[Technology Report]
Consumer Electronics Lead The Way
While consumer electronics and wireless dominate the market, other technologies and trends will play a key role in the future of the industry.
Where would the electronics industry be today without consumer electronics (CE) and wireless technology? Shawn G. DuBravac, staff economist for the Consumer Electronics Association (CEA), has the answer. He says that the CE sector accounts for 40% of the electronics industry. "This includes components, including semiconductors, as well as finished products," he says.
By some estimates, DuBravac says the CE sector accounts for more than half of all semiconductor sales worldwide, a result of the fast-paced introduction of new and innovative products and services (Fig. 1).
Gartner's Semiconductor Worldwide Group tends to back him up. The research firm reports that all of the industry's top 10 OEMs, which collectively accounted for $84 billion of the semiconductors consumed in 2006, are major CE players.
Gartner ranks Hewlett-Packard as the top semiconductor consumer with approximately $12 billion in semiconductor purchases, but Nokia and Dell have closed the gap to within $0.5 billion. Samsung and Sony rounded out the top five semiconductor consumers, followed by Motorola, Siemens, Toshiba, and LG.
Apple cracked the top 10 for the first time, propelled by strong sales of its portable media products, including iPods (more than 100 million sold, according to Apple).
Overall, factory-to-dealer sales of consumer electronics have been climbing every year, from about $117 billion just three years ago to a projected $155.2 billion in 2007, according to the CEA (Fig. 2).
"Consumers started the year [2006] investing in innovative consumer electronic products and seemingly never stopped," says Todd Thibodeaux, CEA's senior vice president of industry relations. "With the 2007 forecast, we see the consumer love affair with technology continuing at a healthy clip." A recent study conducted by the CEA supports Thibodeaux's notion, purporting that the average U.S. household spends $1200 annually on CE products.
Part of what makes the CE sector so dynamic is the pace of new product development and how rapidly it can glom onto new and emerging technologies. And while consumer electronics today rely largely on physical media and on broadcast delivery of entertainment content, ABI Research believes the market is in the midst of a major shift to a greater reliance on network-based delivery.
The market research firm expects Wi-Fi networking to become a key enabler for delivery and redistribution of this content in the home, particularly for retail CE hardware. It forecasts that the total number of Wi-Fi-enabled CE devices will grow from 40 million shipped in 2006 to nearly 249 million in 2011.
"From the enormous interest in online gaming to the rapid emergence of new Internet distribution channels for top movie and TV content, the connectivity in mainstream consumer electronics is growing rapidly," says Michael Wolf, research director at ABI Research. "While the consumer Wi-Fi market has previously consisted largely of routers, gateways, and adapters, we believe that as the market evolves towards digital distribution, its growth will be fueled by the inclusion of embedded Wi-Fi in consumer electronics."
CEA market research supports the networking trend. "Two of the fastest movers in the CE industry—namely network routers or hubs and cable modems—are devices that enable home networking," says Elena Caudle, a CEA senior research analyst. "The other three products enable consumers to create, shift, or transport digital content."
The Internet also plays a large role in how CE products are purchased. Online research could influence as much as $25 billion in sales over a six-year period, according to a study sponsored by the CEA and Yahoo. The study revealed that such research plays a key role as many consumers prepare to purchase CE products whether they make their end-purchases online or elsewhere.
Another significant trend is that the CE market is getting bigger geographically, especially in places like China, Russia, India, and Brazil. Of course, there are risks involved in these markets, such as copyright concerns. But the growth and potential for even greater revenue from these regions hasn't stopped most of the larger CE OEMs from pursuing them.
CE sales in Brazil have climbed from $11.2 billion in 2002 to $17.1 billion in 2006. In addition to the increase in CE sales, China and India are building manufacturing facilities with foreign-based partners.
The CEA, meanwhile, plans to take a broader look at the impact of its members. DuBravac says the association is preparing a larger study to explore the role the CE industry has in the U.S. economy, which he expects to be published by October of this year.
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