-octane sports. These cameras are growing in popularity as they offer what other devices do not – a rugged, take-anywhere video camera that can attach to the body.

Sales

Unit sales of digital cameras are declining due primarily to competition from smartphones and a corresponding reduction in the sales of both compact digital cameras and digital camcorders.

311 Currys (2012): Bridge Camera Buying Guide, available from http://www.currys.co.uk/gbuk/bridge-camera- guide-987-commercial.html

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Digital cameras

In 2011, sales of low-end compact digital cameras declined by 30% in Europe (Techradar, 2012). As smartphones become more ubiquitous and more advanced, their manufacturers begin to take market share away from compact digital camera manufacturers. Indeed, in the first half of 2013, sales of basic compact digital cameras were down 40% (GfK, 2013). Furthermore, in 2012, camera phones with 3 megapixel or greater image sensors were outselling stand-alone digital still cameras by a 6:1 ratio (IC Insights, 2012).

However, at the other end of the spectrum, more powerful and more expensive, cameras – namely digital single-lens reflex cameras (digital SLR) and compact system cameras – are suffering far less than compact digital cameras. It would appear that, although a smartphone can take perfectly adequate general-purpose photographs, for professionals or those with an interest in photography there is no substitute device for a high-quality camera. In 2011, digital SLR and compact system cameras had a 13% share of global camera sales (Prophoto, 2012). Combined sales of digital SLR and compact system cameras increased by approximately 20% in 2011 when compared with 2010 figures, and are forecast for growth again in 2012 (Prophoto, 2012).

With smartphones proliferating and making it easy to instantly share digital photos over the Internet, or share as attachments to transmissions, annual revenues for stand-alone digital cameras have been declining since 2007. Worldwide unit shipments of digital still cameras, which peaked in 2011 at 142 million systems, fell by 4% in 2012 and are estimated to have declined to 133 million systems in 2013 (IC Insights, 2012). According to the CIPA (Camera and Imaging Products Association), shipments of digital cameras were down 42% in the first five months of 2013 (Wakabayashi, 2013).

The CIPA has statistical data from all major Japanese camera manufacturers which, when combined, account for the majority of the global market (approximately 83%). Data from the CIPA regarding units produced and shipped to Europe, as well as production and shipment price, are highlighted in Table A5-1 below.

Table A5-1: CIPA Production and Shipment Data 2008-2012 Total Total Units Price Total Unit Total Units Producti Unit Shippe Shipped Shipmen Shipment shipments Year Produced on Shipment d to to ts s to to Europe (millions) (millions) s Europe Europe (millions) Europe (€million) (millions) (%) (%) (millions) 2012 100.37 9.63 98.14 11.89 32.45 3484.87 33.07 29.30

2011 114.62 11.66 115.52 14.52 35.61 4184.54 30.83 28.81

2010 121.77 12.24 121.46 14.62 37.05 4087.33 30.50 27.95

2009 103.04 10.65 105.86 12.80 32.09 3949.64 30.31 30.85

2008 116.12 15.18 119.76 18.61 37.89 6042.94 31.64 32.47

Source: CIPA (nd)

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Based on data from CIPA and other sources, it is estimated that Europe accounts for one third of the global market for digital cameras. In 2010, 45 million digital cameras were sold in Europe, and in 2011 this had increased to 46 million. Europe is one of the largest markets for digital cameras; it is very close in terms of size to the USA but far exceeds the market in both China and Japan (see Table A5-2).

Table A5-2: Global market for digital cameras 2010 – 2011 2010 2011 Region/Country Volume % Volume % Europe 45 million 31% 46 million 33% America 53 million 37% 47 million 33% Japan 11 million 7% 10 million 7% China 15.5 million 11% 15 million 11% Rest of the World 20.5 million 14% 22 million 16% Total 145 million 140 million Source: SIPEC (2012)

Digital Camcorders

In 2011, 16.6 million camcorders were produced globally, which represents a decrease of 2.6% when compared with 2010 (Gartner, 2012). According to a study by GfK, in Western Europe, the camcorder market suffered a decline of 12% in the first half of 2011 when compared with data from the previous year, with overall unit sales of 1.7 million. Additionally, sales revenue fell by 21% to €400 million (GfK, 2011). Although the camcorder market in the UK experienced an increase in unit sales in the first half of 2011, revenue fell by 20% due to lower average prices. Overall, unit sales of traditional camcorders in Western Europe decreased by 17% during the first half of 2011 (GfK, 2011). The EU produces a small number of video camera recorders; however, production levels have decreased significantly (by approximately 57%) between 2008 and 2012, as presented in Table A5-3 below.

Table A5-3: EU Production of Video Camera Recorders (and other video recording or reproducing apparatus) (2008 to 2012) Year Production 2008 8,000,000 2009 6,600,000 2010 6,978,069 2011 4,635,532 2012 3,418,965 Source: Eurostat (note: data not available for all countries)

Pocket Camcorders

An estimated 1.6 million pocket video cameras were sold in Europe in 2008 (Harris, 2009). This segment has revived the broader camcorder market (which had stagnated over recent years) by attracting younger users and those attracted by low prices (Harris, 2009). However, as smartphones begin to catch up in terms of video capabilities and quality, sales of pocket video cameras are forecast to slow considerably (Harris, 2009).

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One segment of the pocket video camera market that is growing is the ‘action camera’. Globally, the market for action cameras achieved 24% growth in 2011 with shipments reaching 1.5 million units (Futuresource Consulting cited in CEATEC, 2012). In Europe specifically, sales of action cameras grew 83% in 2012 (Futuresource Consulting, 2013).

Regarding the degree of expected growth in the action camera market, sources differ. According to a study conducted by Futuresource Consulting, the global action camera market is forecast to experience over 37% CAGR between 2012 and 2016 as the products begin to appeal to a wider audience (Futuresource Consulting, cited in CEATEC, 2012). Indeed, and as illustrated in Figure A5-1 below, shipments are expected to reach 3.35 million units in 2014 and 5.15 million units in 2016. However, other sources expect less conservative growth in the market – with 4.5 million units shipped already in 2012 (Mac, 2012), shipments in 2014 are predicted to reach 8 million units (McNicholas, 2012) and 13 million units by 2016 (Daily Finance, 2013).

Figure A5-1: Action Camera Global Development (2011 to 2016) (Source: Futuresource Consulting, cited in CEATEC, 2012)

Prices

Compact digital cameras are providing decreasing levels of revenue for manufacturers. It is estimated that they account for 43% of revenue while digital SLR cameras account for 49% (Sans Mirror, 2013). As fewer SLR cameras are sold, when compared to compact digital cameras, they represent higher value for manufacturers.

It is also important to note that the price per unit of production and shipment has fallen significantly (€131 to €96 and €155 to €121, respectively), with price per unit shipment to Europe falling even more so (€159 to €107) from 2008 to 2012. Charging Requirements

Due to the vast differences between products in the market for digital cameras and camcorders, different battery types are used in different models which consequently require different charging solutions. Indeed, some digital cameras, such as digital SLR cameras, are extremely advanced and

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require more power than small compact digital cameras. Rechargeable compact digital cameras typically require 3.6V or 3.7V lithium batteries, whereas a digital SLR will use 7.2V or 7.4V batteries and, as such, require charging solutions which provide significantly higher power. A similar trend is noted in digital camcorders and action cameras, with small devices requiring less powerful batteries than more advanced camcorders. A brief survey of the website of an electronics retailer revealed the most common batteries used in the different types of digital cameras and camcorders on the market. The data is presented in Table A5-4 below.

Table A5-4: Summary of charging requirements of different types of digital camera and camcorders Type of digital camera Typical battery used Disposable batteries (AA alkaline) Compact digital camera Rechargeable lithium-ion 3.6V/3.7V battery Disposable batteries (AA alkaline) Bridge camera Rechargeable lithium-ion 3.7V battery Compact system camera Rechargeable lithium-ion 7.2V/7.6V battery Digital single lens reflex camera Rechargeable lithium-ion 7.2V/7.4V Type of camcorder Typical battery used Digital camcorder Rechargeable lithium-ion 6.8V/7.2V/7.4V battery Pocket camcorder Rechargeable lithium-ion 3.6V/3.7V Action camera Rechargeable lithium-ion 3.7V

The battery type used ensures the optimum performance of the particular model and, for that reason, a range of charging solutions are used in the market for digital cameras and camcorders, including proprietary charging. There are four principal charging methods used in digital cameras and digital camcorders:

 removable battery;  USB charging;  disposable batteries (typically AA or AAA); and  a wall charger.

In most cases, rechargeable digital cameras and digital camcorders are sold with their own charger and data connection cable. In the case of a removable battery, the battery from the camera can be removed and charged separately in a proprietary charger and, in some instances, it can also be charged in the camera via its USB connection. For example, the Samsung WB30F digital camera has a rechargeable battery which can be charged via USB or using the battery charging cradle. Consequently, there is no standard charger or charging connection used in the market for digital cameras or camcorders currently.

Structure of the Sector

Digital Cameras

The global market for digital cameras includes a large number of players, each of which is competing for a share of a market which is shrinking. From the data available, it would appear that globally no

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one manufacturer dominates the market for digital cameras. The global market share of a number of manufacturers in 2009 and 2010, as well as in 2012, is presented in Table A5-5.

Table A5-5: Market Share of Manufacturers of Digital Cameras 2009, 2010 and 2012 (global) Company 2009 2010 2012 Canon 19% 19% 23% 11.1% 12.6% 21% Sony 16.9% 17.9% 15% Samsung 10.9% 11.1% 9% Fujifilm 5.4% 4.9% 8% 8.8% 7.4% - Panasonic 7.6% 7.6% - Olympus 6.2% 6.1% - 4.7% 4% - Pentax 1.7% 1.5% - Vivitar 0.7% 1.2% - Other 7% 6.7% 24% Source: Wakabayashi (2013); Sawa & Yasu (2011)

For the digital camera market as a whole, Canon is the market leader, and although it has gained market share from 2010-2012, competition from Nikon is increasing as the latter has also gained market share during this time. The increasing market share of Canon and Nikon would appear to have been at the detriment of other players such as Sony and Samsung, with the exception of Fujifilm which has increased its market share over this period. In 2012, Kodak announced it was to stop production of digital cameras, pocket digital camcorders and digital picture frames in efforts to cut costs (Techradar, 2012b).

Similarly, the market for compact digital cameras also has a large number of players, each of which is competing for a share of an ever decreasing market. However, the market for other types of digital cameras is less fragmented with fewer companies competing. In the market for digital SLR cameras, Canon and Nikon dominate with 45% and 29.8% market share, respectively, in 2010 (Sawa & Yasu, 2011). Sony had approximately 11.9% of the market in 2010 (Sawa & Yasu, 2011).

Manufacturing in the EU

The EU is not a significant producer of digital cameras; indeed, the majority are currently imported by Japanese manufacturers. However, some companies, such as Leica of Germany, do conduct some manufacturing in Europe, although it is not known how many digital cameras are manufactured in the EU by these companies. As shown in Table A5-6, the EU produces a number of digital cameras annually, and importantly, in spite of the decrease in sales of digital cameras at the global level, the level of production in the EU has been increasing since 2009.

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Table A5-6: EU Production of Digital Cameras (2008 to 2012) Year Production Quantity Production Value Average Value 2008 102,238 154,376,839 1,509.98 2009 161,152 152,000,000 943.21 2010 231,000 240,000,000 1,038.96 2011 257,160 315,541,688 1,227.02 2012 316,928 319,117,932 1,006.91 Source: Eurostat (note: data for Croatia was not available)

From Table A5-6, it can be seen that the average production value per unit produced in the EU was €1,006.91 in 2012. When compared with the value (per unit) of imported digital cameras, which is in the region of €100, it is clear that the units produced in the EU are of significantly greater value than those digital cameras that are imported. Indeed, cameras manufactured in Europe appear to be ‘high end’ and aimed primarily at the niche or professional markets, with no mass manufacturing taking place. For example, one company active in Europe, the German manufacturer Leica, produces high-value cameras and is well known for its excellent build quality. Leica has plants in both Germany and Portugal. In addition, there are some other companies who continue to manufacture in the EU, for example:

 In Sweden, the company Hasselblad, has manufacturing facilities. It specialises in the manufacture of professional camera equipment but has recently began (in collaboration with Sony) making compact cameras for the consumer market.  Linhof (Germany) manufactures high-end professional camera equipment. It does not appear that they currently manufacture cameras for the consumer market.  DHW Fototechnik (Germany) appears to manufacture Rolleiflex cameras in the country. These are specialist, high-end products. Compact Rollei cameras are also available but appear to be manufactured outside of the EU.

It is not clear to what extent the components for cameras manufactured in the EU are actually produced in the EU. Indeed, it would appear that some components are produced outside of the EU, with final assembly taking place in the EU. However, there are also a number of component manufacturers located within the EU, e.g. Cooke Optics which manufactures high-quality lenses and is based in the UK, Schneider Kreuznach of Germany also manufactures lenses and filters, and Carl Zeiss, an international company which manufactures lenses and also has some manufacturing in Europe.

Employment

The total level of employment in the manufacturing of cameras in the EU is not known. According to data from Eurostat, employment in the EU-27 in the manufacture of optical instruments and photography was 44,500 (and 2,500 companies) in 2010 (Eurostat, 2013312).

312 Eurostat (2013): Manufacture of computer, electronic and optical products – statistics – NACE Rev.2, available from http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Manufacture_of_computer,_electronic_a nd_optical_products_statistics_-_NACE_Rev._2

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That said, the Leica camera group company has a number of employees in the EU. It was estimated that in 2008, that there were 451 employees in Germany and 477 in Portugal. Hasselblad (Sweden) has 180 employees, and DHW Fototechnik employs approximately 50 people.

SMEs

It would appear that a number of the camera manufacturers active in Europe are SMEs. For example, Hasselblad (Sweden) have only 180 employees and DHW Fototechnick, 50.

Digital Camcorders

The main manufacturers of digital camcorders on a global scale are Sony, Panasonic, JVC and Canon. Although some smaller companies are involved in the manufacture of camcorders, they face intense competition from big-name rivals and from smartphones and, as a result, some have been dissolved by their parent companies (e.g. Flip was would up by Cisco in 2011).

Sony is a European market leader in digital camcorders, and in 2012 accounted for 40% of the market by volume and 44% by value (Phillippon, 2013).

The market leader in action cameras is the US company GoPro. Indeed, GoPro is the action camera leader in every European country (Futuresource Consulting, 2013). Sales of GoPro action cameras have more than doubled every year since the sale of the first camera in 2004. In 2012, GoPro sold 2.3 million cameras worldwide and grossed $521 million, (Mac, 2013). GoPro accounted for 21.5% of the digital camcorder shipments in the USA in the first half of 2012 and, when considering shipments of pocket camcorders specifically, this rises to one third (Mac, 2013). The company is facing increasing rivalry from manufacturers of conventional digital camcorders including Sony and JVC. Possibly as a result of increased competition, Contour, a company which was second to GoPro for many years, ceased production and closed down in August 2013.The manufacturer of GPS/Personal Navigation Devices, , also recently released an action camera onto the market.

Manufacturing in the EU

Sony has a manufacturing presence in the EU. Previously, camcorders were manufactured in a plant in France although this site is now manufacturing other Sony products. Sony high-end system cameras (video cameras for the professional market) are manufactured and serviced at a site in Wales, UK. The site at Pencoed, South Wales employs some 513 people and 135 focus on the manufacture of professional products (Sony, nd).

It would not appear that any other digital camcorder manufacturing takes place in the EU.

Employment

Total employment in the manufacture of digital camcorders within the EU is not known. However, it would appear that very little (if any) manufacturing is conducted in the EU currently, therefore employment levels are not expected to exceed those reported by Sony in South Wales (although they focus on the manufacture of professional video cameras rather than digital video cameras which are more widely used by consumers).

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SMEs

From the data available it would appear that there are not any SMEs involved in the manufacture of digital camcorders within the EU.

Trade

Digital Cameras

When comparing data on sales of digital cameras in the EU and level of imports of digital cameras to the EU, it is evident that the EU is heavily reliant on imports of such products, with little domestic production. Imports, however, have fallen from 2008 to 2012, with approximately 48 million imported in 2008, compared to 32 million in 2012. This is largely explained by the decrease in sales of digital cameras on a global basis, and particularly the decrease in sales of cheap, compact digital cameras. Exports of digital cameras are significantly lower than imports and although they too have decreased, it has been at a significantly lower rate than imports: from 5.5 million in 2008 to 3.2 million in 2012. The change in imports and exports of digital cameras is illustrated in Figure A5-2: below.

Figure A5-2: Imports and Exports of Digital Cameras to and from the EU from 2008 to 2012 (Source: Eurostat)

Video cameras

Data from Eurostat suggests that imports of video camera recorders have fallen from 54 million in 2008 to 24 million in 2012. When compared with other data regarding sales and production of digital camcorders, it would appear that this data includes more than digital camcorders. Exports of video camera recorders have also fallen slightly, from 2008 to 2012, although they have increased in value. Table A5-7 below presents the imports and exports of video camera recorders to and from the EU from 2008 to 2012.

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Table A5-7: Imports of Video Camera Recorders to the EU (2008 to 2012) Year Imports (quantity) Exports (quantity) 2008 53,993,208 4,897,702 2009 46,359,344 7,164,973 2010 42,364,624 4,063,739 2011 37,167,876 3,784,973 2012 24,012,043 3,698,688 Source: Eurostat (note: data was not available for all countries)

Market Trends

Sales of digital cameras are decreasing as the market for compact digital cameras matures and as sales slow thanks, for the most part, to the increasing capabilities of devices such as smartphones. Some sources estimate that the global digital camera market has shrunk to 102 million units in 2013, compared to its peak of 144 million in 2010 (Wakabayashi, 2012). The decreasing sales of compact digital cameras are having a significant impact on the market as manufacturers reduce their sales forecasts and profit outlooks, and as some leave the market entirely. Indeed, in January 2013 Canon, the market leader in digital cameras, forecasted sales of 17 million compact digital cameras for the year but, in July 2013, this figure was lowered to 14 million. Consequently, Canon also lowered its profit outlook for the year by 10%, citing falling camera sales as the main reason (Wakabayashi, 2013). Further, in 2012, Sony cited a drop in sales of video cameras and compact digital cameras as affecting revenue growth, and in 2013, revenue from cameras was expected to be static or decrease (Ribeiro, 2013). In 2013, Nikon reduced its unit sales and revenue estimates for the year due to poor market conditions and a large drop in compact camera sales (DP Review, 2013).

As well as reducing sales forecasts, some manufacturers have begun to reduce, or even cease, production of entry-level, compact digital cameras. In May 2013, Olympus announced that they would cut back production of cheap, low-margin, point-and-shoot cameras to focus instead on high- margin, mirrorless, interchangeable lens cameras (such as digital SLR cameras) (Richards, 2013). Canon has also hinted that it would begin to focus more on high-end cameras rather than compact digital cameras (Wakabayashi, 2013). Following a decrease in sales of digital camera in the USA from 7 million in 2008 to 3.6 million in 2011, in early 2012, Kodak announced it would no longer produce digital cameras, pocket video cameras and digital photo frames (Mattioli, 2012). The company would instead focus on online- and retail-based photo kiosks and desktop, inkjet printers (Mattioli, 2012).

Manufacturers of entry-level, compact digital cameras are beginning to move away from them by reducing or ceasing production as the smartphone continues to absorb the market for small portable cameras. Companies are instead placing more emphasis on the manufacture of high-end cameras. Olympus, for example, is focusing on the production of digital SLR cameras in spite of the fact that it only accounts for 35% of its business, and the company only has an estimated 7% market share (Richards, 2013). However, it is possible that as an increasing number of camera manufacturers begin to flood the high-end market, profit margins may erode as prices fall (Wakabayashi, 2013).

As well as focusing on high-end, high-quality cameras, manufacturers are also aiming to ensure that digital cameras remain relevant and competitive when compared with devices such as smartphones. Ensuring digital cameras are ‘connected’ is one way in which this is possible. Consequently, digital cameras are increasingly becoming ‘Wi-Fi’ enabled, allowing users to share their photographs online

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and on social media quickly and easily. In June 2013, one in seven digital cameras sold in Western Europe was able to connect to the internet (Le Parisien, 2013). Case Study Countries

Finland

Sales

The rate of penetration of digital cameras in Finnish households grew significantly between 2003, peaking at 71% in 2011. However, 2012 saw the penetration rate drop to 66%.

Table A5-8: Frequency of Digital Cameras In Finnish Households (2003-2012) Year % of Households 2003 14 2004 25 2005 38 2006 51 2007 58 2008 64 2009 67 2010 68 2011 71 2012* 66 Source: Statistics Finland (2013) * Data for 2012 includes digital video camera

In 2012, compact cameras sold 101,287 units in Finland, a decrease of 42.7% from the previous year. Sales of compact cameras were worth an estimated €18 million, which is a decrease of 31.6%. In 2012, the average price of a compact camera in Finland was €178, an increase of 19.3%. Despite this decline, however, one source states that sales of advanced compact digital cameras around the €400 price range have grown by as much as 60% in the year 2012-13 (Invest in Finland, 2013).

Table A5-9: Sales of Compact Cameras in Finland 2008 to September 2013 Year Sales Sales Value (€1,000) Average Price (€) 2009 373,090 69,127 185 2010 349,442 62,525 179 2011 338,975 51,035 151 2012 268,138 40,053 149 2013 (to September) 101,287 18,017 178 Source: Kotek (2008), (2009), (2010), (2011), (2012), (2013)

Regarding sales of camcorders, it is estimated that 11,014 units were sold in 2012, which represents a decrease of 30%; the value of sales of video cameras also dropped 30% in 2012. The average price of a camcorder in 2012 was €410.

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Table A5-10: Sales of Camcorders in Finland 2008 to September 2013 Year Sales Sales Value (€1,000) Average Price (€) 2008 63,608 18,725 429 2009 51,243 19,375 378 2010 44,685 17,371 389 2011 43,972 14,688 334 2012 27,768 9,839 354 2013 (to September) 11,014 4,581 410 Source: Kotek (2008), (2009), (2010), (2011), (2012), (2013)

Manufacture and Trade

Finland does not produce digital cameras. In line with the gradual decline in sales, imports of digital cameras were at their highest level in 2008, falling significantly in 2009, rising slightly through to 2011, and then falling again in 2012. This is a general pattern that has been recognised throughout many EU countries (as will be illustrated in subsequent sections). Figure A5-3 illustrates the patterns for imports and exports to Finland from 2008 to 2012.

