[Technology Report]
Wireless, Homeland Security, And Don't Forget About Cars
While consumers scramble for the latest gear, they need something to scramble in—and somebody to watch their backs.
Is anything hotter than wireless? Maybe consumer electronics. Both are pervasive markets. But wireless is everywhere and constantly finding new applications, even where wired solutions didn't exist. There's GSM, CDMA, Wi-Fi, WiMAX, Bluetooth, ISM, RFID, and ZigBee, which together represent a market in the hundreds of billions of dollars.
Cell-phone penetration in the U.S. will increase from 66% in 2005 to 88% in 2009, according to the Telecommunications Industry Association's (TIA) 2006 Market Review & Forecast. Cell-phone generated revenue also will grow, according to the TIA, fueled mainly by new and emerging technologies and new applications, some of which we haven't seen yet.
Even third-generation (3G) wireless, still slow to grow in the U.S., can claim more than 160 3G systems in commercial operation in 75 countries with more than 230 million 3G subscribers at the end of 2005.
Consumers Drive Chip Growth How important is wireless and consumer electronics to the semiconductor industry? Just ask Texas Instruments, whose chips are in most of the cell phones produced in the world. Or, you could ask flash chip maker SanDisk.
Eli Harari, the president and CEO of SanDisk, believes the semiconductor industry is at the beginning of a new 20-year growth cycle that largely will be driven by consumer electronics demand. Harari says consumer electronics will create the same kind of growth in the next 20 years that PCs did from 1980 to 2000.
"When you have dramatic cost reductions, and the key driving force is Moore's Law, you enable completely new markets," Harari said, noting that three of the top five markets for NAND flash did not exist five years ago. (SanDisk's sales more than doubled from $1 billion in 2003 to $2.3 billion last year with a lot of help from digital camera sales.)
Pushkar Apte, vice president of technology programs for the Semiconductor Industry Association (SEMI), made essentially the same point at the recent SEMI Strategic Business Conference, presenting data that showed that in 1965, the U.S. government purchased 80% of all semiconductors. During the 1980s and 1990s, corporate users became the most significant purchasers in the market. That changed in 2005, he said, when individual consumers overtook the corporate sector as the single largest user of semiconductor-enabled products.
Much of this growth is coming from flat-screen TVs. While only 17% of consumers currently own a flat-panel display (FPD), 49% say their next TV set purchase will be some type of flat-panel technology, according to research by the Consumer Electronics Association (CEA).
"The current TV market is in the midst of a massive upgrade cycle," says CEA Director of Industry Analysis Sam Wargo. "Flat-panel shipments now comprise 36% of total revenues, and growth is assured with FPDs reaching 63% of revenues by 2009—despite and because of continual price declines in this category."
The CEA forecasts the shipment of $32 billion worth of TVs to U.S. dealers in 2006, with shipments increasing nearly $30 million by the close of the decade, making it the single largest consumer electronics category. "It is likely many consumers use 'plasma' to describe the broader flat-panel category, and for other consumers, perhaps flat is just flat regardless of the technology type," Wargo says.
Confusion about TV terminology isn't unique to flat panel displays. A large portion of rear-projection set owners aren't sure what type of projection technology they own, and the term plasma is more recognizable to consumers than the venerable cathode ray tube or CRT set. LCD familiarity isn't far behind plasma, which is a testament to the growth of this category over the last year. In fact, Wargo says LCD is the most owned type of FPD at 53%.
Radio, meanwhile, continues to be the most ubiquitous consumer electronics product with 98% household penetration. Much of its growth is due to innovations such as satellite, HD Digital Radio, and Internet radio. Introduced in 2001, satellite radio shipped more than 3.6 million tuners in 2005 and continues to add subscribers at a good clip.
The key to much of consumer electronics' recent success is in the creation and acceptance of new portable devices. Besides mobile handsets, PDAs, and portable electronic games, several companies have introduced portable Internet radios that no longer need a computer basestation, while MP3 reigns as the top content format.
Apple Computer has had tremendous success with its iPod, shipping 8.5 million units in the second quarter of this year, while adding new features to newer models. In January, Apple unveiled a remote control with FM radio capabilities for the iPod. The CEA is projecting that 13.5 million portable radios, including MP3/radios, CD player/radios, boomboxes, and headphone radios, will be sold this year.
Yankee Group market analysts believe the only way companies can maintain their success with portable entertainment products is to have a firm grasp of consumer behavior and the competitive landscape. "The major players must understand who will lead and who will follow in order to successfully plan future strategy and appropriately target their investments," says Mike Goodman, the Yankee Group's senior analyst for media and entertainment strategies.
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