Figure A5-3: Imports and Exports of Digital Cameras to/from Finland (2008-2012) (Source: Eurostat)

In 2012, Canon was the market leader for compact cameras in Finland, with an estimated 40% of the market. It was also the market leader in SLR cameras with approximately 57% of the Finnish market for and was second in the market for camcorders with 32% of the market (Canon, 2013).

France

Sales

It is estimated that more than 75% of French households own a digital camera (Le Parisien, 2013). However, both the volume and value of sales of digital cameras in France have been decreasing since 2009 (as presented in Table below) in spite of the fact that the average price of digital cameras

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increased 8.8% in 2012 (Le Figaro, 2012). It is estimated that 4.3 million digital cameras were sold in France in 2013 (GfK, 2012).

Table A5-11: French Market for Digital Cameras Volume and Value 2009-2013 Year Volume Value 2009 5,268,000 1,129,000,000 2010 5,380,000 1,100,000,000 2011 5,200,000 985,000,000 2012 4,650,000 960,000,000 2013 4,350,000 935,000,000 Source: GfK (2012); GfK (2010)

It is estimated that compact digital cameras represent 80% of the digital cameras sold in France (Ken Research, 2013). However, sales of compact cameras have been decreasing since 2010, with 3,385,000 estimated to be sold in 2013, compared to 4,220,000 in 2011. In contrast to this pattern, sales of more specialised cameras (such as hybrid and reflex cameras) have been increasing steadily in both value and volume since 2011, as illustrated in Table A5-12 below.

Table A5-12: French Market for Digital Cameras Volume (thousands of units) and Value (millions of €) from 2009- 2013 by Type of Camera Type of 2009 2010 2011 2012 2013 Camera Value Volume Value Volume Value Volume Value Volume Value Volume Hybrid 8 10 21 35 29 65 46 105 62 140 Reflex 334 518 339 565 318 513 322 500 344 516 Bridge 106 350 87 305 111 401 103 350 89 310 Compact 681 4390 653 4475 528 4220 488 3700 440 3385 Source: GfK (2012); GfK (2010)

According to data compiled by GfK, there has been a decrease in the number of units of digital camcorders sold in France. It is estimated that sales have decreased from 600,000 units in 2011 to 420,000 in 2012. Table A5-13 below presents the sales of video cameras in France from 2010 to 2013.

Table A5-13: Sales of Digital Camcorders in France Year Units 2010 730,000 2011 600,000 2012 420,000 2013 ~380,000 Source: Philippon (2012) (Note: these figures do not include products capable of taking videos e.g. digital cameras, smartphones etc.)

Although sales of digital camcorders are decreasing and the digital camcorder market is estimated to have declined (in volume terms) by 8% in 2013, sales of action cameras are on the rise (Husson, 2013). Indeed, in 2012, of the 420,000 units sold 100,000 were action cameras (Husson, 2013). Furthermore, in 2013, sales of action cameras are reported at 150,000 units compared to 240,000 conventional cameras (Husson, 2013).

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According to EuroMonitor (2012), Sony France SA and Nikon France SAS led imaging devices in 2011 with volume shares of around 16%. Sony France SA ranked first in camcorders, controlling almost 24% of sales, and was second in cameras with a volume share of 15%. Nikon France SAS led sales cameras with a volume share of 19% (EuroMonitor, 2012).

Manufacture and Trade

France does not, and has not since 2008, produced any digital cameras. The imported units of digital cameras into France follow a similar pattern to many of the other EU countries, and the exports pattern is more individual. Figure A5-4, below illustrates these patterns.

Figure A5-4: Imports and Exports of Digital Cameras to/from France 2008 to 2012 (Source: Eurostat)

Market Structure

The digital camera market structure in France appears to follow a different pattern to the global one. Indeed, in 2009 in terms of volume of sales:

 Panasonic had 17% of the market;  Nikon had 13.5%;  Canon had 12.8%; and  Sony had 12.6%.

The market was different again when considering market share in terms of value. In 2009, despite having only 12.8% of the market in terms of volume, Canon accounted for 20.9% of the market's value; Nikon had 20% and Panasonic 18.8% (PC Impact, 2009). Furthermore, in the market for digital camcorders, Sony is the market leader in France and, in 2012, had 45% of the market in terms of volume and 55% in terms of value (Philippon, 2013). Sony’s leading position has strengthened since 2010 when it had 40% of the market in terms of volume and 47% in terms of value (Philippon, 2013).

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Germany

Sales

Between 2007 and 2012, the market for digital cameras in Germany has decreased slightly in terms of both sales volume and value (as illustrated in Table A5-14). Sales of compact digital cameras particularly have decreased during this time, and this trend is expected to continue as demand for low-priced compact digital cameras reduces and interest in digital SLR and compact system cameras increases. A reducing interest in low-priced compact digital cameras is expected to be primarily due to a lack of diversity between smaller, cheaper models and from increasing competition from smartphones (Prophoto, 2012).

Table A5-14: Sales of Digital Compact Cameras in Germany 2007 to 2012 (incl. MMC and Action Cameras) Digital Compact Cameras (incl. MMC and Digital Cameras (total, incl. MMC) Action Cameras) Year Volume (million Volume (million Value (million euros) Value (million euros) units) units) 2007 8.55 1,995 7.84 1,457 2008 9.32 1,861 8.44 1,275 2009 8.51 1,710 7.61 1,160 2010 8.62 1,744 7.66 1,142 2011 8.57 1,724 7.47 1,050 2012 7.89 1,719 6.73 1,000 Source: Prophoto (2012)

As well as affecting sales of compact digital cameras, competition from smartphones and other devices is also affecting sales of digital camcorders in Germany. Sales have been in decline since 2007, with further reductions expected beyond 2012, as presented in Table A5-15 below.

Table A5-15: Sales of Camcorders in Germany 2007 to 2012 Year Volume (excluding MMC) Value (€ millions) 2007 720,000 309 2008 718,000 275 2009 642,000 241 2010 569,000 202 2011 392,000 191 2012 345,000 155 Source: Prophoto (2012)

However, in contrast to demand for traditional digital camcorders, demand for action cameras is on the rise in Germany, with demand expected to continue to rise (Prophoto, 2012). Sales of action cameras in Germany totalled approximately 30,000 units in 2011 and are reported to be around 150,000 in 2012 (Prophoto, 2012).

Manufacturing and Trade

Figure A5-5 below shows the production of digital cameras in Germany from 2009 to 2012 in terms of both volume and value. As can be seen from the Figure, Germany’s production of digital cameras

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has increased year-on-year since 2009, and production value has closely followed evolutions in the number of units produced.

Figure A5-5: Production of Digital Cameras in Germany (volume and value) 2009 to 2012 (Source: Eurostat)

Production of cameras in Germany is conducted by a number of well-known brands, many of which produce high-quality and high-end cameras. One such brand is Leica, which has production facilities in Wetzlar, Germany (as well as other locations inside and outside the EU) and produces high-end digital and analog cameras. In 2010, Leica announced a 140% increase in global sales and, in 2012, sales increased by 10% again. Arguably, sales in 2012 could have increased further had capacity and production facilities allowed (Overgaard, 2013).

Trade

Despite increases in production of digital cameras in Germany, exported digital camera units have decreased from nearly 7 million in 2008 to 4.6 million in 2012 (as illustrated in Figure A5-6 below). Imports and exports of digital cameras to and from Germany have followed a similar pattern from 2008 to 2012, and do not have an inverse effect on one another, as illustrated in Figure A5-6.

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Figure A5-6: Imports and Exports of Digital Cameras from Germany (2008 to 2012) (Source: Eurostat)

Imports and exports of cameras to and from Germany have decreased as production has increased. However, as production units are a factor of 1,000 less, it would be unwise to draw conclusions regarding a correlation between the two sets of data. Additionally, as both imports and exports have decreased, this data indicates an all-around decrease in the demand for digital cameras.

In 2011, Canon was the market leader in Germany with regards sales of compact digital cameras; Panasonic was second in the market and Nikon third. Fujifilm and Sony were fourth and fifth respectively (Chip Online, 2011).

Italy

Sales

In 2012, it was estimated that sales of digital cameras decreased 15% when compared with sales in 2011. Indeed, in 2011, some 3.1 million units were sold for a value of €550 million compared to 2.6 million sold in 2012 for a value of €489 million. Decreasing sales of compact digital cameras (which represents approximately 88% of the digital camera market in terms of volume, and 60% in terms of value) are largely to blame for the decrease, with 2.8 million sold in 2011 compared to 2.3 million in 2012 (Ritondo, 2012). However, demand for compact system cameras appears to be increasing somewhat, although it still only represents 2% of the Italian market in terms of volume and 4% in terms of value. Sales of compact system camera have increased by 134% between 2011 and 2012, with unit sales increasing from 21,000 in 2011 to 51,000 in 2012 (Ritondo, 2012).

According to data from GfK, between January and July 2011, some 1.8 million digital cameras were sold in Italy with a value of €314 million. Italy is one of the largest markets for digital cameras in Europe, coming behind Germany, France and the UK in terms of volume sold, but also behind Spain when considering the value of sales (Colombo, 2011). Italy has a lower average value per camera sold, suggesting a lower penetration/popularity of photography and less emphasis placed on

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products with added value (Colombo, 2011). Indeed, according to data from ISTAT in 2013, 27.2% of Italian families had a digital camcorder and 53.4% had a digital camera (ANSA, 2013).

Sales of digital camcorders have also been decreasing, with a reduction of 21% between 2006 and 2012, and a decline in total revenue of €125 million (Perracino, 2012).

Manufacturing and Trade

Production data from Eurostat for Italy is only available for the years 2010, 2011 and 2012; nonetheless, an increase in units produced is shown, albeit at a very small scale. However, this increase in units produced is not followed by an increase in production price.

Figure A5-7: Production of Digital Cameras in Italy (2010, 2011 and 2012) (Source: Eurostat)

The number of units imported to Italy shows a decrease from 2008 to 2009, a rise in 2010, and then an accelerating decrease from that point onward.

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Figure A5-8: Imports and Exports of Digital Cameras to/from Italy (2008 to 2012) (Source: Eurostat)

According to EuroMonitor (2012), Canon and Nikon were the leaders of imaging devices in 2011, with 23% and 22% volume shares, respectively. Nikon led the market for cameras with a 25% volume share in 2011, while Canon ranked second in the market for both cameras and camcorders with volume shares of 23% and 22%, respectively.

Nikon accounts for almost one third of the Italian market when considering compact and SLR cameras. Indeed, in 2008, Nikon was the market leader in Italy for digital SLR cameras with 47.1% of the market in terms of volume and 53.9% in terms of value (Dphoto, nd).

The Netherlands

Sales

The market for digital cameras and digital camcorders peaked in 2008; since then sales of both have been in decline, as illustrated in Table A5-16 below.

Table A5-16: Sales of Digital Cameras and Camcorders in the Netherlands Year Sales of Digital Cameras Sales of Digital Camcorders 2007 1.6 million 229,000 2008 1.76 million 209,000 2009 1.6 million 192,000 2010 1.5 million 189,000 Source: FIAR (2010); FIAR (2009); FIAR (2008)

Cameras with fixed lenses (e.g. compact digital cameras) have dominated the market in the Netherlands for a number of years, and in 2010 accounted for 86% of the market in terms of volume and 60% in terms of value. However, as in other countries, demand for compact digital cameras has been decreasing whereas demand for more advanced cameras (e.g. compact system cameras and digital SLRs (with interchangeable lenses) has been increasing. Table A5-17 below presents the sales

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volume and value of fixed lens and interchangeable lens cameras in the Netherlands from 2007 to 2010.

Table A5-17: Sales of Cameras with Fixed Lens and Interchangeable Lens 2008-2010 Fixed Lens Interchangeable Lens Year Volume Value (€) Volume Value 2008 1,556,400 266,340,000 193,600 119,660,000 2009 1,400,000 232,000,000 200,000 125,000,000 2010 1,290,000 199,200,000 210,000 132,800,000 Source: FIAR (2011); FIAR (2010); FIAR (2009)

In the first quarter of 2013, sales of digital cameras were down 20% year on year. In past years, the decline in the camera market was a result of the declining popularity of compact cameras; however, in the first quarter of 2013, all cameras were experiencing declining sales (GFK, 2013b). In 2012, less than one million compact cameras were sold in the Netherlands, for the first time since 2008. In 2013, this figure declined again to approximately 700,000 (GfK, 2013b).

Like digital cameras, sales of digital camcorders have also been declining in the Netherlands – from 229,000 units sold in 2007 to 189,000 in 2010, as presented in Table A5-18.

Table A5-18: Volume and Value of Sales of Digital Camcorders in the Netherlands Year Volume Value (€) 2007 229,000 99 million 2008 209,000 79 million 2009 192,000 67 million 2010 189,000 61 million Source: FIAR (2011); FIAR (2010); FIAR (2009)

Although overall sales of digital camcorders have been decreasing, sales of multimedia camcorders (small, pocket recording devices) have been increasing, with 11% growth in terms of volume and 70% in terms of value recorded in 2010 (FIAR, 2011).

Manufacturing and Trade

The Netherlands no longer produces digital cameras, and has not since 2008. Polaroid had a factory in Enschede but this was closed in 2008 following the bankruptcy of the company.

In 2012, the Netherlands imported 14.4 million units of digital cameras. Unlike other countries, it exports a similar level of digital cameras to those that it imports (when considering the scale), with only a ~400,000 unit difference in 2012. Figure A5-9 illustrates the imports and exports of digital cameras to and from the Netherlands since 2008.

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Figure A5-9: Imports and Exports of Digital Cameras to/from Italy (2008 to 2012) (Source: Eurostat)

Poland

Sales

Sales of digital cameras in Poland began to decline in 2011, with a decrease of 15% year on year. As in other countries, consumer demand appears to be shifting from small cameras with fixed lenses to those with interchangeable lenses (WP.pl, 2012). Again, the main reason for this is the development of the smartphone.

Table A5-19: Average Price of Digital Cameras in Poland Price Percentage <250 PLN (<€60) 9.48% 250 - 500 PLN (€61 - €120) 17.08% 501 - 750 PLN (€121 - €180) 14.44% 751 – 1,000 PLN (€181 - €240) 13.39% 1,001-1,250 PLN (€241 - €300) 17.84% 1,251-1,500 PLN (€301 - €360) 10.09% 1,501-1,750 PLN (€361 - €420) 8.12% >1,750 PLN (€420) 8.02% Source: WP.pl (2012)

Overall, the digital camera market in Poland is quite fragmented. Sony was the market leader in 2012 with 19%, closely followed by Canon and Nikon both with 18%, Panasonic with 13% and Fujifilm with 12% (as illustrated in Table A5- below). However, when considering digital SLR cameras specifically, the market is significantly more defined with two clear market leaders. Nikon is the market leader with 48% of the market, followed by Canon with 34% of the market. Sony is a significantly smaller player in the digital SLR market in Poland with approximately 10% of the market (WP.pl, 2012).

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Table A5-20: Popularity of Digital Camera Manufacturers in Poland Manufacturer Market Share Sony 19% Nikon 18% Canon 18% Panasonic 13% Fujifilm 12% Olympus 8% Samsung 7% Inne 5% Source: WP.pl (2012)

Manufacture and Trade

Poland does not produce digital cameras, and has not since at least 2008. The imports pattern follows a similar pattern to that of many other EU countries, with a large number of imports in 2008, dropping in 2009, and reducing again in 2012 – the year with the least imported units. However, until 2012, exported units of digital cameras were increasing.

Figure A5-10: Imports and Exports of Digital Cameras to/from Poland (2008 to 2012) (Source: Eurostat)

Portugal

Portugal does not produce digital cameras, and has not since at least 2008. The units imported since 2008 follow a familiar trend, while the trend set by exported units is unique.

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Figure A5-11: Imports and Exports of Digital Cameras to/from Portugal (2008 to 2012) (Source: Eurostat)

Spain

Sales

In 2011, 2.3 million cameras were sold in Spain, reflecting a small decrease from sales in 2010 (as presented in Table A5-21). According to a 2011 study, half of the cameras sold in that year in Spain cost less than €100, and 70% cost less than €150. The remaining 30% were more advanced cameras, such as advanced compact cameras and cameras with interchangeable lenses. It is estimated that sales of advanced compact cameras are in the region of half a million units per year.

Table A5-21: Sales of Digital Cameras in Spain 2008-2012 Year Number of Units Sold 2008 3,446,300 2009 3,194,100 2010 2.68 million 2011 2.3 million 2012 1.77 million Sources: Asimelec (2010); El País (2011); Electro Market (2012); Artecom (2013)

Like in other European countries, Spain is seeing a shift from sales of cheap, compact digital cameras to those of higher quality and price. The market for compact digital cameras has been eroded by the increasing popularity of smartphones and tablets. Compact cameras worth less than €200 do not appear to have many future opportunities, although currently they still account for approximately 40% of total sales. The value of the digital photography market in Spain has been decreasing steadily since 2008 (as presented in Table A5-22 below). 2013 saw a sharp drop in terms of actual sales of digital cameras in Spain; however, sales of cameras through online vendors have seen an increase of 1% (Electro Market, 2013). Indeed, between September 2012 and August 2013, the value of the market contracted by 20% (Electro Market, 2013). In contrast, fixed cameras with a zoom lens 20x more are flourishing with a growth in sales of 44%.

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Table A5-22: Value of Digital Photography Market in Spain (2008-2011) Year Value 2008 €560 million 2009 €473 million 2010 €471 million 2011 €412 million 2012 €334 million Source: Electromarket (2012)

In 2008, 21.7% of households in Spain had a digital camcorder, and this had increased to 22.9% by 2009 (Asimelec, 2010). Annual sales of digital camcorders have been decreasing since 2007, with 225,100 sold in 2012. The sales of digital camcorders from 2007 to 2012 are presented in Table A5- 23 below.

Table A5-23: Sales of Digital Camcorders in Spain (2007-2012) Year Sales 2007 530,000 2008 440,000 2009 366,000 2010 329,000 2011 275,400 2012 225,100 Sources: Electro Market (2011); Electro Market (2013b)

The market for digital camcorders has experienced increasing competition from digital cameras and smartphones/mobile telephones which offer video recording of an acceptable quality. According to experts, the market for video cameras is limited because recording requires effort – as much for the recording as for the editing. Parents having their first child are the main market for video cameras, with family occasions the most recorded. One of the new additions to the video camera market is the ability to film in 3D (as well as 2D) (Electro Market, 2011). Additionally, cheap and easy to use multimedia video cameras are also seeing increased prominence in Spain, as illustrated in Table A5- 24 below.

Table A5-24: Sales of Digital Camcorders in Spain 2011 and 2012 2011 2012

Volume Value Volume Value Multimedia video cameras 36,400 3,587,000 48,100 2,631,000 Other digital camcorders 239,000 71,560,000 177,000 54,822,000 Source: Electromarket (2013)

The average price of multimedia video cameras in 2012 was €55 (-44%) while the average price of other digital camcorders was €310.

Nikon continued to be the market leader in Spain in 2013, with 26% of the market. Considering the market for compact cameras, which has decreased some 30% for the year, Nikon is also number one is this segment with 20.4% of the market (Blog Nikon, 2013).

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Manufacturing and Trade

Between 2008 and 2012, Spain did not produce any digital cameras, and had a smaller number of imports and exports than the likes of Germany and the UK. The pattern for imports is accelerating downwards, and that of exports is different from the other countries studied, as illustrated in Figure A5-12 below.

Figure A5-12: Imports and Exports of Digital Cameras to/from Spain (2008 to 2012) (Source: Eurostat)

Slovakia

Between 2008 and 2012, Slovakia did not produce any digital cameras. Unlike many other EU countries, the imports and exports are on comparable scales and follow comparable trends, as illustrated in Figure A5-13.

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Figure A5-13: Imports and Exports of Digital Cameras to/from Slovakia (2008 to 2012) (Source: Eurostat)

United Kingdom

Sales of digital cameras in the UK have fallen by 29% since 2006. In 2011, the market for digital cameras had a value of £598 million, compared with £843 million in 2006. It is forecast that by 2016, it will have declined further to £523 million. Data from Mintel claims that 8% of UK adults are likely to use a smartphone rather than replace their current digital camera when it breaks. Indeed, whilst 80% of UK consumers capture photos with a digital camera or camcorder, only 40% use a digital camera or camcorder specifically (Mintel, 2012).

With regard to digital camcorders, sales have decreased 21% in the five years to 2012 and the value of sales decreased from £354 million in 2006 to £279 million in 2011. It is estimated that some 45% of consumers use their smartphone to capture photo or video (Mintel, 2012).

In the UK, production of digital cameras has been relatively stable, but did increase between 2011 and 2012.

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Figure A5-14: Production of Digital Cameras (volume and value) 2008 to 2012 (Source: Eurostat)

Non-EU Countries

United States

Research estimates that 84% of US households have a digital camera CE (2013).

Table A5-25: US Digital Camera Revenue (wholesale revenues in billions) Year Total Revenue Revenue from Digital Still Cameras Revenue from Digital SLRs 2008 $6.8 billion $4.7 billion $2.1 billion 2009 $6.3 billion $4.8 billion $1.5 billion 2010 $6.8 billion $5.2 billion $1.2 billion 2011 $6.9 billion $5.0 billion $1.9 billion 2012 (estimated) $5.8 billion $4.0 billion $1.8 billion Source: CEA (2012)

Table A5-26: Forecast of Household Penetration of Digital Cameras and Camcorders in the USA Year Digital Cameras Camcorders 2010 81% 54% 2011 84% 55% 2012 84% 52% 2013 85% 42% Source: CE (2013)

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In 2011, the US was the biggest importer of digital cameras and camcorders, with a trade value of $7,517 million. It was also the fifth biggest exporter with a trade value of $2,136 million globally313.

Due to high ownership of digital cameras, the number of shipments in the US market has been decreasing in the past years314. Between 2010 and 2012, the US camcorder market decreased by 9%315. The key vendors dominating the US market include Canon Inc., Nikon Corp., Sony Corp., Samsung Electronics Co. Ltd., and Panasonic Corp316.

Research and Markets forecasts the digital camera market in the US to grow at a CAGR of 8.3% between 2013 and 2018. The main drivers of growth will potentially be demand for new technologies, such as mirrorless interchangeable-lens cameras (MILC) due to their improved features and light weight. Demand for personalized digital cameras is also expected to grow; advanced waterproof and rugged digital cameras are already being introduced in the market in different colours. Targeting female consumers is another potential for growth. The main threat for the market is presented by smartphones equipped with increasingly advanced cameras317.

China

In 2011, China was the second biggest importer of digital cameras and camcorders, with a trade value of $6,575 million (Hong Kong SAR being third with $4,592 million), and the biggest exporter with a trade value of $11,583 million (Hong Kong SAR being third with $3,335 million) globally318. China is also the world's largest market for pro camcorders, experiencing a 19% volume growth between 2010 and 2012319.

China is the largest producer of digital cameras of the world. In 2010, it exported 109 million units for $7.07 billion. In the first quarter of 2011, the export and import values of digital cameras reached $1.904 billion, the import value was $569 million and the export value was $1.335 billion. During the same time, 20.11 million digital camera units were exported320.

According to the forecast of KEN Research, the digital camera market of China will experience strong growth through 2017. The driver behind the growth is the high demand for cameras with interchangeable lenses. This study also suggests that the market is projected to grow at a CAGR of

313 World Trade Daily: WIT Report for HS Code: 852580 Digital Cameras & Camcorders, accessed at http://worldtradedaily.com/2013/04/22/wit-report-for-hs-code-852580-digital-cameras-camcorders/ 314 Yahoo Finance: Global Digital Camera Industry Outlook to 2017 - Emerging Markets, Next Big Destination for DSC Manufacturers, accessed at http://finance.yahoo.com/news/global-digital-camera-industry- outlook-164500369.html 315 Broadcast: Global camcorder market returns to growth, accessed at http://www.broadcastnow.co.uk/techfacils/global-camcorder-market-returns-to-growth/5059115.article 316 Market Research Report: Digital Camera Market in the US 2014-2018, accessed at http://www.marketresearchreports.biz/analysis-details/digital-camera-market-in-the-us-2014-2018 317 CNBC Press releases: Research and Markets: Digital Camera Market in the US 2014-2018: Increasing Demand for MILCs a Major Growth Factor, accessed at http://www.cnbc.com/id/101338812 318 World Trade Daily: WIT Report for HS Code: 852580 Digital Cameras & Camcorders, accessed at http://worldtradedaily.com/2013/04/22/wit-report-for-hs-code-852580-digital-cameras-camcorders/ 319 Future Source: Pro camcorder market volume returns to growth in Q2 2013, up 14% accessed at http://www.futuresource-consulting.com/2013-08-pro-camcorder.html 320 Research in China: Global and China Digital Still Camera (DSC) Industry Report, 2011, accessed at http://www.researchinchina.com/Htmls/Report/2011/6203.html

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21.9% during 2012-2017321. RnR Market Research also predicts that the sales revenue of digital cameras will increase in the forthcoming years. According to their forecast, revenues will reach ¥85 billion by 2017322.

According to GfK, mirrorless cameras remain the main growing segment within the camera industry. Since 2013, over 1 million mirrorless cameras were sold, which represents a 33% rise in the segment’s overall market in Asia. The trend is driven by China which saw a 60% increase in units. The main reason is the declining average price which makes mirrorless cameras increasingly affordable. Whereas the average price in 2012 in Asia was $576, in 2013 the average price had fallen around 12% to $508323.

The full frame SLR camera market also continued to grow in Asia. The segment’s overall market units grew by 52%. However, this translates to only 28% increase in the segment’s overall market value because the average price of these products has fallen by 16% to $2,567. China is the main driver here as well, with a 66% increase in units324.

According to Research and Markets, the top three vendors in the Chinese market in 2012 were Canon, Nikon and Sony, accounting for more than 70% of the total digital camera market. Research and Markets also forecast the sales revenue of digital cameras to increase in the next years and reach ¥85 billion by 2017325.

321 KEN Research: Global Digital Camera Industry Outlook to 2017 – Emerging Markets, Next Big Destination for DSC Manufacturers, accessed at http://www.reportlinker.com/p01171795-summary/Global-Digital- Camera-Industry-Outlook-to-Emerging-Markets-Next-Big-Destination-for-DSC-Manufacturers.html 322 RnR Market Research: China Digital Camera Industry Analysis and 2017 Forecasts in New Research Report, accessed at http://www.prweb.com/releases/2017-china-digital-camera/market-analysis- report/prweb10945691.htm 323 GFK: Latest trends in Asia Camera Market, accessed at http://www.gfk.com/news-and- events/news/pages/latest-trends-in-asia-camera-market.aspx 324 GFK: Latest trends in Asia Camera Market, accessed at http://www.gfk.com/news-and- events/news/pages/latest-trends-in-asia-camera-market.aspx 325 Research and Markets: Research and Forecast of China Digital Camera Industry, 2013-2017, accessed at http://www.reuters.com/article/2013/07/31/research-and-markets-idUSnBw315846a+100+BSW20130731

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Annex 6 Portable Media Players

Introduction

Portable media players or MP3 players, as they are also known (as many modern devices can also play video) – are rechargeable pocket-sized devices that play digital music and videos (Hall, 2012).

The first MP3 player went on sale in 1998. MP3 players have been extremely popular, notably following the launch of the Apple iPod in 2001. Apple has maintained a very high market share since the launch of the iPod (above 70%). The popularity of the MP3 player peaked in 2007, and subsequently declined. This decline can be attributed to the improving capabilities of smartphones, which have come to replace many small portable electronic devices such as smartphones. Sales

Sales of MP3 players in Europe appear to have peaked in 2007, when 43.5 million devices were sold at a value of €3.8 billion (EITO, 2010). Since 2007, interest in the MP3 players has been declining largely due to the increasing capabilities of smartphones and the increasing popularity of multi- function devices. This is also reflected in the Table below, which shows a drop in global Apple iPod sales from 2006 to 2013.

Figure A6-1: Sales of Apple iPod (Global) 2006 to 2013 Source: Statista, 2013g

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Charging Requirements

Desk based research suggests that the battery voltage of most MP3 players is 3.7V. The majority of Apple portable media players require a proprietary charger, with the exception of the iPod Shuffle range which charge via a 3.5mm headphone jack.

SanDisk’s Fuze+ and Clip Zip devices are fitted with a Micro-USB port, and are charged via this port. SanDisk’s Clip+, however, must be charged via Mini-USB Structure of the Sector

As previously stated, Apple Inc. hold the majority of the portable media player market. In 2012, Apple’s iPod held 70% of the portable music market share (MacTech, 2012), and 70% of US market share in the first quarter of 2013 (Ritchie, 2013). In 2009, SanDisk was Apple’s closest competitor, with a 7.2% market share, and in that year Microsoft held 1.1% (Topolsky, 2009).

Apple’s current portable media devices range includes: the iPod Classic, the iPod Nano, the iPod shuffle and the iPod Touch. SanDisk’s current range includes: the Sansa Fuze+, the Sansa Clip Zip and the Sansa Clip+. A number of other manufacturers including Sony have a range of portable media players on the market.

It is difficult to ascertain the market share of particular brands in Europe as often analysts “refrain from giving percentages, fearing negative feedback from companies” (FinnWatch, SACOM and SOMO, 2009). Market Trends

Apple is the market leader for digital audio players, with its line of iPod products. In 2011, the music market share for the Apple iPod was revealed at 78% (Macale, 2011), and was still over 70% in 2012 (MacTech, 2012). Therefore, the iPod’s sales figures provide a good representation of the portable audio player market. Apple announced that they had sold 12.7 million iPods in the first quarter of 2013, compared to 15.4 million in the first quarter of 2012 (Apple Inc., 2013) and 19.4 million in the first quarter of 2011 (Apple Inc., 2012) It is worth noting that the first quarter produces the largest percentage of annual sales, as it includes Christmas sales figures. 35.2 million units were sold in 2012 (Apple Inc., 2012b), 42.6 million sold in 2011, and 50.3 million sold in 2010 (Apple Inc., 2011) – a 15.3% decline between 2011 and 2012, and a 30.1% decline between 2010 and 2012.

The MP3 player market is in decline as it gives way to the increasing popularity of smartphones. Smartphones are increasingly able to perform an array of functions, becoming all-in-one devices. Indeed, comparing the first quarters of 2012 and 2013, where iPod unit sales declined by almost 18%, Apple’s iPhone sales increased by 29%, from 37.0 million to 47.8 million units. Case Studies

Finland

It is reported that in Finland, Creative was the most popular music player in early 2008 (GfK Sverige (2009) cited in FinnWatch, SACOM & SOMO, 2009).

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France

Figure A6-2 below shows MP3 player sales in France between 2006 and 2011.

Figure A6-2: Sales of MP3 players in France 2006-2011 Source: Les Echos, 2011

In France, Apple dominated the portable media players market in 2011, accounting for 32% (EuroMonitor, 2012b). Samsung Electronics France and Sony France SA followed Apple Computer France with volume shares of less than 10% each (EuroMonitor, 2012b).

Germany

Similar to other devices, the rise of smartphones would appear to have impacted the sales for portable media players such as MP3 players326. The Table below charts the decline in sales of MP3 players for Germany from 2008 until September 2013.327

Table A6-1: Consumer electronics market index 2008-Q1-Q3 2013: MP3 players Year Sales (thousand units) 2008 7,790 (-1.9%) 2009 6,684 (-14.2%) 2010 5,362 (-19.8%) 2011 4,596 (-14.3%)

326 Heise Online (2013): MP3-Player sind kaum noch gefragt: Der Boom ist lange vorbei, accessed at http://www.heise.de/newsticker/meldung/MP3-Player-sind-kaum-noch-gefragt-Der-Boom-ist-lange- vorbei-2067863.html 327 Gesellschaft für Unterhaltungs- und Kommunikationselektronik (gfu) mbH (2014): Consumer Electronics, accessed at http://www.gfu.de/home/marktzahlen/markt.xhtml

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Table A6-1: Consumer electronics market index 2008-Q1-Q3 2013: MP3 players Year Sales (thousand units) 2012 3,768 (-18,0) Q1-Q3: 2,635 January – September 2013 1.759 (compared to Q1-Q3 2012: -33.2%)

Italy

In 2011, portable MP3 players and portable multimedia players were increasingly replaced by Smartphones such as the iPhone and Samsung Galaxy, with , portable media players declining by 24% in current value terms to reach €283 million in 2011 (EuroMonitor, 2012c). The difficulties of the Italian economy may have further exacerbated this negative trend. It is reported that Sony Italia dominated sales of portable players in Italy in 2011, recording a retail volume share of over 25% (EuroMonitor, 2012c).

Spain

In 2011, 1,595,000 portable music players were sold with a total value of €98 million, the average device price being €55. In 2012, sales had decreased to 1,180,000 with a total value of €65 million; however the average price of devices had increased to €65 (Ametic and Funcoas, 2011). The emergence of the smartphone has been cited as the primary cause of reducing sales of MP3 and MP4 players in Spain (Elektromarket, 2013b).

In 2009, 14.02 million mobile phones with the ability to play MP3 music were sold in Spain – 8.4% more than in 2008. In addition, in 2009 1.86 million smartphones with the capability to store and play music were sold, which represents an increase of 197.6% when compared with 2008.

Table A6-2: Sales of Portable Music Players in Spain 2007-2012 Year Portable CD Player MP3 Player MP4 Player 2007 162,300 1,822,600 2,224,500 2008 91,000 950,500 2,270,500 2009 0 655,300 1,844,300 2010 - 740,000 1,540,000 2011 - 1,595,000 2012 - 1,180,000 Source: Asimelec (2010); Ametic and Funcoas (2011)

United Kingdom

The largest individual market for MP3 players in Europe is Great Britain (EITO, 2010). Although 43% of the UK population own an MP3 Player, it has been estimated that only 31% of the UK population actually uses an MP3 player. There is thus a significant gap between the use and ownership of MP3 players. This trend is similar to findings reported in the Communications Market Report 2011 and may be due to the increasing use of smartphones as music players, leading to fewer consumers using their MP3 players and iPods for this purpose (Ofcom, 2012).

In the UK, as is likely the case with the rest of the EU, MP3 players make up the vast majority of unit sales in the personal audio sector. In 2011, the market for MP3 players with a capacity of less than 1 GB decreased by 90.4% in sales volumes, and 95.2% in sales value (Independent Electrical Retailer,

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2011). However, players with a memory size of 16 GB or more have performed well; and those with memories of greater than 32 GB saw a 77.3% rise in sales volume, and 77.8% rise in growth value – with an average price dropping to £188. Overall, the number of MP3 player sales decreased 17.3% compared to 2010, and their sales value decreased by 6.4%, with the average price going down 3.19% (Independent Electrical Retailer, 2011). In 2012, portable media players suffered a further sales decrease of 31% over 2011, and a 33.24% decrease in value (Independent Electrical Retailer, 2012). This trend is set to continue, with Mintel predicting that by 2017, UK sales will halved and may potentially drop to around £31 million.

Table A6-3, below, shows the market trends for MP3 players in the UK in 2011 compared to 2010.

Table A6-3: Growth/decline (%) of portable audio products sales in 2011 in the UK Volume Value Price Memory size <8GB -14.18% -20.66% -7.55% 8-16GB -41.4% -36.98% -7.54% >16GB -28.86% -28.99% -0.18% Price (£) £0-£50 -12.83% -15.09% -2.59% £50-£100 -63% 63.24% -0.64% £100-£150 -67.51% -68.43% -2.83% £150-£200 -12.2% 7.62% -4.09% £200-£250 -29.97% -29.85% 0.18% £250-£300 3.91% -0.68% -4.41% £300-£350 -67.07% -66.25% 2.49% >£400 15.09% 21.83% 5.85% Touchscreen With touchscreen -19.66% -21.52% -2.31% Non-touchscreen -39.92% -55.52% -25.975 Source: (Independent Electrical Retailer, 2012)

United States

In 2008, 37% of US adults reportedly owned an mp3 player. This number initially increased to around 44% in 2009 and then grew to 47% in 2010. . Since 2010, ownership levels have remained relatively stable, with ownership levels in 2011, 2012 and 2013 estimated to be in the region of 44% 42% and then 43% respectively. 328.

The reason behind the stagnation/decrease is likely to be the spread of smartphones capable of carrying thousands of songs as well as TV episodes, movies and even books. Consumers carrying smartphones already, find it unnecessary to have an additional dedicated portable media device

328 Statista: Percentage of adults in the United States who owned a mp3 player between April 2006 and January 2013, accessed at http://www.statista.com/statistics/256770/percentage-of-us-adults-who-own-a- mp3-player/

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with them. However, portable media players are likely to remain the choice of consumers looking for a product to use while engaging in some type of fitness activity (e.g. listening to music while running). For such purposes, a portable media device has a number of advantages compared to a smartphone, namely, that they tend to be lighter and smaller. Moreover, a portable media player is likely to be cheaper than a smartphone which may be an important factor for some consumers as the risk of damaging the device is higher during sporting activities compared to normal everyday use. On the other hand, smartphones offer consumers the potential to combine the features of a sports and activity monitor via a fitness app and portable media device. As is noted below in Annex 7, there is evidence that this trend is growing.

Besides fitness related use, the spread of lossless audio offers growth-potential to the portable media market. Lossless media requires considerably more space than lower quality audio. Smartphones normally have less storage capacity than portable media devices, and even that limited storage space competes with a higher range of files since smartphones are used for a wider range of activities involving different programs.329

China

In 2008 Research and Markets forecasted China's portable media players industry to grow at a CAGR 34.5% from 2008 to 2012, however their expectations about the market growth were not realised330.

The retail volume sales of portable media players declined in China in 2011 and 2012. The shrinking of the market accelerated further in 2013 as mobile phone penetration reached 93%. People who own a phone, and especially the growing number of those who own a smartphone, find carrying a separate media player unnecessary, which affects portable media player sales in China. In 2012 the leading Chinese vendor was Beijing Newman Ideal Digital Technology Co Ltd. With around 600 sales agents, 800 specialist stores and 5,000 specialist counters, Beijing Newman Ideal Digital Technology Co Ltd.’s distribution network covers most prefecture-level cities in China. The company’s retail volume share fell by 3% between 2009 and 2012 to reach 10%. Retail volume sales of the portable media player market are expected to shrink by 13% CAGR331.

329 TUAW: iPod continues to dominate dying portable media player market, accessed at http://www.tuaw.com/2013/12/19/ipod-continues-to-dominate-dying-portable-media-player-market/ 330 Research and Markets: China's Portable Media Players Industry Will Grow at a Compound Annual Growth Rate (CAGR) of 34.5 Percent from 2008 to 2012, accessed at http://www.businesswire.com/news/home/20081024005335/en/Research-Markets-Chinas-Portable- Media-Players-Industry#.UwS82oUeqZQ 331 Euromonitor International: Portable Players in China, accessed at http://www.euromonitor.com/portable- players-in-china/report

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Annex 7 Sports and Activity Monitors

Introduction

The sport monitoring market previously targeted only enthusiasts and high performance athletes. The market has since expanded, with manufacturers of fitness and sports devices targeting leisure and novice athletes across a range of sports. For the everyday health conscious consumers, activity monitors can measure a range of data such as calories expended throughout the day, sleep quality and steps taken. Devices that target sports enthusiasts have, for some, become an integral part of their training, as various data can be reviewed after training and then shared on-line with social communities. Sales

Global Sales

The global market for sports devices has previously been dominated by Polar Electro. In 2008, it was estimated that it had a total market share of 30% across all sports devices (e.g. running, cycling), almost five times greater than its nearest competitor.

The World Market for Sports & Fitness Monitors from IMS Research estimated that global shipments will increase from 43.8 million units in 2013, to 56.2 million units in 2017. Over this five year period, the total number of units shipped globally will be an estimated 252 million units (Figure A7-1).

Figure A7-1: Global forecast for Sports & Fitness Monitor Shipments332

332 Mobihealth news, Report: 56 million sports fitness monitors to ship in 2017, May 16, 2013, accessed at: http://mobihealthnews.com/22447/report-56m-sports-fitness-monitors-to-ship-in-2017/

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Another report estimates that the number of health and medical devices will increase to around 170 million devices, up from 21 million devices in 2012. Of the 170 million devices, around 90 million will be wearable fitness devices compared to 80 million health focused devices333. Clearly, there is some discrepancy between the number of devices sold to date and forecasts. Nevertheless, it is clear that this is a burgeoning market.

Global sales are predominantly accounted for by two regions, the first is the Americas accounting for 41% of the market while the second region encompasses Europe and Middle East and accounts for 42% of the market. The market in the Asia-Pacific region is however set to expand and is expected to increase its market share from 17% to 21% by 2017334.

The number of new entrants to the market is also indicative of the potential for growth in this area of the market. For example, TomTom has diversified from manufacturing PND and has released multi-sport GPS watches. Global sales forecasts for these devices are presented in Table A7-1.

Table A7-1: Global Sales Forecasts of TomTom GPS sports watches335 Year Sales Revenue ($ million) 2011 457 2012 677 2013 1009 2014 1208 2015 1428

Types of Devices

It has been difficult to gather information that provides a clear picture of the market for sports devices. Information that has been gathered suggests that Polar Elector dominates the market for devices that use a heart rate monitor and Garmin the market for devices with GPS compatibility. However, there are increasingly devices that have both GPS and heart measuring capabilities.

Pedometers

In terms of overall number of units sold, simple pedometers possess the largest share of the sports and fitness market. However, the sale of standalone pedometers is likely to decline as smartphones and ‘activity monitors’ gain hold in the market336.

Activity Monitors

Activity monitors track everyday activities (e.g. steps taken, calories expended and quality of sleep) thereby helping the user to maintain a healthy lifestyle. Comparing the number of units sold and

333 Mobihealth, By 2017: 170 million wearable wireless health and fitness devices, 23 February 2012, accessed at: http://mobihealthnews.com/16415/by-2017-170m-wearable-wireless-health-and-fitness-devices/ 334 IHS Technology, shipments of sports and fitness monitors to total one-quarter billion from 2013 through 2017, 16/05/2013, accessed at: https://technology.ihs.com/434231/shipments-of-sports-and-fitness- monitors-to-total-one-quarter-billion-from-2013-through-2017 335 GPS Business News, accessed at: http://www.gpsbusinessnews.com/GPS-Watches-Sales-Forecasts-Until- 2015_a4210.html 336 IHS Technology, shipments of sports and fitness monitors to total one-quarter billion from 2013 through 2017, 16/05/2013, accessed at: https://technology.ihs.com/434231/shipments-of-sports-and-fitness- monitors-to-total-one-quarter-billion-from-2013-through-2017

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sales revenue for activity monitors sold on e-bay, it can be seen that Fitbit Flex is the clear market leader (Table A7-2).

Table A7-2: Number of Units Sold and Sales Revenue for Activity Monitors over 90 days 337 Product Sales Revenue Units Sold Fitbit Flex $721,831 6,400 Nike FuelBand $476,390 3,677 Jawbone UP $450,481 5,536 Fitbit One $265,316 4,050 Polar FT4 $138,418 2,206 Basis $98,990 325 Fitbit Zip $74,080 1,596 BodyMedia Fit Core $7,279 117 Striiv Play $1,860 43 Motorola MotoActiv $399 8

From this indicative sample of sales over 90 days from e-bay, it can be seen that:

 Price would appear not to be an influential factor (two of the lower priced products rank near the bottom of the list – Fitbit Zip and Striiv Play); and  Design and aesthetics are clearly important as the top three devices, measured in terms of sales revenue, are the Fitbit Flex, Nike FuelBand and Jawbone UP. All of these devices are thin, sleek and minimalist devices that have simple interfaces and look more like a bracelet than watch. Whereas those devices that sold fewer units in this time period are less compact and look more like a watch338.

Table A7-3 outlines the range of charging methods that have been adopted by the manufacturers of activity monitors. As is common for many Polar devices, a battery is used to power the Polar FT4. There would also appear to be a trend for those activity monitors that resemble watches rather than bracelets to be charged via a USB – Micro-USB cable.

Table A7-3: Charging requirements for activity monitors Product Charging Method Fitbit Proprietary charger Nike FuelBand Plugs into computer/USB cable Jawbone UP Syncs with computer/iPhone and charges via 3.5mm jack plug Polar FT4 Battery Basis Proprietary or Bluetooth sync BodyMedia Fit Core Micro-USB Striiv Play Micro-USB Motorola MotoActiv Micro-USB

337 Terapeak Trends: Fitbit, Nike Top the Market for Activity Trackers, accessed at: http://www.terapeak.com/blog/2013/07/31/fitbit-nike-top-the-market-for-activity- trackers#.UkrHGhDXOUm 338 Terapeak, Terapeka trends: Fitbit, Nike, Top of the Market for Activity Trackers, accessed at: http://www.terapeak.com/blog/2013/07/31/fitbit-nike-top-the-market-for-activity- trackers#.UkrHGhDXOUm

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Heart Rate Monitors

Sports devices that are supplied with heart rate monitors account for the largest overall revenue within this market sector (23%). However, this is expected to decline to around 19% by the end of 2017 as the market matures and the use of activity monitors increases339. Data gathered on the US market in 2008 would suggest that Polar Electro dominated the market for devices compatible with a heart strap. Indeed, Figure A7-2 shows that Polar Electro had a market share of 80% in the US for devices that monitored what the author of the report called ‘vital signs’ (Fitness Vital Signs Monitoring).

Figure A7-2: Percentage of Market Share for Consumer Monitoring for Fitness, 2008 (US)340

While one 2007 source found that most of Polar Electro’s €170 million sales come from Western Europe and the US341, a more recent study suggested that Polar has annual sales of more than $250 million and a 75% global market share342. It is likely that Western Europe and the US remain Polar Electro’s main market.

GPS Devices

There are sufficient GPS devices to justify these be considered as a standalone category in the sports monitor market. It would seem that Garmin dominate this market, with it possessing as much as

339 IHS Technology, shipments of sports and fitness monitors to total one-quarter billion from 2013 through 2017, 16/05/2013, accessed at: https://technology.ihs.com/434231/shipments-of-sports-and-fitness- monitors-to-total-one-quarter-billion-from-2013-through-2017 340 JRC Scientific and Policy Reports (2013), Market Developments – Remote Patient Monitoring and Treatment, Telecare, Fitness/Wellness and mHealth, accessed at: http://ftp.jrc.es/EURdoc/JRC71141.pdf 341 Czinkota, Michael et al (2006) International Marketing 8th Edition, Thomson South – Western 342 Overheat-athletics.com, An iPhone device to detect exercise induced hypoxemia (EIH), accessed at: https://sites.google.com/site/overheatathleticscom/

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90% of the global market in 2011343. Indeed, the sports and fitness market has become increasingly important for Garmin (particularly with a decline in PND sales), as year on year, this sector accounts for a greater percentage of its total revenue. Included within this total revenue will be accessories such as heart rate monitors, cadence meters, footpods and innovative cycle power meters. These are often sold in bundles alongside sports device or are aftersales purchases.

As the potential market for sports devices grows and the range of devices expands, the average selling price across all manufacturers has dropped, with the most common devices available for around $200344. To remain competitive, Garmin has predicted that the price of their products could further decrease by 25% over the coming years345. Charging requirements

Sports Devices

The sports device market has diversified and now offers devices for a range of sports which include specific running, cycling and swimming devices, multisport/triathlon watches, navigations devices for outdoor walking, GPS devices to assist golfers with club selection. Furthermore, watches are available for mariners (Garmin quatix™).

Sports devices are unique in that they often need to be waterproof and as such are subjected to pressure tests in order to assign the appropriate water rating. It is this that determines whether a watch can be worn while swimming without damage. This is an important consideration for manufacturers in terms of the most appropriate charging solution for a given device. Table A7-4 outlines the definitions that Garmin use for each of the water ratings and guidance as to which activities are suitable and unsuitable. Garmin assert that watches must be capable of withstanding pressure equivalent to a depth of 50 metres before they are suitable for swimming. Interestingly, Suunto, TomTom and Bia also believe this to be the case whereas Polar believe that watches are suitable for swimming provided they are resistant to a depth of 30 metres.

343 Satellite Sportlight, Fitness GPS market gets hotter with emergence of new players, devices and applications, 05/08/2011, accessed at: http://satellite.tmcnet.com/topics/satellite/articles/205066-fitness- gps-market-gets-hotter-with-emergence-new.htm 344 IHS Technology, shipments of sports and fitness monitors to total one-quarter billion from 2013 through 2017, 16/05/2013, accessed: https://technology.ihs.com/434231/shipments-of-sports-and-fitness- monitors-to-total-one-quarter-billion-from-2013-through-2017 345 ZDNET, Garmin runs from crowded GPS market to new fitness focus, 03/06/2011, accessed: http://www.zdnet.com/blog/btl/garmin-runs-from-crowded-gps-market-to-new-fitness-focus/49890

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Table A7-4: Water rating for sports devices346 Water Definition Suitable activities Unsuitable activities Rating Indoor/outdoor use in the The device will withstand presence of rain, snow or IPX7 incidental exposure to water of up Any sustained immersion intermittent splashes of to 1 metre for up to 30 minutes water The device will withstand pressure Showering, swimming Improved resistance to 1 ATM equivalent to a depth of 10 and other water-related rain, snow and splashes metres activities The device will withstand pressure Showering, rain, snow, Swimming and water- 3 ATM equivalent to a depth of 30 splashes and accidental related activities metres immersion High speed watersport The device will withstand pressure Surface swimming, surface impact may 5 ATM equivalent to a depth of 50 snorkelling and similar exceed this rating (e.g. metres activities wipe-out during motorised water sports)

The tables in the following pages provide an overview of devices that are available for different sports, the release date, price at release, charging method, the extent to which it is waterproof and whether it comes with an AC charger or charging block. It should be noted that devices have been categorised by the sport for which the units is primarily intended. For example, the Polar RC3 has the ability to record some cycling data, but is primarily marketed towards runners.

346 Garmin website, accessed: http://www.garmin.com/en-US/legal/waterrating

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Table A7-5: Overview of fitness devices that can be worn while swimming Comes with AC Device name Target sport Price Date of release Waterproof Charger charger/charging block BIA GPS Triathlon €230 Feb 2014 50 m Charging clip Bryton Cardio 60 Multisport Run €150 Mar 2013 30 m Watch FINIS Swimsense Swim €265 Sep 2010 yes Charging clip Garmin Forerunner 310XT Triathlon €416 Jun 2009 Yes Charging clip Charging block Garmin Forerunner 910XT Triathlon €164 Apr 2012 50 m Charging clip Charging block Garmin Swim Swim €399 Jul 2012 Yes N/a N/a Magellan Switch & Switch Up Triathlon €440 Feb 2012 50 m Charging clip Device itself charged via battery - accompanying Polar RCX5 Triathlon €567 Jun 2011 30 m No GPS pod charged via Micro-USB Polar V800 Triathlon €89 Apr 2014 30 m Charging clip Released April 2014 Triathlon / Suunto Ambit2 S €227 May 2013 50 m Charging clip No ultra-running Cradle that connects to watch, Mini-USB cable Swimovate Pool-Mate Pro Swim €126 Yes that connects cradle to laptop ATM5 (50 m TomTom Multisport GPS Watch Triathlon €230 Jul 2013 Charging clip No roughly) Timex Global Trainer Triathlon €150 Jun 2010 50 m Charging clip Charging block Source: DC Rainmaker, accessed at: http://www.dcrainmaker.com/ Garmin, accessed at: http://www.garmin.com/en-GB Amazon, accessed at: http://www.amazon.co.uk/ Swimovate, accessed at: http://www.swimovate.com/ Polar, accessed at: http://www.polar.com/uk-en

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Table A7-6: Overview of fitness devices designed to be used by cyclists Device name Target sport Price Date of release Waterproof Charger Comes with AC charger CycleOps Joule 2.0 (Original) Cycling €334 Mar 2010 IPX7 Mini-USB No CycleOps Joule GPS Cycling €139 Jun 2012 IPX7 Garmin Edge 200 Cycling €214 Sep 2011 IPX7 Mini-USB Charging block Garmin Edge 500 Cycling €314 Dec 2009 IPX7 Mini-USB Charging block Garmin Edge 510 Cycling €378 Jan 2013 IPX7 Mini-USB Charging block Garmin Edge 800 Cycling €403 Nov 2010 IPX7 Mini-USB Charging block Garmin Edge 810 Cycling €252 Jan 2013 IPX7 Mini-USB Charging block Garmin Edge Touring (Normal) Cycling €315 Oct 2013 IPX7 Mini-USB No Garmin Edge Touring (Plus) Cycling €249 Nov 2013 IPX7 Mini-USB No O-Synce Navi2Coach Cycling €219 Oct 2012 IPX7 Micro-USB No Polar V650 Cycling €260 Apr 2014 IPX7 Micro-USB Timex Cycle Trainer 2.0 GPS Cycling €334 Jun 2012 IPX7 Micro-USB No Note: Shaded cells indicate that device is charged via Micro-USB Source: DC Rainmaker, accessed at: http://www.dcrainmaker.com/ Garmin, accessed at: http://www.garmin.com/en-GB

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Table A7-7: Overview of fitness devices designed to be used by runners Device name Target sport Price Date of release Waterproof Charger Comes with AC charger Cradle/clip Adidas Smart Run GPS Run €400 Nov 2013 1ATM(~IPX7) (Micro-USB plugs into this) Garmin Fenix Run €441 Aug 2012 50 m Charging clip Charging block Garmin Forerunner 10 Run €126 Sep 2012 50 m Charging clip No Garmin Forerunner 110 Run €176 May 2010 IPX7 Charging clip Charging block Garmin Forerunner 210 Run €227 Oct 2010 IPX7 Charging clip Charging block Garmin Forerunner 220 Run €277 Oct 2013 50 m Charging clip No Garmin Forerunner 405 Run €200 Jan 2008 IPX7 Charging clip Charging block Garmin Forerunner 410 Run €239 Oct 2010 IPX7 Charging clip Charging block Garmin Forerunner 60/70 Run €140 Aug 2009 N/a N/a Garmin Forerunner 610 Run €290 Apr 2011 IPX7 Charging clip Garmin Forerunner 620 Run €416 Oct 2013 50 m Charging clip No Garmin Tactix Run €390 Nov 2013 50 m Charging clip Yes Magellan Echo Run €126 Oct 2013 IPX7 N/a N/a Motorola Run €183 Oct 2011 IP55 Micro-USB Yes No - watch itself can be directly Nike+ GPS Sportwatch Run €189 Apr 2011 50 m Device connected to laptop - although an extension cable is provided Polar RC3 Run €314 Sep 2012 IPX7 Micro-USB No Polar RCX3 Run €200 Jun 2012 Yes N/a N/a Soleus 1.0 GPS Run €144 IPX7 Charging clip No Soleus 2.0 GPS Run €160 IPX7 Charging clip No Yes – 100 m Suunto Ambit Run €429 Apr 2012 Charging clip No ISSO 2281 Suunto Ambit2 R Run €453 Mar 2014 50 m Charging clip No Timex Marathon GPS Run €100 Apr 2012 30 m Charging clip No Timex Run Trainer GPS 1.0 Run €126 Sep 2011 50 m Charging clip No Timex Run Trainer GPS 2.0 Run €284 Apr 13 50 m Charging clip No

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Table A7-7: Overview of fitness devices designed to be used by runners Device name Target sport Price Date of release Waterproof Charger Comes with AC charger TomTom Runner GPS Watch Run €189 Jul 2013 ATM5 50 m Charging clip No Note: Shaded cells indicate that device is charged via Micro-USB Sources: DC Rainmaker, accessed at: http://www.dcrainmaker.com/ Garmin, accessed at: http://www.garmin.com/en-GB Amazon, accessed at: http://www.amazon.co.uk/

Table A7-8: Overview of fitness devices designed to be used by golfers Device name Target sport Price Date of release Waterproof Charger Comes with AC charger Garmin Approach S1 Golf €164 (IPX7) Charging clip Charging block Garmin Approach S2 Golf €211 yes - 10m Charging clip Charging block Garmin Approach S3 Golf €293 (IPX7) Charging clip Charging block Garmin Approach S4 Golf €317 yes - 10m Charging clip Charging block Garmin Approach G3 Golf €234 (IPX7) Garmin Approach G5 Golf €293 (IPX7) Garmin Approach G6 Golf €306 (IPX7) Mini-USB Charging block Garmin Approach G7 Golf €340 (IPX7) Mini-USB Charging block Garmin Approach G8 Golf €435 (IPX7) Mini-USB Charging block Sources: http://www.garmin.com/en-GB

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The most striking thing about the overview of devices in the tables above is that only five devices are charged via a Micro-USB port. All of these were released after October 2011.

Sports devices have batteries that can be recharged by either a Mini-USB connector or charging clip/cradle. The benefits of each of the charging methods have been considered below.

Mini-USB Charging Devices

Considering the Garmin Forerunner® 301 and 305 devices that are charged via Mini-USB, the former was released in 2001 and the latter was released in 2005. Desk based research suggests that the charging clip/cradle had not been introduced until 2008 and so this was the best charging solution for a device with an integrated battery at that time.

Turning to the Garmin Edge® series and the more recently released Garmin Approach G6, G7 and G8, it is notable that these devices are not worn on the wrist of the user when in operation. Rather, the Garmin Edge® series devices are fixed to the users bicycle while the Garmin Approach® series can be attached to a golf buggy or kept in the pocket and consulted by the user when necessary (for example, when determining length of a particular hole or distance of the golf ball from the pin). As well as charging, data can be uploaded and downloaded via the Mini-USB data transfer cable.

Devices charged via a Mini-USB port are shielded from water by rubber sealing rings and/or magnetic locks. Thus they are only compatible with IPX7 and are not to be used while swimming.

Micro-USB

Of the devices reviewed, only five used Micro-USB for charging, two running devices and three cycling devices, these are highlighted in green in the tables above. For four of the five devices identified, a waterproof rating of IPX7 has been attained, the level of protection from water deemed sufficient for running and cycling devices. No sports device that is intended to be worn while swimming is charged via Micro-USB. Of the two biggest manufacturers Garmin and Polar, only Polar have a device that can be charged via Micro-USB, this being the RC3, which was released towards the end of 2012 and is the first Polar device to have integrated GPS. Previous Polar devices have been powered by a battery. However, as devices have attained more features and required more power, Polar have switched to rechargeable batteries. Indeed, GPS performance was realised with a Micro-USB charged accessory (e.g. RCX5). A possible advantage of incorporating a Micro-USB port rather than the Mini-USB is reduced size, as sports devices that use Mini-USB typically have a thicker design.

It should be noted that a newly released Garmin device intended for cycling (Garmin 1000) has adopted Micro-USB charging. This suggests that Garmin consider this method of charging technically feasible for devices not worn by the user or used when immersed in water.

Charging Clip/Cradle

Charging clips/cradles would seem to offer the advantage of providing a waterproof method of charging and also data transfer. This means that devices such as the Garmin Forerunner® 310XT and 910 can target the triathlon market while the Garmin quantix™ can be marketed towards mariners. However, Garmin now produce fully waterproof devices for runners (Garmin Forerunner 50) and outdoor enthusiasts (Garmin Fenix).

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The charging clip also appears to minimise the size of the connecting components in the wearable device. This allows for thinner devices that are more comfortable for consumers. For example, the Garmin Approach® S1 -4 series and Forerunner devices that are charged via a Micro-USB are suitably compact and are the same size as a standard watch.

However, if the proprietary charging clip/cradle is lost or damaged by the consumer, replacements are only available from authorised sites and can be expensive. Capacity

Table A7-9 shows the potential capacity for a range of Garmin sports devices. It is interesting to note that cycling devices charged via Mini-USB have a larger capacity.

Table A7-9: Charging power, selected Garmin devices Charging Charging clip Mini-USB device Forerunner Forerunner Forerunner Forerunner Device Edge 810 Edge 705 210 610 310XT 910XT 200 mAh 200 mAh 700 mAh 620 mAh 1100 mAh 1200 mAh rechargeable, rechargeable, rechargeable, prismatic, rechargeable, rechargeable, lithium ion, lithium ion, lithium ion lithium ion built in, built in, Battery spec coin cell coin cell battery battery lithium ion lithium ion battery battery battery battery

Source: Collated from user manuals available on Garmin website, accessed at: http://www.garmin.com/en- GB

Non – Rechargeable Battery

It would seem that Polar typically design sports devices without an integrated rechargeable battery. However, as devices have become more powerful with additional features, rechargeable batteries have become more common. Although Garmin have two methods of charging devices with integrated batteries (charging clip/cable and Mini-USB), devices that are targeted towards outdoor enthusiasts instead rely on non-rechargeable batteries that can be easily replaced. This is a useful feature for those who need a fully charged navigating device but may be walking in areas where it is not possible to recharge the device.

Future Markets

It is likely that smart phones will impact future sales of health and fitness devices. The download and installation of mobile phone apps used for sports and fitness activities is predicted to increase from 156 million in 2012, up to 248 million in 2017 (Figure A7-3). These forecasts are for three major app categories, namely, recording runs (e.g. run keeper), measuring heart rate and multi-sport apps and relate to the number of times that these apps are likely to be downloaded from an app store rather than the number of users347.

347 IHS, Sports and fitness app market to expand by more than 60% in 5 years, 11/07/2013, accessed at: http://press.ihs.com/press-release/design-supply-chain/sports-and-fitness-app-market-expand-more-60- percent-five-years

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Figure A7-3: Global Forecast of Installations of Sports & Fitness Mobile Apps (in millions of units)348

It is also possible to pair smartphones with accessories such as heart rate monitors. It is likely that the sale of such accessories for this purpose will account for an increasing proportion of the revenue of manufacturers such as Garmin and Polar. A recent study concluded that of smartphone owners, 62% of people that were interested in sport and fitness apps and exercised once a week would be prepared to purchase a fitness sensor. When asked how much they would be willing to pay, around 82% of respondents indicated they would pay up to £90 for a complementary sensor349. Smart Watches

Smart watches are multipurpose devices that are capable of performing similar functions to a smartphone. They can either be used as a standalone device or be paired with a smartphone. Sony and Motorola were initially market leaders but have since been joined in the market by other manufacturers which include Apple, Google, Microsoft and Samsung350. Smart watches are a new innovative market with global shipments predicted to increase from around 268,000 units in 2013, to 2.6 million units in 2014. Growth is set to continue in the long term, with shipments expected to reach nearly 39 million units by 2018 (Figure A7-4).

348 IHS, Sports and fitness app market to expand by more than 60% in 5 years, 11/07/2013, accessed at: http://press.ihs.com/press-release/design-supply-chain/sports-and-fitness-app-market-expand-more-60- percent-five-years 349 Mobihealth news, Survey, Consumer interest in app-enabled fitness sensors, 03/07/2012, IMS Research, accessed at: http://mobihealthnews.com/17802/survey-consumer-interest-in-app-enabled-fitness- sensors/ Canalys, Over 5 million smart watches to ship in 2014, 16/07/2013, accessed at: http://www.canalys.com/newsroom/over-5-million-smart-watches-ship-2014

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Figure A7-4: Preliminary Global Forecast of Smartwatch Shipments (thousands of 351 units)

Conversely, another analysis suggests that in 2014, worldwide shipments of smart watches will be around 8.9 million, reaching 214 million units in 2018. In terms of market value, it is estimated that the retail value of this market will be USD 2.9 billion in 2014 and USD 62.2 billion in 2018. Taking into consideration the potential of the smart watch, it is suggested that even these figures may be conservative. It is conceived that the smart watch will in the near future (6 – 18 months) be paired with an in-ear loudspeaker that allows communication in the same way as a phone. It is predicted that users of the future will carry a tablet and a smart watch. The sale of smartphones will taper to around 2.3 billion units in 2018, up from 1.4 billion units in 2013352. Case Study Countries

United States

Sports and activity monitors are one of the fastest growing segments within consumer electronics. InMedica (or IHS) has found that the sports and fitness monitoring market is outpacing overall growth in consumer electronics revenue, and is exceeding short-term growth for the sports and

351 HIS, HIS news flash: Fast facts ad analysis of today’s smartwatch announcements, 04/09/2013, accessed at: http://press.ihs.com/press-release/design-supply-chain-media/ihs-news-flash-fast-facts-and-analysis- todays-smartwatch-ann 352 Tekcarta, smart watches, 02/09/2013, accessed at: http://www.generatorresearch.com/tekcarta/analysis- insight/smart-watches/

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fitness industry in general353. It has been predicted that for 2014, the sale of activity trackers will top $1 billion in the US and could reach $8 billion by 2018354.

China

In 2013 the Asia-Pacific region accounted for 17% of the global sales of sports and activity monitors, coming third behind the Americas and the collective Europe-Middle East-Africa (EMEA) region. However, according to the forecast of IHS, the Asia-Pacific region will account for 21% share of the global market by 2017, owing to strong growth expectations in China355.

353 IHS: Sports and Fitness Monitors - World – 2013, accessed at: http://www.imsresearch.com/report/Sports_and_Fitness_Monitors_World_2013 354 Activity monitors tipped to flood market with several new devices launched at CES, accessed at: http://www.news.com.au/technology/gadgets/activity-monitors-tipped-to-flood-market-with-several- new-devices-launched-at-ces/story-fnda1lbo-1226797516276 355 IHS: Shipments of Sports and Fitness Monitors to Total One-Quarter Billion from 2013 Through 2017, accessed at: http://www.isuppli.com/Home-and-Consumer-Electronics/News/Pages/Shipments-of-Sports- and-Fitness-Monitors-to-Total-One-Quarter-Billion-from-2013-Through-2017.aspx

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Annex 8 Personal Navigation Devices

Introduction

There are a number of ways in which a Personal Navigation Device (PND) can be physically incorporated into vehicles:

 A standard aftermarket PND that is capable of docking into the mounting station of a car;  An original equipment manufacturer (OEM) PND that docks in a mounting station and connects wirelessly to the car infrastructure;  Specific OEM PND that is incorporated into the dashboard of a car;  Black box OEM PND that is connected to the infrastructure of a car (whether connected by the multi-media system of the car, connected directly to the car infrastructure or part of the multimedia system); and  PND fully integrated into the design and build of the car356.

An OEM manufactures products or components that are purchased by another company. The purchasing company will then incorporate that product into a final product that will carry its name. With regard to OEM, the European and the US market are the most highly developed, with respective market penetration rates of 27% and 29%357. This section of the report will focus on the standard aftermarket PNDs that require charging. This includes PNDs for motorbikes and automobiles. Sales

Global Sales

Table A8-1 shows the number of aftermarket PNDs sold from 2008 – 2012 and estimate sales for 2016 and 2017. It is clear that the global PND market has been in decline since 2008 and that this trend is unlikely to reverse in the future.

356 Safety Forum (2009): Nomadic Device Forum Final Report – Short Form, accessed at: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&ved=0CEAQFjAC&url=h ttp%3A%2F%2Fec.europa.eu%2Finformation_society%2Factivities%2Fesafety%2Fdoc%2F2009%2Fsteering _group%2F09_ndf__final_report_short.pdf&ei=59pwUvOTHoOU7QbM- 4GQAQ&usg=AFQjCNENehFVsvEzsjNVe1uZD4IoimLJZQ&bvm=bv.55617003,d.ZGU 357 MiTAC annual report 2009

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Table A8-1: Global Shipment Volume of PNDs

2008* 2009* 2010* 2011* 2012* 2016** 2017** 41 million 40.5 million 39 million 36 million 28 million 23 million 17 million Sources: * Mitac Internal Corp Annual Reports (2008 – 2012) accessed at: http://www.mitac.com/InvestorRelations/AnnualReport.html ** Berg Insight, LBS Research Series, Mobile Navigation Services and Devices accessed at: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CDIQFjAB&url=http %3A%2F%2Fwww.berginsight.com%2FReportPDF%2FSummary%2Fbi-lbsseries2013- sum.pdf&ei=xs9wUp7zMOOp7AbkgIFo&usg=AFQjCNH0VtFCWD8P1WomnulXmCC3UHyxqQ&bvm=bv.556170 03,d.ZGU

European Sales

PND ownership and use in Europe

A 2012 Flash Eurobarometer survey asked interviewees in the EU27 about their current use of navigation systems. More specifically, they were asked whether ‘they were using navigation systems in their car or for any other purpose, such as hiking or biking’. This included a PND, smartphone with navigation software or a built in navigation system that has been incorporated into the dashboard of an automobile. The responses for the EU27 overall and Member States that form the focus of this study have been presented in Table A8-2 below.

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Table A8-2: Flash Eurobarometer Responses Member Yes, I am using my No, but I No, and Don’t Yes, I am using a State built in navigation plan to I do not know Yes, I am smartphone with system, integrated acquire plan to using a PND navigation into the dashboard one acquire software one NL 45% 24% 19% 3% 26% 1% DE 40% 17% 19% 4% 33% 0% FI 32% 29% 15% 9% 34% 1% UK 32% 27% 9% 5% 40% 2% FR 30% 16% 17% 7% 40% 1% PL 28% 17% 12% 10% 39% 2% IT 26% 12% 11% 7% 43% 4% SK 23% 15% 8% 13% 44% 2% PT 20% 9% 9% 9% 56% 3% ES 19% 22% 14% 5% 49% 2% EU27 29% 18% 13% 7% 41% 2% Source: Flash Eurobarometer 355 – TNS Political & Social (2012) Space Activities. Report for European Commission, Directorate-General Enterprise and Industry, accessed at: http://ec.europa.eu/public_opinion/flash/fl_355_en.pdf

Number of PND units sold in Europe, Middle East and Africa

Table A8-3 shows the size of the European market for PND as reported by TomTom, per quarter, per year358. Corresponding with the international trend, it can be seen that the number of units sold has consistently dropped year on year and there is little to suggest this will change.

Table A8-3: Market size of PND Europe (million units sold) Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total 2008 3.9 4.3 4.1 4.9 17.2 2009 3.3 3.7 3.8 4.3 15.1 2010 2.7 3.1 3.4 3.5 12.7 2011 2.4 2.7 3 3.2 11.3 2012 2 2.4 2.6 2.5 9.5 2013 1.7 2.1 - - 3.8 Source: TomTom annual reports, accessed at: http://corporate.tomtom.com/reports.cfm

2008

TomTom’s annual report suggests that the size of the market in 2008 for Europe, Middle East and Africa was in the region of 17.2 million units. This broadly accords with figures reported elsewhere that suggest that total sales in the EU and other countries (Russia, Switzerland) amounted to 18.1 million units. A breakdown of PND sales by country is outlined in Figure A8-1. As would be expected, the EU5 represents the five most important markets for Europe. The seven Member States that sold the most PNDs in 2008 are case study countries.

358 Data have been collected using Annual and quarterly reports from TomTom, which can be accessed: http://corporate.tomtom.com/reports.cfm

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Figure A8-1: Number of PND units sold in 2008, per Country359

Turning to the average selling price (ASP), it would seem that there is a notable difference between the highest and lowest ASP in Europe for 2008. Figure A8-2 shows the three countries with the lowest ASP for PNDs (Great Britain €164, Portugal and Spain €174) and the three countries with the highest ASP (Slovakia €282, Czech Republic €278 and Belgium €239). Interestingly, Germany sold the most PNDs in 2008 with an ASP of €198, a figure very close to the ASP for PNDs across Europe, €192.

Figure A8-2: Average Selling Price of PND, 2008360

When comparing Figure A8-1 and A8-2, there would seem to be a correlation between the ASP of PNDs and the number of units sold by that country. The available data suggests that in those countries with higher PND sales where the market has been established, the ASP of PND is lower. If this assumption is accepted, the relatively low global ASP of TomTom units would suggest that

359 Cellular news, Record sales of PND devices in Europe, 02/02/2009 accessed at: http://www.cellular- news.com/story/36291.php 360 Cellular news, Record sales of PND devices in Europe, 02/02/2009 accessed at: http://www.cellular- news.com/story/36291.php

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TomTom predominately sold PNDs to countries in Western Europe. However, this is expected given the number of PND sold by TomTom that year and its high share of the European market.

It should be noted that the ASP for TomTom PNDs is available for only two of the years that are of interest to this study (Table A8-4). In 2010, TomTom provided an ASP for quarter 1 only, declaring that the expansion and growth of its service element has made it difficult to compare products361.

Table A8-4: Global Average Selling Price for TomTom PND (€) Year Average Selling Price (€) 2008 €118 2009 €93 2010, Quarter 1 only €89 Source: TomTom annual reports, accessed at: http://corporate.tomtom.com/reports.cfm

However, there would seem to be a general decline in the ASP of all PNDs globally. More recent TomTom annual reports have attributed this to additional GPS and navigation features being added to other products (e.g. smartphones). Indeed, the likelihood of the ASP increasing in the future is low as the supply and range of PND increases, market competition intensifies and discretionary consumer spending on consumer electronic markets remains low.

Supplied with Charger

PNDs can be charged via a mains socket, the cigarette lighter/12 Volt port found in automobiles or by connecting to a desktop or laptop. The latter method of charging will result in a trickle charge and will take longer than the other two options. PNDs typically have a Mini or Micro-USB port. It would seem that all devices come with a vehicle power charge cable, but only some come with AC home charger and/or compatible USB cable.

Tables A8-5a, b, and c detail which chargers are compatible with each PND.

361 TomTom Annual Reports, accessed: http://corporate.tomtom.com/reports.cfm

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Table A8-5a: Representative sample of Garmin PND - Year of release, charging methods and whether PND supplied with a USB cable 2008 2009 2010 2011 2012 2013 Mini-USB Micro Mini-USB Micro- Mini- Micro- Mini- Micro-USB Mini-USB Micro-USB Mini-USB Micro -USB -USB USB USB USB USB Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin nüvi®200 nüvi® nüvi® Nulink! nüvi® 30 560LMT Zumo nüLink!® nüvi® 2407 nüvi® Camper 855 1100 1695 Camper 350LM LIVE 2320 2597LM / 760LMT-D Deluxe 2597 LMT Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin nüvi® nüvi® 205 nüvi® nüvi® nüvi® nüvi® 40 nüLink!® Zumo 760 LMT- nüvi® nüvi® 2797LMT 1200 1200 2200 2340 LIVE 340LM Digital 2408LT-D 2598LMT- D Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin nüvi® 255 nüvi® nüvi® nüvi® nüvi® 50 nüLink!® nüvi® nüvi® nüvi® 1210 1300 2300LT 2390 LIVE 3540LT 2417LM 3597LMT Garmin Garmin Garmin Garmin Garmin Garmin Garmin Garmin nüvi® 500 nüvi® nüvi® nüvi® nüvi® 2300 nüvi® nüvi® nüvi® 1240 2440 2340 3590LMT 2467LM 3598LMT- D Garmin Garmin Garmin Garmin Garmin Garmin Garmin nüvi® Zumo nüvi® nüvi® 2340 nüvi® 3710 nüvi® nüvi® 42 1250 220 2360 LT LMT 2497LM/LMT Garmin Garmin Garmin Garmin Garmin Garmin nüvi® nüvi® nüvi® 2460 nüvi® 2300 nüvi® 2507 nüvi® 44 1300 2440 LMT Garmin Garmin Garmin Garmin Garmin nüvi® nüvi® nüvi® nüvi® nüvi® 52 1310 37610T 3490LMT / 2508LT-D 3490 LT Garmin Garmin Garmin Garmin Garmin nüvi® nüvi® nüvi® 2450 nüvi® 2547- nüvi® 54 1340 3790T LM

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Table A8-5a: Representative sample of Garmin PND - Year of release, charging methods and whether PND supplied with a USB cable 2008 2009 2010 2011 2012 2013 Garmin Garmin Garmin nüvi® nüvi® nüvi® 1370T 2567LM 2557LMT Garmin Garmin Garmin nüvi® nüvi® 2577LT nüvi® 1390 2797LMT Garmin Garmin nüvi® Zumo 1490T 390LM Garmin nüvi® 1690 Garmin Zumo 660LM 100% 0% 100% 0% 38% 62% 27% 73% 25% 75% 91% 9% Note: Shaded boxes denote devices that are not supplied with USB cable (Source: Garmin website, accessed at: https://support.garmin.com/support/searchSupport/case.faces?caseId={bb133aa0-692c-11dd-59a9-000000000000}) Garmin, accessed at: http://www.garmin.com/en-GB

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Table 8-5b: TomTom - Year of release and charging methods for TomTom devices 2008 2009 2010 2011 2012 2013 Mini-USB Micro -USB Mini-USB Micro-USB Mini-USB Micro-USB Mini-USB Micro-USB Mini-USB Micro-USB Mini-USB Micro -USB New TomTom TomTom TomTom TomTom TomTom TomTom Start Via GO Live Via Start One 2008 (relaunched) 125 820 / 825 130 / 135 TomTom GO TomTom TomTom Via TomTom Go TomTom 530 / XXL IQ 125 / 125 Live Camper Via 125 Live 630/730/93 Routes Live and Caravan 0 T TomTom TomTom Go Tom GO TomTom GO TomTom TomTom 6000/5000/ Live 1005 Rider (v4) 740 Live / One IQ Urban Rider TomTom 600/500 940 Live Via 110/120 / 120 Live TomTom TomTom TomTom XL TomTom XL Start Start Model IQ Routes 1 IQ Routes 2 20/ 25 60 TomTom XL 2008 TomTom TomTom GO GO Live 750 Live / 1000/1005 950 Live 100% 0% 100% 0% 71% 29% 25% 75% 0% 100% 50% 50% Sources: TomTom Max, accessed at: http://www.tomtomax.fr/ Amazon, accessed at: http://www.amazon.co.uk/

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Table 8-5c: Year of release and charging methods for manufacturers other than Garmin and TomTom 2008 2009 2010 2011 2012 2013 Mini-USB Micro-USB Mini-USB Micro-USB Mini-USB Micro-USB Mini-USB Micro-USB Mini-USB Micro-USB Mini-USB Micro -USB Mio Moov Mio Moov Mio Mio Spirit Binatone Mio Spirit 200u/330u 700 Navman 470 380/480/48 S500 490 LM / /475/ 575 5/680 / 686 495 LM / 687

Mio Moov Mio Moov Binatone Binatone Mio Spirit 300 / 380 / S568 / S501 F350 R350 695 LM / 580 697 LM Mio C517 Mio Spirit Takara GP34 RAC 5000 Digi-walker V735 TV wide Mio Mio Moov RAC 515F DracoTek Knightrider M400 / Car GPS GPS M500 "CubiWin” RAC 300 Becker DracoTek – Traffic Assist Peaklife – Z205 3.5 inch weatherpro of GPS navigator 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% 100% 0% Sources: PDAdb.net, accessed at: http://pdadb.net/index.php?m=main Mio, accessed at: http://eu.mio.com/en_gb/ Amazon, accessed at: http://www.amazon.co.uk/

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All Garmin Nuvi devices, which accounted for 43% of the company’s total revenue in 2012362, come with a vehicle power charge cable but only some come with an AC power cable and/or USB cable. The nüvi® PNDs in Table A8-6 are not supplied with a USB cable. USB cables for these units are considered as optional extras. Should a consumer require a USB cable, they can be purchased from Garmin, although it is noted on the Garmin website that363:

 Cables used to connect digital cameras, card readers and other electronic devices to your computer may work;  Blackberry USB cables may work;  A Garmin AC adapter that uses a removable USB cable may work; and/or  Family or friends will commonly own USB cables that may work.

Table A8-6: PND not supplied with a USB cable nüvi® 200/200W series nüvi® 1200 series (except nüvi® nüvi® 2450 1260T) nüvi® 205/205W, 255/255W nüvi® 1300, 1350 and 1350T nüvi® 30 nüvi® 500 series nüvi® 2200 series nüvi® 40 series 1 nüvi® 1100 and Nuvi 1100LM nüvi® 2300 nüvi® 50 series

Source: Garmin website, accessed at: https://support.garmin.com/support/searchSupport/case.faces?caseId={bb133aa0-692c-11dd-59a9- 000000000000}

Garmin OEM home chargers for PND have an output of 5 volts and 1 Amp and thus Wattage of 5 amps Chargers for PND that plug into the 12V port within a car have a higher output of around 2 Amps. This higher current allows the user to charge the device while it is being used.

TomTom

Table A8-7 below gives an indication as to the devices which are compatible with Mini and Micro- USB cables. All devices are supplied with an in-car USB charger and USB cable. Presumably, a home charger is not supplied as it is not required by all users and helps to keep prices down. The exception to this is the TomTom Rider series, which are designed for motorcycles. These are supplied with a USB cable and home charger. Users of these devices can then either charger their PND at home prior to leaving or make further efforts to use a battery cable to connect the PND to the motorcycle’s power supply.

362 24/7 Wall street, America’s most profitable products, 03/03/2013, accessed: http://247wallst.com/special- report/2013/05/03/americas-most-profitable-products/2/ 363 Garmin website, accessed: https://support.garmin.com/support/searchSupport/case.faces?caseId={bb133aa0-692c-11dd-59a9- 000000000000}

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Table A8-7: TomTom PND compatible with Mini/Micro-USB Mini-USB Micro-USB TomTom One TomTom Start 20/25/60 TomTom Go 300/500/700 TomTom Go Live 825 TomTom 125/130/130S/140/140S TomTom Via 110/120/125 TomTom Rider 520/530/530T/630/720T TomTom Go Live 1000/Go Live 1005/Go 950 Live/Go Live 820/ Source: TomTom website, accessed at: http://www.tomtom.com/en_gb/products/your-drive/car- navigation/

Preliminary research suggests that TomTom did not have a Micro-USB compatible PND until the end of 2010. TomTom car home chargers appear to have an output of 5 Volts and 1.2 Amps. The chargers that plug into the 12V port within a car provide around 2 Amps to the device so as to ensure the device can be used and charged at the same time when in use. Market Structure

Global PND Market Share

Looking at the years 2008 and 2009, it can be seen that the market was dominated by two manufacturers, Garmin and TomTom (Figure A8-3).

Figure A8-3: Global PND Market Share, 2008 and 2009364

364 Garmin Annual Shareholder Meeting, May 20, 2010, accessed at: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&ved=0CD0QFjAD&url=h ttp%3A%2F%2Fwww8.garmin.com%2FaboutGarmin%2FinvRelations%2Freports%2F2010_Shareholder_Mt g_Presentation.pdf&ei=2NJzUre5HMif7gaWloGAAg&usg=AFQjCNHyq- zjxnWwUXXjzBGCxVaInNm_Aw&bvm=bv.55819444,d.ZGU

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As the number of units sold declined from 2008 onwards, competition intensified and a number of vendors exited the market. In some cases, this was a result of key vendors acquiring competitors. For example, MiTAC completed the acquisition of the PND operations of Navman in 2008 and then subsequently acquired the consumer product division of Magellan Navigation in 2010. As a result of such mergers, the PND market has come to be dominated by three companies; Garmin, TomTom and MiTac, which together hold around 73% of the global market. This dominance is even more apparent in Western Europe and North America where they hold around 90% market share365.

Garmin

Of the three companies, Garmin is most dominant worldwide, as evidenced by its high global market share (Figure A8-4).

Figure A8-4: PND Units sold and Worldwide Market Share, Garmin366

Although Garmin is the PND market leader, it is interesting to compare PND revenue from 2008 to 2013 as a percentage of its total revenue (see Table A8-8). It must be noted that Garmin collates all revenue from PNDs, OEM navigation devices and mobile phones together. Whereas contributions from mobile phone revenue will be marginal367, it is possible that the pre-installed OEM navigation devices could account for up to 30% of the reported revenue. Nevertheless, the decline in revenue from this sector correlates with the shrinking of the PND market.

365 Berg Insight, LBS Research Series, Mobile Navigation Services and Devices, accessed at: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CDIQFjAB&url=ht tp%3A%2F%2Fwww.berginsight.com%2FReportPDF%2FSummary%2Fbi-lbsseries2013- 366 Garmin Annual Report 2012, accessed at: http://www8.garmin.com/aboutGarmin/invRelations/reports/2012_Annual_Report.pdf 367 When the decline of PND became apparent in 2010, Garmin released a number of navigation friendly phones in an attempt to appeal to those consumers who would rely on a smartphone rather than PND for navigation. However, none of these devices proved successful.

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Table A8-8: Global Automobile/Mobile Revenue, Garmin Automobile/mobile revenue Percentage of Total Garmin Revenue Year ($ millions) 2008 2538 75% 2009 2055 70% 2010 1669 62% 2011 1591 58% 2012 1493 55% 2013 (first 2 quarters) 598 49% Source: Data compiled from Garmin quarterly/annual reports, accessed at: http://www.garmin.com/en- US/company/investors/earnings/

European Market Share

TomTom

Although there has been a decline in the number of PND units sold, TomTom has retained a strong share of the overall European market. As shown in Table A8-9 below, their market share has consistently remained between 45% and 47% of the market. Furthermore, figures for the first half of 2013 would suggest that TomTom’s market share has increased, perhaps as a result of increased market competition.

Table A8-9: TomToms Market share of the European PND Market

Average market Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 share 2008 - 45 – 50% 45% 46% 46% 2009 44% 44% 44% 46% 45% 2010 47% 49% 48% 49% 48% 2011 47% 45% 45% 47% 46% 2012 46% 45% 46% 50% 47% 2013 51% 50% - - - Source: TomTom Annual Reports, accessed at: http://corporate.tomtom.com/reports.cfm

Garmin

Garmin is the other major player in the PND market and has from 2008 increased its share of the European PND market from around 20% in 2008 to over 30% in 2012368.

Future Trends

In 2011, research conducted by GfK Retail and Technology suggested that over two-thirds (70%) of smartphone owners in the UK, Germany and France would choose a dedicated PND for in-car navigation rather than a smartphone with a navigation app. However, over half of consumers in Germany believed that smartphones would be able to keep up with PNDs in the future (48% in the

368 Garmin Annual Reports, accessed at: http://www.garmin.com/en-US/company/investors/earnings/

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UK and 39% in France)369. Recent market data has proved consumers beliefs correct. Despite the innovations such as bigger screen, free map updates and ‘connectivity’ that provides PND with traffic updates via digital radio, Bluetooth and built in SIM cards370, the PND market has been overtaken by smartphones which have built-in satellite navigation and maps at no extra cost for users. In global terms, users who have registered for the use of navigation apps on smartphones and used them at least once a month increased from 100 million to 150 million in 2012371.

For this reason, TomTom has switched its focus from the production and selling of GPS hardware to producing software and mapping services, with a particular focus on apps for smartphones372. It has also entered the sports activity watch market.

Case Study Countries

Finland

Information on the sales of satellite navigation devices in Finland is shown in Table A8-10. This shows a steady decline in sales as well as the average selling price.

Table A8-10: Sales of Satellite Navigation Devices in Finland – 2008 to September 2013 Sales Sales Value (€1,000) Average Price (€) 2008 242,228 45,464 188 2009 213,062 33,157 156 2010 159,144 23,527 148 2011 148,561 20,755 140 2012 121,842 17,199 141 2013 (to 62,682 8,807 140 September) Source: Kotek (2013): Tilastot 2013 – Kodintekniikkaindeksi 1-9/2013, accessed at: http://www.kotek.fi/tilastot/ Kotek (2012): Tilastot 2012 – Kodintekniikkaindeksi 2012, accessed at: http://www.kotek.fi/tilastot/ Kotek (2011): Tilastot 2011 – Kodintekniikkaindeksi 2011, accessed at: http://www.kotek.fi/tilastot/ Kotek (2010): Tilastot 2010 – Kodintekniikkaindeksi 2010, accessed at: http://www.kotek.fi/tilastot/ Kotek (2009): Tilastot 2009 – Kodintekniikkaindeksi 2009, accessed at: http://www.kotek.fi/tilastot/ Kotek (2008): Tilastot 2008 – Kodintekniikkaindeksi 2008, accessed at: http://www.kotek.fi/tilastot/

369 GFK, The trned towards mobile navigation usage will not destroy demand for PNDs…at least not in 2011 anyway, 02/020/2011, accessed at: http://www.gfktechtalk.com/2011/02/02/the-trend-towards-mobile- navigation-usage-will-not-destroy- demand-for-pnds-at-least-not-in-2011-anyway/ 370 GFK, Portable loudspeakers are conquering the market, 04/09/2013, accessed at: http://www.gfk.com/news-and-events/press-room/press-releases/pages/portable-loudspeakers-are- conquering-the-market.aspx 371 Mitac Annual Report 2012, accessed at: http://www.mitac.com/InvestorRelations/AnnualReport.html 372 MSI, TomTom non chiude con i navigatori ma ormai ci conta , 21/05/2012, accessed at: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&ved=0CDgQFjAB&url=h ttp%3A%2F%2Fwww.tomshw.it%2Fcont%2Fnews%2Ftomtom-non-chiude-con-i-navigatori-ma-ormai-ci- conta-poco%2F37553%2F1.html&ei=j2F7UtWiLcmv0QXcgYHQBA&usg=AFQjCNFyEDauHT8aN5sU- 86Phs64eppRHA&bvm=bv.56146854,d.d2k

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France

Table A8-11 shows the number of PNDs sold from 2008 to 2013. Mirroring the international decline of PNDs, sales have dropped year on year with sales in 2012 renewals rather than new purchases373.

Table A8-11: Sales of PND in France 2006 to 2013374 Year Sales (million units) 2008 2.72 2009 2.5 2010 2.2 2011 2 2012 1.68 2013 1.5 (estimate)

The decline in PND sales can be attributed to increased ownership of smartphones which come pre- loaded with free maps and navigation software. An estimated 90% of smartphones sold in France in 2009 had such capabilities375.

TomTom is the largest manufacturer of GPS systems in France. It has held approximately 50% of the market for many years. More specifically, it had 54.3% of the market in 2009 and 53% in 2012. In terms of value, TomTom is also the largest player in France – in 2009 it had 61.9% of the market in terms of value. Garmin is a smaller player in France with approximately 14-16% of the market and approximately 13% of the market by value. Smaller players on the French market include Navigon with 2.6% of the market by volume and 2.2% by value, and Magellan which occupies around 1% of the market376.

Germany

There was an increase of 70% in sales for high-end PND that provide up to date information such as traffic, flight and weather reports on the move or that allow users to search using Google. Those

373 GNT, GPS : chute de 20% des ventes des systèmes autonomes en France en 2012, 09/04/2013, accessed at: http://www.generation-nt.com/gfk-etude-pnd-gps-ventes-france-recul-actualite-1716932.html 374 Collated from a range of sources, accessed: Metronews, Chiffres : Les Français et la high-tech en 2009, 27/01/2010, accessed at: http://www.metronews.fr/high- tech/chiffres-les-francais-et-la-high-tech-en-2009/rjaz!R5dFIDlh2EWMCZLzrCQ5Pg & GNT, GfK : toujours plus de PND vendus, mais à rythme ralenti, 02/03/2009, accessed at: http://www.generation-nt.com/gfk- etude-ventes-pnd-gps-europe-bilan-ralentissement-demande-actualite-241331.html & Distributique, Face à la baisse du marché des GPS autonomes TomTom mise sur les produits connectés, 07/03/2011, accessed at: http://www.distributique.com/actualites/lire-face-a-la-baisse-du-marche-des-gps-autonomes-tomtom- mise-sur-les-produits-connecteset-160-16068.html & Neomag, GfK dresse le bilan d’un premier semestre à deux vitesses pour l'EGP, 09/09/2011, accessed at: http://www.neomag.fr/actualite/i-1517/ifa-2011-gfk- dresse-le-bilan-dun-premier-semestre-a-deux-vitesses-pour-legp.html 375 SFR, Avec SFR GPS : explorez, trouvez, naviguez !, 12/09/2010, accessed at: http://www.sfr.fr/innovation/2010-08/sfr-gps.jsp 376 Clubic.com, GPS autonomes : TomTom largement leader en France, Garmin et Mio au coude à coude , 14/01/2009, accessed at: http://www.clubic.com/actualite-251084-gps-autonomes-tomtom-leader-france- garmin-mio-coude-coude.html

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PNDs that are ‘connected’ experienced an increase in sales from 5% to 10%377. In 2010, Garmin and Navigon had the biggest market in Germany, with around 46% market share (24% Garmin and 22% Navigon)378.

Spain

In 2007, 1,166,700 car satellite navigation systems were sold in Spain. This increased to 1,223,500 in 2008 but decreased to 1,015,200 in 2009 (Asimelec, 2010). The figures from 2010 are however considerably lower. Table A8-12 shows the number of PNDs sold in Spain for 2010 and 2011. In 2011, Spain represented 6% of the European market for PNDs and 20% of cars had a PND. TomTom has 70% of the Spanish market for PNDs, compared to an average of 50% of the total European market.

Table A8-12: Sales of Navigation Systems in Spain in 2010 and 2011 Year Units Value (€ thousands) 2010 837,232 130,088 2011 737,000 109,134 Source: Revista Protienda (2012)

Users of satellite navigation systems renew their devices every 4.3 years on average. The price of satellite navigation systems in Spain fell between 10% and 12% in 2009. In 2011, the price of PND was expected to rise slightly, in contrast to previous years.

United States

In 2008 the US PND market was growing rapidly. The size of the market doubled within a year. All the top five market players reported a growth in sales although to a greatly varying extent: Navigon, while being the smallest company in the top five, grew by 6086%, at the same time Magellan only managed to enhance its sales by 4.7% (see Table A8-13).

Table A8-13: US PND Market, Market shares379 Vendor Q2 2008 Shipments Market share 1 year growth Garmin 1,765,440 47.3% 87.1% TomTom 915,750 24.6% 189.9% Magellan 411,940 11% 4.7% Mio Technology 166,490 4.5% 111.5% Navigon 133,000 3.6% 6086% Others 336,490 9% 96.8% Total 3,729,110 100% 95.8%

377 Telematics News, Germany: Demand grows for CD-less audio, connected navigation and larger in-car displays, 05/04/2011, accessed at: http://telematicsnews.info/2011/04/05/germany-cd-less-audio- connected-pnds-market-share-doubles-as-customer-needs-change_a2051/ 378 GPS Business news, IFA: Garmin-Navigon, the start of a new Euro PND power player? 01/09/2011, accessed at: http://www.gpsbusinessnews.com/IFA-Garmin-Navigon-the-Start-of-a-New-Euro-PND-Power- Player_a3203.html 379 Canalys: US PND market doubles in Q2 - Leaders Garmin, TomTom and Magellan have more than 80% of the market, accessed at: http://www.canalys.com/newsroom/us-pnd-market-doubles-q2

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In the 4th quarter of 2008, the US accounted for 52% of the worldwide PNDs shipped, which is quite significant considering that the EMEA only accounts for 36%. According to Chris Jones (Canalys VP and principal analyst) “The US has continued to deliver unit growth year-on-year, despite the economic situation, but this is supported by very aggressive pricing”380.

In 2011 TomTom made only half of the profits expected a year before due to the faster-than- expected shrinkage of the PND market of the US381.

China

The car navigation market and the PND navigation market developed rapidly from 2006 to 2011, with the sales volume of car navigation in China maintaining high-speed growth (CAGR hitting 47.5%). At the same time the penetration rate of car navigation remained low, so China’s car navigation market was expected to hold more potential. Furthermore, the related apps market (real-time traffic information service, value-added electronic maps, etc.) were still in the initial stage of development382.

Another factor supporting the growth potential of the Chinese market is growing car sales. However, smartphone built-in GPSs are to an extent in competition for this market, which reduces the sales potential for dedicated PNDs. The number of smartphone subscribers with navigation applications is estimated to expand from 93.2 million in 2012 to 400 million by 2018, making China one of the largest smartphone navigation markets in the world. The growth of the Chinese PND market is likely to be driven by real-time connected services and co-operation with OEMs. Accordingly, demand for navigation systems (including embedded, aftermarket and PND) is expected to increase from 10.4 million units in 2012 to 21.0 million units by 2018. Only the aftermarket embedded in-dash market share is forecast to decline due to the rising penetration of smartphone navigation and OEM navigation383.

380 Canalys research release: North America overtakes EMEA as largest satellite navigation market – Garmin retains global PND lead, smart phones become the new battleground (2009) accessed at: http://www.canalys.com/static/press_release/2009/r2009031.pdf 381 The Wall Street Journal: TomTom Takes a Beating, Loses 27% of Market Value (2011), accessed at: http://online.wsj.com/news/articles/SB10001424052702304447804576413200721276630 382 GPSWorld: China Industry Report: “Amazing Growth” in Mobile Market, accessed at: http://gpsworld.com/china-industry-report-amazing-growth-in-mobile-market/ 383 Technolohy Tell: China to Emerge as One of the Largest Markets for Automotive Navigation and Telematics Services, accessed at: http://www.technologytell.com/in-car-tech/2602/china-to-emerge-as-one-of-the- largest-markets-for-automotive-navigation-and-telematics-services/

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Annex 9 Portable Handheld Games Consoles

Introduction

A handheld games console is a portable electronic device with a built-in screen, game controls and speakers (University of Maribor, 2007). These differ from other electronic games consoles, as others usually require a separate screen and a mains power supply. The market today is dominated, in entirety, by Sony and Nintendo. Archos have also produced a games console; however this is a hybrid tablet/games device rather than a dedicated games device and is therefore considered a tablet for the purpose of this study. Sales

The market for handheld games consoles is declining; Figure A9-1 presents the sales for Nintendo’s DS range and Sony’s PSP from 2008 to 2013. As mobile devices such as smartphones and tablets gain popularity, handheld games devices, as well other devices such as digital cameras have suffered reduced sales in recent years. Consumers are electing to buy and play games on their smartphones or tablets, which offers more convenience, choice and affordability, rather than on a separate device, even where the quality and experience are sub-par in comparison to a dedicated device.

Figure A9-1: Unit sales for handheld games consoles for Nintendo and Sony.

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Charging Requirements

There are five main handheld games consoles on the market; three are manufactured by Nintendo, and two by Sony. All five of these consoles are sold with chargers, and all five are charged with a proprietary charger. The older of Sony’s two consoles uses a Mini-USB for data transfer, and the other uses a proprietary connection. The Sony consoles each connect to a PC or laptop via USB connection for data transfer, so in order to switch to Micro-USB connectors it is just a matter of changing the port. The Nintendo consoles would also be compatible with Micro-USB charging.

Also falling into this category are the controllers used for mains-supplied electronic games consoles. Sony, Nintendo, and Microsoft each have consoles that use wireless controllers on the market today. Sony’s PlayStation 3 has wireless controllers that are charged and connected to the main console via a Mini-USB connector port. Nintendo’s Wii and Wii U controllers use proprietary ports for their USB connection. Microsoft’s Xbox 360 controllers can either use batteries or proprietary connection ports to standard USB cables. Structure of the Sector

As has been previously stated, Sony and Nintendo completely dominate the portable games console market. Since 2010, Nintendo has held the larger market share, due largely to the popularity of its latest consoles, 3DS and 3DS XL. Figure A9-2 shows the market share for the main devices until 2015 (projected from 2012), when Nintendo is expected to remain the largest manufacturer384. It should be noted that since this time, Sony has released a new portable console – the PSP Vita 2000 – perhaps creating more market share for Sony.

Figure A9-2: Handheld gaming hardware units shipments by OEM model385

384 3DS, GameBoy, DS, and DSi, are manufactured by Nintendo, and PS Vita and PSP are manufactured by Sony 385 iSuppli website: Sony, Nintendo and Microsoft Change Strategies in Fragmented Handheld Gaming Market, accessed at http://www.isuppli.com/Home-and-Consumer-Electronics/MarketWatch/Pages/Sony- Nintendo-and-Microsoft-Change-Strategies-in-Fragmented-Handheld-Gaming-Market.aspx

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Market Trends

In 2012, handheld gaming consoles or handhelds held 9.8% of the global games market, however this is expected to decrease over the coming years to a low of 5.8% in 2016, Figure A9-3. Reduced sales of handhelds are compensated by smartphones and tablets whose market share will increase dramatically during this period.

Figure 0: Global games market 2012 - 2016386

Surveys completed by Accenture, reveal that 20% of consumers own a handheld games console, with 6% claiming it is in the ‘Top 5’ most used devices387. Ownership decreased by 2% from 2010 to 2011, this compares to a 25% increase for smartphones and a 4% increase for tablets, the main rivals. The survey also revealed that only 1% of those surveyed intended to purchase a handheld games console in the next 12 months (2012).

Sales of handheld games consoles have begun declining since 2009; a trend which is expected to continue. Sony estimates that it will sell five million up to March 2014, compared to seven million recorded for the year ending April 2013; nine million short of the initial target for that period (Ivan, 2013). In comparison, Nintendo have reported expected sales of 18 million 3DS units (Dumitrescu,

386 Newzoo website: Global Games Market 2012 – 2016, accessed at http://www.newzoo.com/infographics/global-games-market-report-infographics/ 387 Accenture (2012): Always On, Always Connected – Finding Growth Opportunities in an Era of Hypermobile Consumers, accessed at http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture_EHT_Research_2012_Consumer_Te chnology_Report.pdf

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2013), which would be up from 14 million for the business year ending 2013, and go against the current trend.

In August 2013, Nintendo revealed the ‘2DS’ which was launched on the market in October 2013, in a bid to extend its portfolio and boost sales. The 2DS is smaller than the 3DS, can play 3DS games 388 and is significantly cheaper . Case Studies

Finland

In a recent Ipsos survey (2012), Finish consumers were asked which devices they use to play games. As shown in the Figure A9-4, only 7% of respondents said they play games using a portable games device. Three percent (3%) of consumers said they used a Nintendo DS, 2% a Sony PSP and 1% a Nintendo 3DS.

Figure A9-4: Devices used to play games in Finland Source: Ipsos (2012) Note: all online questionnaire respondents

388 Metro news website (French): The 2 DS, the new surprise of Nintendo, accessed at http://www.metronews.fr/high-tech/consoles-portables-2ds-la-surprise-de- nintendo/mmhC!Bt3Os8AbQ3HPk/

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France

In France, 27% of gamers will only use a handheld games console for gaming, this compares to the average of 19%. The French also play more general portable games (i.e. also on smartphones and tablets) (56%) than this collective on average (47%). This compares to consumers who solely use their smartphones for portable gaming, which is 36% in France, compared to 42% across the average, though 23% use both a handheld console and a smartphone (Newzoo, 2012).

In 2011, 60% of consumers that played on a Nintendo DS also played games on their mobile phones (Bosman, 2011).

In a recent Ipsos survey (2012), 20% of French consumers said they use a portable games device. 16% of respondents indicated that they used a Nintendo DS, 5% used a Sony PSP and 4% used a Nintendo 3DS. 4% of consumers said they used another brand of portable games device.

Figure A9-5: Devices used to play games in France Source: Ipsos (2012) Note: all online questionnaire respondents

Germany

While the stationary games console segment is expected to grow, the portable games consoles segment is expected to decline slowly (A.T. Kearney, 2011).

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Of smartphones, tablets and handheld games consoles, a lower percentage of German gamers (18%) solely use handheld games consoles than the average (19%) of the UK, GER, FR, NL, BE, and IT. Germans also play more general portable games (i.e. also on smartphones and tablets) (54%) than this collective on average (47%). This compares to consumers who solely use their smartphones for portable gaming, which is 50% in Germany, compared to 42% across the average, and 17% use both a handheld console and a smartphone (Newzoo, 2012b).

Figure A9-6: Devices used to play games in Germany Source: Ipsos (2012)

Italy

Of smartphones, tablets and handheld games consoles, a higher percentage of Italian gamers (25%) solely use handheld games consoles than the average (19%) of the UK, GER, FR, NL, BE, and IT. Italians also play more general portable games (i.e. also on smartphones and tablets) (52%) than this collective on average (47%). This compares to consumers who solely use their smartphones for portable gaming, which is 46% in Italy, compared to 42% across the average, and only 2% use both a handheld console and a smartphone (Newzoo, 2012c).

In a recent Ipsos survey (2012), 15% of Italian consumers said they use a portable games device. 9% of respondents indicated that they used a Nintendo DS, 6% used a Sony PSP and 3% used a Nintendo 3DS. 4% of consumers said they used another brand of portable games device.

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Figure A9-7: Devices used to play games in Italy Source: Ipsos (2012) Note: all online questionnaire respondents

The Netherlands

Of smartphones, tablets, and handheld games consoles, a lower percentage of Dutch gamers (17%) solely use handheld games consoles than the average (19%) of the UK, GER, FR, NL, BE, and IT. The Dutch do, however, play more general portable games (i.e. also on smartphones and tablets) (51%) than this collective on average (47%). This compares to consumers who solely use their smartphones for portable gaming, which is 43% in The Netherlands, compared to 42% across the average, though 15% use both a handheld console and a smartphone (Newzoo, 2012d).

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Figure A9-8: Devices used to play games in The Netherlands Source: Ipsos (2012) Note: all online questionnaire respondents

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Poland

Figure A9-9: Devices used to play games in Poland389 Note: all online questionnaire respondents

389 Ipsos (2012): Videogames in Europe: Consumer study, Poland, available at http://www.isfe.eu/industry- facts/statistics

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Portugal

Figure A9-10: Devices used to play games in Portugal Source: Ipsos (2012) Note: all online questionnaire respondents

Between January and November 2013, 102,998 consoles were sold in Portugal, a value which represents a decrease of 35% compared to the same period last year. This reduction in sales can perhaps be attributed to consumers waiting until the end of the year for the launch of the Xbox One and PlayStation 4. It is likely that there was a marked increase in the number of consoles sold in December with the arrival of Christmas and new consoles. The nearly 103,000 consoles sold in 2013 yielded 20.21 million euro, a fall of 31.7% compared with the same period of analysis, 2012.

Spain

The Spanish use handheld games consoles the same as the average (19%) of the UK, GER, FR, NL, BE, and IT. The Spanish do, however, play more portable games (i.e. also on smartphones and tablets) (61%) than this collective on average (47%) (Newzoo, 2012e).

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Table A9-1: Income from Sales of Videogames in 2011 (€ millions) Household Devices Portable Devices PC Total UK 1,452 224 89 1,765 Germany 893 224 376 1,493 France 956 231 125 1,312 Italy 451 111 37 599 Spain 328 140 44 512 Total 4,080 930 671 Source: (PWC, 2013)

In 2009, there was a significant decrease in the sales of handheld games devices. In 2007, 1,912,900 portable consoles were sold, this decreased to 1.6 million in 2008 and 1.3 million in 2009 (Asimelec, 2010). In 2012, the sale of portable handheld devises decreased significantly again (ADESE, 2013).

Table A9-2: Sales of Video Games Consoles in Spain (2010-2011) (units) 2008 2009 2010 2011 2012 Portable device 1,692,000 1,340,000 917,000 880,000 715,000 Home devices 1,486,000 1,384,000 1,198,000 1,030,000 777,000 Source: ADESE (2009); ADESE (2010); ADESE (2011); ADESE (2012); ADESE (2013)

Table A9-3: Value of Portable Games Devices (2008-2012) Year Value 2008 €269,740,000 2009 €212,420,000 2010 €167,000,000 2011 €143,000,000 2012 €124,000,000 Source: ADESE (2010); ADESE (2011); ADESE (2012)

In terms of the share of the video game market, Sony is widening the gap against the main competitor, Nintendo, thanks to the PlayStation 3.

Table A9-4: Share of the Video game Market by Manufacturer (2007-2011) Year Manufacturer 2007 2008 2009 2010 2011 Sony 57% 48% 47% 49% 50% Nintendo 37% 44% 42% 40% 37% Microsoft 6% 8% 11% 11% 13% Source: PWC (2013)

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Table A9-5: Video Games Consoles – Market Volume and Value in 2011 and 2012 2011 2012 Device Volume Value Volume Value PC 12% 6% 12% 7% PS3 27% 37% 31% 40% Wii U 0.4% 0.6% Wii 18% 21% 16% 17% Xbox 360 11% 11% 13% 13% PS Vita 2% 3% PSP 12% 7% 10% 4% 3DS 3% 4% 7% 8% DS 12% 10% 8% 7% PS2 4% 2% 2% 1% Source: ADESE (2013)

The video game industry is likely to continue to grow in Spain, with an annual growth of 11%, which will result in sales of €54 billion in 2013. The stable growth can be attributed to the release of new consoles and their accompanying games. By 2017, consoles will have a 41% market share of computer game segment compared to 31% today. Of course, this is far below the market share recorded previously, whereby the market share of consoles within the computer game segment was in the region of 78%390. United Kingdom

Of smartphones, tablets, and handheld games consoles, a lower percentage of UK gamers use handheld games consoles (15%) than the average (19%) of the UK, GER, FR, NL, BE, and IT. They do, however, play more general portable games (i.e. also on smartphones and tablets) (63%) than this collective on average (47%). This compares to consumers who solely use their smartphones for portable gaming, which is 42% in the UK, compared to 42% across the average, and 21% use both a handheld console and a smartphone (Newzoo, 2012f).

390 Accessed at: http://www.idgtv.es/gamers/el-mercado-del-videojuego-vivira-cambios-radicales-en-2014

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Figure A9-11: Devices used to play games in Great Britain Source: Ipsos (2012) Note: all online questionnaire respondents

United States

The market for handheld game consoles in the US (the biggest market world-wide391) is shrinking due to pressure from smartphones. It is illustrative to see how Nintendo’s market share of this sector has collapsed from 70% in 2009 to 57% by 2010. During the same time period Apple's iOS and Google's Android's market share grew from 19% to 34%. The main driver behind the trend is the great variety of inexpensive games available for smartphones392.

China

In 2000, all game consoles were banned in China in a move designed to stop adolescents wasting their time playing on computer consoles and preventing other perceived negative effects of gaming.

391 PRWeb: Global Console and Handheld Gaming Software Market to Reach US$38.4 Billion by 2018, According to New Report by Global Industry Analysts, Inc., accessed at http://www.prweb.com/releases/console_gaming_software/handheld_gaming_software/prweb9793175.h tm 392 CNN Money: Flurry: iOS and Android capture 34% of U.S. handheld video market in 2010 (2011), accessed at http://tech.fortune.cnn.com/2011/04/15/flurry-ios-and-android-capture-34-of-u-s-handheld-video- market-in-2010/

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However, the ban only resulted in gamers turning to other gaming platforms such as PC, smartphone, and tablet etc.393.

The ban was only lifted in January 2014. Foreign companies must produce their consoles in the Shanghai Free Trade Zone to sell them in China and authorities will still undertake censorship on video games394.

However, a black market for such products has always existed which makes assessing the impact of removing the ban difficult to ascertain. Indeed, some have suggested that lifting the ban will have little practical effect since those interested in these products could have acquired consoles easily, irrespective of the ban395. Others say that advertising, promotions, marketing, legal distribution of games (which has been enabled by lifting the ban) can promote market growth to a considerable extent396.

393 Financial Times: China ends ban on foreign game consoles, accessed at http://www.ft.com/cms/s/0/1ffe5fac-7779-11e3-807e-00144feabdc0.html#axzz2trRBvbcH 394 The Telegraph: China lifts 14 year ban on foreign games consoles, accessed at http://www.telegraph.co.uk/technology/video-games/video-game-news/10555370/China-lifts-14-year- ban-on-foreign-games-consoles.html 395 Nintendo stock surging after China lifts ban on consoles, accessed at http://www.gamasutra.com/view/news/208234/Nintendo_stock_surging_after_China_lifts_ban_on_conso les.php 396 With console ban lifted, analysts predict $13.1 billion game market in China for 2013, accessed at http://venturebeat.com/2013/09/30/analysts-predict-13-1-billion-china-game-market-for-2013/

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Annex 10 Personal Care Products with Self-Contained Motor

Introduction

Personal care products which are rechargeable and portable primarily take the form of electric shavers and epilators. Electric shavers are electrical devices which are used for shaving; they generally have oscillating or rotating blades which are behind a metal guard. Epilators are slightly different in that they grasp hairs and pull them out (in the same manner as manual tweezers). Electric personal care products (such as, electric shavers and epilators) are products that could lend themselves to Micro-USB charging. Indeed, models which have Micro-USB charging capabilities (e.g. electric shaver YS502/16) have been introduced. In addition, manufacturers have introduced electric shavers with USB charging capabilities. However these appear to be largely aimed at the travel market, with charging via USB offered for increased travel convenience. Sales

The global market value for male electric shaving is worth approximately €2.5 billion, with a market volume of approximately 40 million units (Zammit, 2007). Electric shavers are widely available for both men and women and Europe is the largest market for electric shavers worldwide, followed by the USA (Digital Journal, 2013). Within Europe, the largest markets for electric shaving are the UK, Germany and France (Hollensen, 2008).

Concerning the market for female electric hair removal products specifically, it is estimated that in Western Europe only 8% of women use an electric shaver and 12% of women use an epilator (Procter & Gamble, 2013).

Production

In the EU-27/28, production of personal care products with self-contained electric motors remained near constant between 2008 and 2011 at around 30 million units. However, in 2012 production dropped significantly, by nearly half, as illustrated in Figure A10-1 below.

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Figure A10-1: EU Production of Personal Care Products (with self-contained electric motor) in Europe (Volume and Value) from 2008 to 2012 (Source: Eurostat)

Trade

Imports into the EU, of personal care products with self-contained electric motors, have been slowly rising, and this can be largely attributed to the number of Chinese imports. However, in spite of this, the number of units exported from the EU remained largely constant between 2009 and 2012.

Figure A10-2: Imports of Personal Care Products with Self-Contained Electric Motor (units and Euros) 2008 to 2012 (Source: Eurostat)

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Figure A10-3: Exports of Personal Care Products with Self-Contained Electric Motor (units and Euros) 2008 to 2012 (Source: Eurostat)

Charging requirements

There are a number of charging possibilities when it comes to personal care appliances such as epilators and electric shavers (Which?, 2013):

 mains rechargeable – which can be used when plugged into the mains and when unplugged and charged;  rechargeable – can only be used when recharged and removed from the mains;  mains – can only be used when connected to the mains; and  battery powered.

However, it would appear that currently most electric shavers and epilators are rechargeable, allowing them to be used on the move and when a power source is not available (Argos, 2013). Those devices that are rechargeable are typically charged via a charging cable or via a docking station.

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Table A10-1: Examples of Charging of Epilators

The Philips ‘SatinPerfect’ epilator can be used when connected to the mains or cordless (when the batteries have been recharged). This epilator is charged via an AC adapter (voltage 100-240V, power consumption 7.5W).

A number of other models and brands also use charging connectors which appear to be very similar to this connector to charge (for example, a number of Braun models appear to use this method of charging).

However, epilators also use the connector more commonly associated with electric shavers (the ‘electric shaver’ connector) to charge. For example, the Braun Silk-Épil 7, another rechargeable epilator and a relatively new model, uses this connector.

There does not appear to be consistency between brands regarding the particular charging connector used, therefore there is not a common standard in the industry. Micro-USB charging is rare in the market for personal care products with only one Philips model identified which offers this. There are a number of cheaper and more basic models which offer charging via USB however these are models which are aimed at the travel market and are not aimed at daily use. Structure of the sector

On a global scale, the large international companies Philips and Braun (which is part of the Procter & Gamble group) dominate the market for both electric shavers (male and female) and epilators. One source estimates that Philips and Braun combined may have as much as 75% of the global market for electric shavers (Hollensen, 2007, cited in AbouElgheit, 2012).

Other manufacturers of personal care products active in Europe include Remington (part of Spectrum Brands), Calor (a French brand which is part of Groupe SEB), Panasonic, Emjoi, Wahl, Veet and Babyliss, however there market share is significantly smaller than that of Philips or Braun. Some retailers also produce ‘own brand’ products, for example, in the UK the retailers Boots and Tesco have their own brand epilators and electric shavers.

Philips

Philips is an international company which is based in the EU (the Netherlands). In 2012, global sales reached €24 billion and the company had some 118,000 employees (Philips, 2013). Philips business is split into three divisions: healthcare, lighting and consumer lifestyle.

The consumer lifestyle sector of Philips business comprises: personal care, health and wellness, lifestyle entertainment and domestic appliances. In 2012, consumer lifestyle generated sales of €5,953 million; of which personal care products (including male grooming) accounted for 25% of total sales (Philips, 2012). The consumer lifestyle division also has approximately 18,900 employees (Philips, 2012). The total sales by business of each are listed in Table A10-1 below.

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Table A10-2: Consumer Lifestyle – Total sales by business 2012 Business Percentage Personal Care (male grooming, skincare, beauty) 25% Health & Wellness (mother and childcare, oral healthcare) 15% Lifestyle Entertainment (audio and visual entertainment, communications, headphones 27% and accessories) Domestic Appliances (coffee, floor care, garment care, kitchen appliances, water and air, 33% beverage appliances) Source: Philips (2012)

In 2011, Philips was the market leader in electric shaving with a market share of more than 50% (Philips, 2011).

Braun (Procter and Gamble)

Braun is a wholly owned subsidiary of the international company Procter and Gamble. In 2010 and 2011, P&G (through the Braun brand) held 30% of the global market for male shavers and 50% of the female epilator market (Procter & Gamble (2010), Procter & Gamble (2011)). In 2012, this had changed to 30% of the global market for male shavers and 40% of the female epilator market (Procter & Gamble, 2012), and by 2013 the share in male electronic shaver market had dropped to 20% while the female epilator market remained at 40% (Procter & Gamble, 2013b).

In 2012, 10% (16% of net earnings) of P&G’s net sales were through grooming products, including blades and razors, electronic hair removal devices, hair care appliances, and pre- and post-shave products (Procter & Gamble, 2012b). 19% of their $83.68 billion net sales were in Western Europe and 14% in CEEMA (Central & Eastern Europe, Middle East, and Africa) (Procter & Gamble, 2012b). Case Study Countries

Germany

It is estimated that 26% of women in Germany use electric shavers (Procter and Gamble, 2013).

In Germany, in 2008, 12.7 million units of electronic personal care products were produced, however in 2012 this dropped to 9.3 million units. Germany is the only case-study country that has produced personal care products with self-contained electric motors between the years 2008 and 2012.

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Figure A10-4: Imports of Personal Care Products with Self-Contained Electric Motor to Germany (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-5: Exports of Personal Care Products with Self-Contained Electric Motor from Germany (units and Euros) 2008 to 2012 (Source: Eurostat)

United Kingdom

It is estimated that the shaving product sector was worth £523 million in the UK in 2009 (Bainbridge, 2010). In the UK, wet shaving equipment accounts for 50.6% of the shaving product market and electric shavers account for 21% of the market (Bainbridge, 2006). According to data from Mintel (as reported in Bainbridge (2010) in an article on Marketing Magazine online), the UK retail value sales of electric and battery shavers (including epilators) were static from 2007 to 2009 (at just over £100m), as were epilators - in the region of £10m.

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Electric shaving appears to be relatively unpopular among women in the UK; only 9% are estimated to use electric shavers or epilators (while 57% of women wet shave) (Bainbridge, 2006). Indeed, the women’s shaving market is relatively under-exploited when compared to the men’s market (Bainbridge, 2006). This is further elaborated in Table A10-3 below, which clearly indicates that the market for male electrical grooming appliances in the UK is significantly larger than the female market in terms of both value and volume.

Table A10-3: Men’s and Ladies’ Grooming Appliances – Value and Volume in 2010 Device Value Volume (units) Men’s shavers £94.9 million 1.85 million Beard trimmer £22.1 million 949,673 Bodygroomer £1.86 million 57,838 Nose/ear trimmer £5.9 million 790,889 Precision grooming £3.55 million 193,293

Ladies shavers £7.6 million 429,218 Epilators £24.6 million 492,326 Ladies trimmer £418,463 48,113 Ladies trim and shape £1.4 million 60,311 Source: Independent Electrical Retailer (2011)

In terms of brands active in the personal care market in the UK, Philips is the leader of the electric shaver market in the UK followed by Braun and Remington. Table A10-4 below presents the manufacturer’s shares in value sales of electric and battery operated shavers and epilators in the UK from 2007 to 2009.

Table A10-4: Manufacturers shares in value sales of electric and battery shavers and epilators Manufacturer 2007 2008 2009 % change £m % £m % £m % 2007-09 Philips 65 59 66 60 67 61 3.1 Procter & Gamble 25 23 26 24 26 24 4 (Braun) Remington 14 13 13 12 12 11 -14.3 Other/own-label 6 5 5 5 5 5 -16.7 Total 110 100 110 100 110 100 - Source: Bainbridge (2010)

Imports and Exports

The UK did not produce personal care products with a self-contained motor between 2008 and 2012.

Imports to the UK have fluctuated in price, being worth less than €10 per unit in 2008 and 2009, but more than €10 in 2010 and 2011, and then below that threshold again in 2012. Exports, on the other hand, are worth far more per unit, being worth the highest amount (at €31.5 per unit) in 2011, and the least (at €19 per unit) in 2010, as Figures A10-6 and A10-7 illustrate below.

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Figure A10-6: Imports of Personal Care Products with Self-Contained Electric Motor to the UK (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-7: Exports of Personal Care Products with Self-Contained Electric Motor from the UK (units and Euros) 2008 to 2012 (Source: Eurostat)

Poland

Figure A10-8 and A10-9 overleaf show the imports and exports of personal care products from Poland. These figures have been derived from Eurostat.

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Figure A10-8: Imports of Personal Care Products with Self-Contained Electric Motor to Poland (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-9: Exports of Personal Care Products with Self-Contained Electric Motor from Poland (units and Euros) 2008 to 2012 (Source: Eurostat)

Spain

It is estimated that one in five women in Spain use an epilator (Procter & Gamble, 2013). Further data suggests that 3.3 million Spanish women use an epilator (Hola.com, nd). Another study suggests 45% of women in Spain use electronic hair removal methods (Hachette Filipacchi, 2010/11). Around 9.9 million personal care products were sold in 2010.

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The personal care sector accounts for 25% of the market for electrical household appliances in Spain (ElectroMarket, 2013). Within this sector, epilation systems account for 5% and electric shavers account for 7% (ElectroMarket, 2013). Focusing only on this sector of the market, electric shavers accounts for 26% of all products sold while hair removal systems account for 20% of products sold. Hair straighteners/moulders and dental care products had market shares of 17%, 12% and 11% respectively397.

In 2012, the small household appliance sector had sales of €779.1 million and personal care appliances had sales of €203.9 million. Electric shavers had sales of €39.4 million, which is a reduction of 23.8% from the previous year. Epilators had sales of €35.9 million which is a reduction of 6.3% from the previous year. It is estimated that there were some 544,000 electric shavers sold in 2012 (down 10.1% from the previous year) and 465,000 epilators sold (down 11.6% on the previous year) (Protiendas, 2012).

In 2011, depilation systems had sales worth €34.7 million (a decrease of 0.2% from the previous year) and some 532,000 units were sold (a decrease of 9.7% from the previous year) (Protiendas, 2011).

In 2012, Philips was the leading manufacturer of electric shavers in Spain (Presspeople, 2012). Like in other EU countries, Braun and Philips appear to be the market leaders in Spain.

Italy

It is estimated that one in five women in Italy use an epilator (Procter and Gamble, 2013).

The market for electric shavers in Italy is comprised of four main players which share 95% of the electric shavers purchased in Italy (Rasoioelettrico.org, nd): Philips, Braun, Remington and Panasonic.

In 2005, it was estimated that 25% of Italians shave with an electric shaver and sales were estimated at approximately 650,000 units per year (Dalpozzo, 2005).

According to the Italian Association of Specialist Electro-domestic retailers in 2010 (second half); the market for small electro-domestic appliances was worth an estimated €1,138 billion in Italy. Electric shavers accounted for 10.2% of this value therefore approximately €120 million (GfK, 2010b).

France

It is estimated that one in five women in France use an epilator (Procter and Gamble, 2013). However, a study from 2010 suggests that 25% of women use an electrical product for hair removal (for the durability of the result). It is estimated that the market for electrical epilators in France is worth in the region of €55 million and comprises sales of a million units each year.

Sales of electrical hair removal products costing more than €100 comprised 8% of such sales in 2008, and 14% in 2009. An estimated 9,000 ‘pulsed light’ epilators costing in excess of €500 were sold in

397 Electro Market website: Las afeitadoras alcanzan en 2011 un 26% de representación en PAE Cuidado Personal, accessed at: http://www.electromarket.com/noticia/3245/las_afeitadoras_alcanzan_en_2011_un_26_de_representaci on_en_pae_cuidado_personal#.Uwc3SIV16hV

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12 months (an increase of 184%). Philips comprises 55% of the market for ‘pulsed light’ epilators in France (Le Figaro, 2010).

In 2010 the market for electrical hair removal appliances saw a 4.7% increase in sales (including epilators, lasers and hair trimmers/clippers) (Harel, 2010).

In the French hair removal market (in 2011) and in terms of value, Braun held 34%, Calor 25%, Babyliss 19%, Philips 15.5% and Panasonic 3.2% (Confortique Magazine, 2012).

The French brand Calor is part of Groupe SEB (a French consortium of companies manufacturing predominantly small appliances). It manufactures various personal care products, such as epilators and electric shavers which are aimed at the female market. Calor products are predominantly available in France and Belgium. In 2011, Calor held 25% (in terms of value) of the French hair removal market, second only to Braun with 34%. Babyliss had 19% of the market, Philips 15.5% and Panasonic 3.2% (Confortique Magazine, 2012).

Table A10-5: Sales of Epilators in France (2005-2012) Year Sales (units) 2005 732,000 2006 804,000 2007 822,000 2008 727,000 2009 736,000 2010 839,000 2011 970,000 2012 960,000 Source: GIFAM (2013)

It is estimated that hair removal products have a penetration rate of 26.8% resulting in some 7.8 million devices in French households. Of this:

 74% are epilators;  19% are electric shavers; and  7% are wax epilators.

The average price of an epilator is €57. In 2011, the hair removal market in France was estimated to be worth €73.4 million, an increase of 14.6%. Electric epilators held first place, accounting for 74.5% in terms of value, followed by light pulsing epilators (or IPL) with 14.5%, electric shavers for women had 19% of the value, bikini trimmers 3.2% and wax epilators 7% (Confortique Magazine, 2012).

In 2011, sales of electric epilators were worth €54.6million. The market was boosted by new innovations such as ‘Wet & Dry’.

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Figure A10-10: Imports of Personal Care Products with Self-Contained Electric Motor to France (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-11: Exports of Personal Care Products with Self-Contained Electric Motor from France (units and Euros) 2008 to 2012 (Source: Eurostat)

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Finland

As shown in the figure below, in 2012, just over 600,000 units were imported to Finland, worth an estimated €10 million. Exports of personal care products with a self-contained electric motor from Finland have increased since 2010. In 2012, over 14,000 units were exported, worth an estimated €350,000. This compares to just under 6,000 units in 2010, worth in the region of €200,000 to €250,000.

Figure A10-12: Imports of Personal Care Products with Self-Contained Electric Motor to Finland (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-13: Exports of Personal Care Products with Self-Contained Electric Motor from Finland (units and Euros) 2008 to 2012 (Source: Eurostat)

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Portugal

Figures A10-14 and A10-15 show the imports and exports of personal care products from Portugal. These figures were derived from Eurostat.

Figure A10-14: Imports of Personal Care Products with Self-Contained Electric Motor to Portugal (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-15: Exports of Personal Care Products with Self-Contained Electric Motor from Portugal (units and Euros) 2008 to 2012 (Source: Eurostat)

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The Netherlands

Figures A10-16 and A10 17 show the imports and exports of personal care products from the Netherlands. These figures were derived from Eurostat.

Figure A10-16: Imports of Personal Care Products with Self-Contained Electric Motor to the Netherlands (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-17: Exports of Personal Care Products with Self-Contained Electric Motor from the Netherlands (units and Euros) 2008 to 2012 (Source: Eurostat)

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Slovakia

Figures A10-18 and A10-19 show the imports and exports from Slovakia. These figures were derived from Eurostat.

Figure A10-18: Imports of Personal Care Products with Self-Contained Electric Motor to the Slovakia (units and Euros) 2008 to 2012 (Source: Eurostat)

Figure A10-19: Exports of Personal Care Products with Self-Contained Electric Motor from Slovakia (units and Euros) 2008 to 2012 (Source: Eurostat)

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United States

The hair removal market was estimated to be worth $2.1 billion in the US in 2011 and is on a similar scale to the UK (Laurence, 2012).

Table A10-6: Market share of men’s electric shavers in the US in 2004 and 2008 by manufacturer

2004 2008 Spectrum Brands 33% 41% (Remington/Rayovac) Philips (Norelco) 44% 34% Procter and Gamble (Gillette/Braun) 14% 10% Conair 8% Matsushita (Panasonic) 5% 5% Wahl 3% Others 1% 2% Source: Statista (2013h)

Table A10-7: Market share of women’s electric shavers in the US in 2004 and 2008 by manufacturer

2004 2008 Spectrum Brands 60% 57% (Remington/Rayovac) Philips (Norelco) 2% 2% Procter and Gamble (Gillette/Braun) Conair 28% 37% Matsushita (Panasonic) 8% 2% Wahl Others 2% 2% Source: Statista (2013i)

US electric shaver sales were decreasing during the economic crises. As incomes rises, demand for electric shavers is expected to rise as well, however, high import penetration restricts the achievable revenues of the US electric shaver manufacturers398.

China

China accounts for one quarter of the global market for electronic shavers. In 2012 men's grooming saw a slower but still high growth of 17% in China399. According to RNCOS, the grooming market in China will increase with a CAGR of more than 20% during 2012 to 2014.400 As Chinese males become

398 IBISWorld: Electric Shaver Manufacturing in the US: Market Research Report (2014), accessed at http://www.ibisworld.com/industry/electric-shaver-manufacturing.html 399 China Daily: The man who likes to cut a fine figure, accessed at http://www.chinadaily.com.cn/business/chinadata/2013-10/10/content_17019329.htm 400 RNCOS: Chinese Male Grooming Market Analysis, accessed at http://www.rncos.com/Report/IM420.htm

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richer they shift towards the more “metrosexual” consumer, which gives a boost to the grooming market401. It would seem that foreign companies dominate the electric razor market in China402.

401 Daxue: Market research: Skin care in China, accessed at http://daxueconsulting.com/skin-care-market-in- china/ 402 Daxue: Market research: Razor market in China, accessed at http://daxueconsulting.com/razor-market-in- china/

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Annex 11 Methodology for Quantitative Modelling

Mobile Phones and Their Chargers

Market Share of MoU Compliant Mobile Phones

This is a spreadsheet model that estimates the annual market share of MoU compliant mobile phones between 2011 and 2013. Estimates are derived for data enabled mobile phones as well as the mobile phone market at large.

This model draws on data collected through desk research and consultation and a range of assumptions about market and consumer behaviour. These data include:

 a sample of mobile phones for which we have collected data on the make/model, release date, and whether they have a Micro-USB socket (or could be charged via an adaptor). This sample currently comprises over 400 phones released between 2008 and 2013 (around 160 smartphones and 260 feature/basic phones). Where such information is available, phones not sold in Europe have been excluded from the sample;  estimated average values for the market lifetime of individual models (1.5 years). This value has been estimated on the basis of published information403 and consultation (a number of sources were used to derive the estimate).  market shares of individual manufacturers between 2008 and 2013; and  market shares of data-enabled and non-data-enabled phones as well as smartphones, feature & basic phones.

These data are used to calculate the proportion of MoU compliant models released by each manufacturer each year while differentiating between smartphones, feature phones and basic phones. These are combined with data on the market lifetime, manufacturers’ market shares and market shares of the different types of mobile phones to derive estimates of the proportion of 2009- 2013 sales (number of units sold) that were compliant with the MoU. The formula for this is set out below in a simplified manner. For reasons of simplification, only the main features of the model are presented below; for example, the assessment was carried out for smartphones, feature phones and basic phones separately and subsequently combined. Also, adjustments and tailored approaches were used whenever more detailed information was available (e.g. on the market lifetime for a specific manufacturer).

403 See http://www.nbcnews.com/id/29258026/ns/technology_and_science-digital_home/t/planned- obsolescence-cell-phone-models and http://google.brand.edgar- online.com/EFX_dll/EDGARpro.dll?FetchFilingHtmlSection1?SectionID=6482508-45544- 112993&SessionID=ae4HHWfPE63d0P7

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Formulae

The following formulae have typically been used to calculate % of compliant handsets in each product group (smartphone, basic, feature phone):

% of MoU compliant handset sales for manufacturer A in Year 3 = [% of MoU-compliant handsets launched in Y1 + 2*(% of MoU-compliant handsets launched in Y2) + 2*(% of MoU-compliant handsets launched in Y3)]/5

% of MoU compliant phones across manufacturers in Year 3 = (% of MoU compliant handset on the market in YEAR 3 (manufacturer A) X market share in YEAR 3 (manufacturer A)) + (% of MoU compliant handset on the market in YEAR 3 (manufacturer B) X market share in YEAR 3 (manufacturer B)) … + (% of MoU compliant handset on the market in YEAR 3 (other manufacturers) X market share in YEAR 3 (other manufacturers))

 Carried out separately for smartphones, feature phones/basic phones and subsequently adjusted to reflect the split between data-enabled and non-data enabled

 Apple deemed compliant due to availability of connectors

 Completed for 2009, 2010, 2011, 2012 and 2013

Data sources

 % of handsets released using Micro-USB charging – handset sample

 Market shares – see market data in Section 4 (primarily estimated based on various IDC press releases404)

 Data-enabled, non-data enabled splits – consultation

 Data on % MoU-compliant handsets from a handset manufacturer

Figure A11-1: Methodology for calculation of percentage of MoU-compliant handset sales

A number of simplifying assumptions/model characteristics have been made to bridge data gaps and/or facilitate the development of a model, e.g. the market shares of individual models in each manufacturer’s sales are not known and for this reason this model assumes equal market shares of all models within a manufacturer’s portfolio. Other assumptions include a) constant market churn (an average value is used although in reality some models will be sold for longer than 1.5 years while others will not be successful and will be withdrawn sooner) and b) the ability of mobile phones with a Micro-USB socket to be charged with a Micro-USB charger (available information only allows us to determine whether a phone has a Micro-USB socket and although it appears that current and recent models with a Micro-USB socket can be charged with a common charger, some older models had a Micro-USB socket only for data transfer). Last but not least, where data are not available for some

404 Accessed at http://www.idc.com/about/press.jsp

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years, these have been estimated based on linear extrapolations or held constant between two years.

Stock of MoU Compliant Mobile Phones

Estimates of the market shares of MoU compliant mobile phones can be further developed to estimate the proportion of compliant stock between 2009 and 2013. Please note that in this model, the term stock refers to mobile phones in use, i.e. mobile phones no longer in use but not yet disposed of are not included. The main parameters in the model include:

 market share of MoU compliant phones in the current and preceding period;  estimated value for the handset replacement cycle. This has been estimated at two years, based on a number of published sources and consultation.

Formula

The following formulae have typically been used to calculate % of compliant handsets in the stock of mobile phones:

% of MoU compliant handset stock in Year 3 = (% of MoU-compliant handsets launched in Y1 + % of MoU-compliant handsets launched in Y2 + % of MoU-compliant handsets launched in Y3)/3

 Completed for 2009, 2010, 2011, 2012 and 2013

Figure A11-2: Methodology for calculation of percentage of MoU-compliant stock

The main weaknesses of the model include a) use of an average handset replacement cycle value and b) the fact 'hand-down' (i.e. older models being passed down to family and friends) is not taken into account.

Market Share of MoU Compliant Chargers

There are essentially two distinct markets for mobile phone chargers: a) sales in the box with new phones and b) sales as an accessory. Estimates of the sales of standalone chargers differ but broadly these range from around 10% to around 20% of the sales together with new phones.

Other assumptions are used to model the market share of MoU compliant chargers include:

 sales of chargers with new phones mirror the market share of MoU compliant phones. This is deemed appropriate considering that available information shows what very few phones are sold without chargers (we have identified three initiatives in the EU supplying phones without chargers quantified the number of phones supplied by two of them – we are currently seeking to quantify the third one); and  sales of standalone chargers include replacements of broken chargers as well as consumers wishing to have multiple chargers – thus this market segment is assumed to reflect the stock

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of MoU compliant mobile phones in use (i.e. including the legacy market) rather than the sales of new phones.

Please note that we have calculated the proportion of chargers that can be used to charge MoU compliant phones, i.e. Apple chargers are included in this figure.

Market Share of Tablets using Micro-USB charging

A model has been developed to calculate the following in relation to tablets sold on the EU market between 2011 and 2013:

 percentage of tablet sales that use Micro-USB charging;  percentage of tablet stock that use Micro-USB charging; and  percentage of tablet chargers (standalone and included with new devices) which are Micro- USB.

The term ‘stock’ refers to tablets which are owned by consumers.

Data sources

The input data for the model has been collected through desk-based research and where appropriate informed by consultation. These data include:

 Average replacement cycle - tablets became popular in 2010, since which time the market has witnessed rapid growth in terms of sales and significant technological development. As such it is difficult to determine the average replacement cycle for a relatively new and innovative market. It is well documented that the average replacement cycle for a smartphone in Europe is around 2 years, with estimates for laptops being higher at around 5 years. Tablets arguably fit between these devices and therefore the average replacement cycle is estimated to be 3-4 years.  Market lifetime - technological innovation and the falling average sale price continue to drive the tablet market. In line with other electronic consumer devices, an estimated average value for the market lifetime of a particular model has been set at 1.5 years.  A sample of tablets has been selected which covers a range of manufacturers and models released in the EU from 2009 to 2013. The sample size currently stands at 218 tablets. For each device, the manufacturer, model, release date, screen size and type of charger have been recorded. The presence of a Micro-USB port does not necessarily demonstrate a particular tablet’s compliance, as it is common for models to have such a port for data transfer and a separate proprietary charging port. Therefore efforts have been made to ensure the information recorded was factually correct and accurate. This included referring to the user manual and product review websites. Details of the sample have been compiled in a spreadsheet database, which also includes references.  Worldwide market shares of individual manufacturers between 2009 and 2013 have been derived from numerous IDC press releases. For further details please refer to the references section and annexes.

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 Tablet sales in Europe were calculated using worldwide sales figures that were apportioned to give sales in Western Europe. A multiplying factor was then used to determine the sales figures for Europe.  Standalone chargers - in almost all cases, new tablets are sold with a charger. However chargers are also purchased separately to replace a lost or broken charger or as a spare charger for use when away from home. The mobile phone model assumes that 10% of mobile phone owners buy a standalone charger (consultation). In comparison, tablets are used to a lesser extent and mostly in the home; therefore it is less likely that chargers require replacing or tablets need charging away from home. The study team has estimated that the percentage of consumers buying a standalone charger for tablets is around 2%.

Calculations

The following section will provide an explanation on how the data previously outlined has been used within the model to calculate the three outputs detailed above.

Percentage of tablet sales that use Micro-USB charging

The sample of tablets reviewed and manufacturer market share data has been used to calculate the proportion of models (all manufacturers) released in a particular year which use Micro-USB charging. Where the market share was not known, these manufacturers have been grouped under ‘Other’.

Formula

% of tablet sales that use Micro-USB charging = (% of tablets released using Micro-USB charging in YEAR 1 (manufacturer A) X market share in YEAR 1 (manufacturer A)) + (% of tablets released using Micro-USB charging in YEAR 1 (manufacturer B) X market share in YEAR 1 (manufacturer B)) … + (% of tablets released using Micro-USB charging in YEAR 1 (other manufacturers) X market share in YEAR 1 (other manufacturers))

 Completed for 2009, 2010, 2011, 2012 and 2013

Data sources

 % of tablets released using Micro-USB charging – tablet sample

 Market share - IDC press releases405

Figure A11-3: Methodology for calculation of percentage of tablet sales that use Micro-USB charging

Percentage of tablet stock that use Micro-USB charging

Using the tablet sales figures for Europe and the % of tablet sales that use Micro-USB charging it is possible to calculate the percentage of tablet stock (devices owned by consumers) which uses Micro- USB charging.

405 IDC website: IDC Media Center, accessed at http://www.idc.com/about/press.jsp

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In a given year the stock of tablets is made up of the devices sold in that year and also those sold in previous years, the latter being dependent on the average replacement cycle. Within the tablet model, the replacement cycle has been set at 3-4 years. The percentage of stock that charges via Micro-USB in the given year is equal to, the percentage of stock that charges via Micro-USB in that particular year in addition to the percentage of stock that charges via Micro-USB in the subsequent three years (where data are available).

Formulae

Tablet sales in Europe (by manufacturer) = total tablet sales in Europe for YEAR 1 X worldwide market share of manufacturer in YEAR 1

Number of tablet sales that use Micro-USB charging (by manufacturer and total) = sales in Europe by manufacturer for YEAR 1 X % of tablets released that use Micro-USB charging by manufacturer for YEAR 1

Number of tablet sales that do not use Micro-USB charging (by manufacturer and total) = sales in Europe by manufacturer for YEAR 1 X (1- % of tablets released that use Micro-USB charging by manufacturer for YEAR 1)

Stock of tablets that use Micro-USB charging (by manufacturer and total) = Number of tablet sales that use Micro-USB charging in YEAR 1 + number of tablet sales that use Micro-USB charging in three previous years (where available)

Stock of tablets that do not use Micro-US charging (by manufacturer and total) = Number of tablet sales that do not use Micro-USB charging in YEAR 1 + number of tablet sales that do not use Micro- USB charging in three previous years (where available)

% of tablet stock that use Micro-USB charging (manufacturer and total) = Stock of tablets that use Micro-USB charging by manufacturer for YEAR 1 / (stock of tablets that use Micro-USB charging by manufacturer for YEAR 1 + stock of tablets that do not use Micro-USB charging by manufacturer for YEAR 1)

 Completed for 2009, 2010, 2011, 2012 and 2013 (all formulae)

Data sources

 Sales in Europe (Gartner press releases406, proportion of worldwide sales attributed to Western Europe407 and Europe multiplying factor)  Worldwide market share by manufacturer – ABI Research408 and IDC press releases409  Percentage of tablets sales that use Micro-USB charging – tablet sample  Replacement cycle – 3-4 years Figure A11-4: Methodology for calculation of percentage of tablet stock that use Micro-USB charging

406 Gartner website: Newsroom, accessed at http://www.gartner.com/newsroom/ 407 Statista website, accessed at http://www.statista.com/statistics/272599/sales-forecast-for-tablet-pcs-by- region/ 408 ABI Research press release: https://www.abiresearch.com/press/apple-ipad-held-85-media-tablet-market- share-in-20 409 IDC website: IDC Media Center, accessed at http://www.idc.com/about/press.jsp

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Percentage of tablet chargers (standalone and included with new devices) which are Micro-USB

Almost all new PND are sold with a charger and 2% of consumers are estimated to be purchase a standalone charger.

Formulae

Chargers included with new devices = % of tablet sales that use Micro-USB charging in a given year

Standalone chargers = % of tablet stock that use Micro-USB charging in a given year

All chargers = (% of tablet sales that use Micro-USB charging in a given year X 98%) + (% of tablet stock tablet that use Micro-USB charging X 1%) in a given year

 Completed for 2009, 2010, 2011, 2012 and 2013 (all formulae)

Data sources

 Percentage of tablet sales that use Micro-USB charging - tablet sample

 Percentage of tablet stock that use Micro-USB charging - see Figure A11-4

 Percentage of consumers buying a standalone charger - 2%

Figure A11-5: Methodology for calculation of percentage of tablet chargers which are Micro-USB

Market Share of Personal Navigation Devices using Micro-USB charging

A model has been developed to calculate the following in relation to personal navigation devices (PND) sold on the EU market between 2011 and 2013:

 percentage of PND sales that use Micro-USB charging;  percentage of PND stock that use Micro-USB charging; and  percentage of PND chargers (standalone and included with new devices) which are Micro- USB.

The term ‘stock’ refers to PNDs which are owned by consumers.

Data sources

The input data for the model has been collected through desk-based research. These data include:

 Average replacement cycle – as the PND market matured, manufacturers appealed to existing customers and sought to encourage those who purchased early models to replace and upgrade. TomTom predicated that 40% of consumers who owned a PND would upgrade their device in 2010. This can be compared to estimates that suggested only 15% of consumers upgraded to a newer PND in previous years. It may have been the case that consumers who purchased a replacement PND in 2010 were likely to have initially bought

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their device between 2004 and 2006. Moreover, the replacement rate was predicted to remain just as high for a few years. Indeed, in 2010 an analyst suggested that around a third of PND shipments to mature markets could be attributed to existing customers that already owned a PND. In these instances, consumers wanted to upgrade to PND with larger screens, live traffic information updates and speed camera warnings410. For the purpose of the model, the average replacement cycle has been set at 4-5 years.  Market lifetime - Technological innovation and the falling average sale price of PND continue to drive the PND market. In line with other electronic consumer devices, an estimated average value for the market lifetime of a particular model has been set at 2 years.  A sample of PND has been selected which covers a range of manufacturers and models released from 2008 to 2013. The sample size currently stands at 123 devices. It should be noted that where appropriate, PND have been grouped by series and treated as one device (e.g. Mio Moov 300, Mio Moov 380, Mio Moov 590 has been treated as one device, Garmin nüvi® 3490LMT / 3490 LT has been classified as one device as has TomTom Via 110/120 / 120 Live). Efforts have been made to ensure the information recorded was factually correct and accurate. This included referring to the user manual and product review websites. Details of the sample have been compiled in a spreadsheet database and in Tables below, which also includes references.  Worldwide market shares of individual manufacturers between 2009 and 2013 have been derived from manufacturer’s annual reports and market reports. For further details please refer to the section 4 and Annex 8.  PND sales in Europe were gathered from internet publications through desk-research, more information can be found in section 4 and Annex 8.  Standalone chargers – in almost all cases, PND are sold without an AC charger for the home and are typically sold with only a car charger. However chargers can also be purchased separately. This may be to replace a lost or broken charger or to be left within a second automobile. The mobile phone model assumes that 10% of mobile phone owners buy a standalone charger (consultation). In comparison, PND are left within a car alongside the charger or the charger will be left in the car with the PND taken inside. Chargers are therefore less likely to be lost or broken. The study team has estimated that the percentage of consumers buying a standalone charger for PNDs is around 2%.

Calculations

The following section will provide an explanation on how the data previously outlined has been used within the model to calculate the three outputs detailed above.

Percentage of PND sales that use Micro-USB charging

The sample of PND reviewed and manufacturer market share data has been used to calculate the proportion of models (all manufacturers) released in a particular year which use Micro-USB charging. Where the market share was not known, these manufacturers have been grouped under ‘Other’.

410 Business Wire, Research and Markets: Personal Navigation Devices 4th edition – PND shipments will peak at 42 million units in 2011, accessed: http://www.businesswire.com/news/home/20101110005972/en/Research-Markets-Personal-Navigation- Devices---4th#.UyMIMIXamUl

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Formula

% of PND sales that use Micro-USB charging = (% of PND released using Micro-USB charging in YEAR 1 (manufacturer A) X market share in YEAR 1 (manufacturer A)) + (% of PND released using Micro- USB charging in YEAR 1 (manufacturer B) X market share in YEAR 1 (manufacturer B)) … + (% of PND released using Micro-USB charging in YEAR 1 (other manufacturers) X market share in YEAR 1 (other manufacturers))

 Completed for 2009, 2010, 2011, 2012 and 2013

Data sources

 % of PND released using Micro-USB charging – PND sample

 Market share - IDC press releases411

Figure A11-6: Methodology for calculation of percentage of PND sales that use Micro-USB charging

Percentage of PND stock that use Micro-USB charging

Using the PND sales figures for Europe and the % of PND sales that use Micro-USB charging it is possible to calculate the percentage of PND stock (devices owned by consumers) which uses Micro- USB charging.

In a given year the stock of PND is made up of the devices sold in that year and also those sold in previous years, the latter being dependent on the replacement cycle. Within the PND model, the replacement cycle has been set at 4-5 years. The percentage of stock that charges via Micro-USB in the given year is equal to, the percentage of stock that charges via Micro-USB in that particular year in addition to the percentage of stock that charges via Micro-USB in the subsequent four years (where data are available).

411 IDC website: IDC Media Center, accessed at http://www.idc.com/about/press.jsp

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Formulae

PND sales in Europe (by manufacturer) = total PND sales in Europe for YEAR 1 X worldwide market share of manufacturer in YEAR 1

Number of PND sales that use Micro-USB charging (by manufacturer and total) = sales in Europe by manufacturer for YEAR 1 X % of PND released that use Micro-USB charging by manufacturer for YEAR 1

Number of PND sales that do not use Micro-USB charging (by manufacturer and total) = sales in Europe by manufacturer for YEAR 1 X (1- % of PND released that use Micro-USB charging by manufacturer for YEAR 1)

Stock of PND that use Micro-USB charging (by manufacturer and total) = Number of PND sales that use Micro-USB charging in YEAR 1 + number of PND sales that use Micro-USB charging in four previous years (where available)

Stock of PND that do not use Micro-US charging (by manufacturer and total) = Number of PND sales that do not use Micro-USB charging in YEAR 1 + number of PND sales that do not use Micro-USB charging in four previous years (where available)

% of PND stock that use Micro-USB charging (manufacturer and total) = Stock of PND that use Micro- USB charging by manufacturer for YEAR 1 / (stock of PND that use Micro-USB charging by manufacturer for YEAR 1 + stock of PND that do not use Micro-USB charging by manufacturer for YEAR 1)

 Completed for 2009, 2010, 2011, 2012 and 2013 (all formulae)

Data sources

 Sales in Europe

 Worldwide market share by manufacturer

 Percentage of PND sales that use Micro-USB charging – PND sample

 Replacement cycle – 4-5 years

FigureA11-7: Methodology for calculation of percentage of PND stock that use Micro-USB charging

Percentage of PND chargers (standalone and included with new devices) which are Micro-USB

Almost all new PND are sold with a charger and 1% of consumers are estimated to be purchase a standalone charger.

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Formulae

Chargers included with new devices = % of PND sales that use Micro-USB charging in a given year

Standalone chargers = % of PND stock that use Micro-USB charging in a given year

All chargers = (% of PND sales that use Micro-USB charging in a given year X 99%) + (% of PND stock PND that use Micro-USB charging X 1%) in a given year

 Completed for 2009, 2010, 2011, 2012 and 2013 (all formulae)

Data sources

 Percentage of PND sales that use Micro-USB charging - PND sample

 Percentage of PND stock that use Micro-USB charging - see Figure A11-7

 Percentage of consumers buying a standalone charger - 1%

Figure A11-8: Methodology for calculation of percentage of PND chargers which are Micro-USB

Market Share of E-Readers using Micro-USB charging

Different models of e-readers sold by different manufacturers are sold with and without a charger (the latter sold with just a USB cable for data download and charging from a computer/laptop). It has not been possible to discern the degree to which these different selling models apply in the EU and consequently, the model developed for e-readers focuses on developing overall estimates of e- readers sold on the EU market between 2009 and 2013 and covering:

 volume of sales of e-readers with and without Micro-USB connectors  % of sales of e-readers with Micro-USB connectors for charging and data transfer  % of sales of e-readers with other connectors for charging and data transfer  stock of e-readers with and without Micro-USB connectors  % of stock of e-readers with and without Micro-USB connectors for charging and data transfer

Data sources

The input data for the model has been collected through desk-based research and where appropriate informed by consultation. These data include:

 Average replacement cycle – e-readers came onto the EU market in approximately 2009. The market grew to 2011-12 but has subsequently diminished as their functionality has been progressively taken over by tablets and smartphones. It is well documented that the average replacement cycle for a smartphone in Europe is around 2 years, with estimates for laptops being higher at around 5 years. E-readers arguably fit between these devices and therefore the average replacement cycle is estimated to be 3-4 years.  A sample of e-readers has been selected which covers a range of manufacturers and models released in the EU from 2009 to 2013. The sample size was 125 e-readers. For each device,

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the manufacturer, model, release date and type of charging have been recorded. Details of the sample have been compiled in a spreadsheet database, which also includes references.  Worldwide global shipments of e-readers for the major sellers in the EU have been identified between 2009 and 2013 from IHS.  E-reader sales in Europe were calculated by adjusting these figures for the EU using a simple GDP multiplier based on IMF figures for global and EU GDP for 2012; please refer to Annex 3 for further details and references.  Data on market shares of the major EU suppliers have been obtained from a number of publically available internet sources; please refer to Annex 3 for further details and references.

Calculations

The following section explains how the data previously outlined has been used within the model to calculate the outputs detailed above.

Sales of e-readers with different charging solutions

The sample of e-readers reviewed, e-reader sales and manufacturer market share data have been used to model sales of e-readers with Micro-USB charging and those without. Where the market share was not known, these manufacturers were grouped under ‘Other’. The methodology utilised is set out in Figure A11-9 below.

Stock of E-readers using Micro-USB

Using the e-reader sales figures for Europe and the % of MoU compliant releases it is possible to calculate the percentage of tablet stock (devices owned by consumers) which is compliant with the MoU.

In a given year the stock of e-readers is made up of the devices sold in that year and also those sold in previous years, the latter being dependent on the average replacement cycle. Within the e-reader model, the replacement cycle has been set at 3-4 years, therefore in a given year the percentage of compliant stock will be an average of complaint sales in the given year and the subsequent three years where data are available.

The methodology utilised is set out in Figure A11-10 below.

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Formula

Sales of e-readers in EU using Micro-USB charging were calculated for each year as follows:

EU sales of Manufacturer A using Micro-USB in Year 1 = [(Global Sales x Manufacturer A’s Market Share) x (EU GDP/Global GDP)] x % of Manufacturer A’s releases with Micro-USB charging

+

EU sales of Manufacturer B using Micro-USB in Year 1 = [(Global Sales x Manufacturer B’s Market Share) x (EU GDP/Global GDP)] x % of Manufacturer A’s releases with Micro-USB charging

+…..

EU sales of Manufacturer X using Micro-USB in Year 1 = [(Global Sales x X’s Market Share) x (EU GDP/Global GDP)] x % of Manufacturer X’s releases with Micro-USB charging.

Sales of e-readers which use other charging solutions were then calculated based on total sales in the EU (= Global Sales x (EU GDP/Global GDP)) minus the calculated EU sales of all manufacturers of e-readers with Micro-USB charging.

The % of e-reader sales with and without Micro-USB for each year was then calculated using the two sets of calculated sales figures for each year.

Calculations were completed for:

 2009, 2010, 2011, 2012 and 2013

Data sources

 % of releases with Micro-USB charging – e-reader sample

 Market share various source as described above

 IHS Global shipment data for e-readers from 2009 to 2013

 EU and Global GDP data for 2012 from IMF

Figure A11-9: Methodology for calculation of sales and percentage of sales of e-readers using Micro-USB

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Formulae

The Stock of e-readers with Micro-USB in the EU was calculated (using the sales figures generated for each year as above) as follows:

Stock of e-readers with Micro-USB in 2009 = Sales of e-readers in EU with Micro-USB in 2009

Stock of e-readers with Micro-USB in 2010 = Sales of e-readers in EU with Micro-USB in 2009 + 2010

Stock of e-readers with Micro-USB in 2011 = Sales of e-readers in EU with Micro-USB in 2009 + 2010 + 2011

Stock of e-readers with Micro-USB in 2012 = Sales of e-readers in EU with Micro-USB in 2009 + 2010 + 2011 + 2012

Stock of e-readers with Micro-USB in 2013 = Sales of e-readers in EU with Micro-USB in 2010 + 2011 + 2012 + 2013

The Stock of e-readers without Micro-USB in the EU was calculated as follows:

Total stock of e-readers in EU in 2009 = [Global Sales in 2009 x (EU GDP/Global GDP)]

Total stock of e-readers in EU in 2010 = [Global Sales in 2009 x (EU GDP/Global GDP)] + [Global Sales in 2010 x (EU GDP/Global GDP)]

Total stock of e-readers in EU in 2011 = [Global Sales in 2009 x (EU GDP/Global GDP)] + [Global Sales in 2010 x (EU GDP/Global GDP)] + [Global Sales in 2011 x (EU GDP/Global GDP)]

Total stock of e-readers in EU in 2012 = [Global Sales in 2009 x (EU GDP/Global GDP)] + [Global Sales in 2010 x (EU GDP/Global GDP)] + [Global Sales in 2011 x (EU GDP/Global GDP)] + [Global Sales in 2012 x (EU GDP/Global GDP)]

Total stock of e-readers in EU in 2013 = [Global Sales in 2009 x (EU GDP/Global GDP)] + [Global Sales in 2010 x (EU GDP/Global GDP)] + [Global Sales in 2011 x (EU GDP/Global GDP)] + [Global Sales in 2012 x (EU GDP/Global GDP)] + [Global Sales in 2013 x (EU GDP/Global GDP)]

Stock of e-readers in EU without Micro-USB in Year X = Total stock of e-readers in EU in Year X – Stock of e-readers with Micro-USB in Year X

% of stock of e-readers with Micro-USB in the EU was calculated as follows:

[(Stock of e-readers with Micro-USB in the EU in Year X)/Total Stock of e-readers in the EU in Year X)] x 100

 Completed for 2009, 2010, 2011, 2012 and 2013

Data sources

 As above in Figure A11-9

 Replacement cycle – 4 years

Figure A11-10: Methodology for calculation of percentage of stock in EU with Micro-USB

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