Consumer Electronics Trends

2007 Fourth Quarter

By Jane Lin-Li, MBA - Associate Editor

YOU KNOW YOU ARE LIVING IN the new millenium when...

You accidentally enter your password in the microwave.

  • You haven’t played solitaire with real cards in years.
  • You e-mail the person who works at the desk next to you.
  • You text a family member who is in another room in the house.
  • You pull up in the driveway and use your cell phone to see if anyone is home to help you carry in the groceries.
  • Your reason for not staying in touch with friends and family is that they don’t have e-mail addresses.

I received this chain letter in my email box and had to chuckle as I read through the list. Aren’t these so true for many of us these days…? The Digital Age has descended upon us, and it is in every way changing the ways we do things, and at the same time changing the things we do.

According to Consumer Electronics Association (CEA), over $160 billion worth of consumer electronics (CE) products will be shipped to dealers in the U.S. by the end of 2007, an 8% growth from a year ago (see Figure). Comparing this growth rate to the US GDP figure of 2.2% for the same period a year ago (Bureau of Economic Analysis), the CE industry is undoubtedly a critical economic pillar in the country’s financial structure, in addition to providing pleasure and bettering quality of life to the many that use it. And as consumers’ appetite for entertainment, productivity, 24x7 connectivity, and their willingness to spend more on technology products continue to escalate, the demand for both hardware and software to support the new millennium’s lifestyle will only further fuel the advancement of digital technology for consumer electronics.

TVs, displays, PCs, wireless handsets, digital cameras, and game systems dominated the U.S. consumer electronics market for all of 2007, contributing to half of the year’s total CE spending. Other product categories that are showing a strong surge in consumer demand and bear a comparatively higher growth potential include HD DVD, set-top boxes, digital photo frame, and MP3 speaker docks. There is much more to the competitive dynamics within each of these product categories. For example, within the digital display category, LCD are expected to continue to expand in volume while all other display types are expected to shrink.

This increase in volume however does not warrant LCD manufacturers an increase in total revenue, reflecting albeit too common the consumer sentiment that while product features will continue to go up over (a short) time prices will go down. Forecast of the digital camera market captures this consumer sentiment most succinctly. In Consumer Electronics Association’s 2007 mid-year projection, digital cameras are forecasted to go on a downward revenue spin year over year with double-digit percentage drop starting in 2009 (-10%) and doubling almost that by 2011 (-19%). It seems that even substantial improvement in mega-pixels will not be enough to reverse this monetary picture. Driven by such sentiment, consumers’ buying behaviors are drastically reducing the CE product lifecycle overall and causing manufacturers and channel players alike to re-think their business models and practices. As the industry speculates if technology convergence will result in fewer products to sell and less money to be made by all, CE manufacturers will be wise to cast a wider net over the broader horizons of what are to come and begin to put gears in place to set their offerings apart by key differentiators.

Touching is the New Seeing

Lev Grossman in his November 12, 2007 Time magazine article “Invention of the Year: The iPhone”, touted touching as part of a new way that human relates to computers – a very marketable and profitable new way at that as evidenced by iPhone. And while more affordable and widespread consumer applications have yet to be seen, the whole “touch” concept and related product development and marketing are here to stay for the foreseeable future as companies like Microsoft (surface.com) and Perceptive Pixel (perceptivepixel.com) continue to charter the course in the area of multi-touch technology.


The anywhere, anytime theme will continue to drive demand for products and services in both hardware and software at both the consumer and business levels. For example, CEA forecasts sales of laptops to outpace desktops in the PC segment at the rate of 2:1 both in volume and revenues in the next few years. And while mobile handsets will continue to have a major play in the CE market, the real star will be the smartphones that enable convergence of wireless capabilities, allowing their users to mix work and play interchangeably – anywhere, anytime. Next-generation DVD will follow similar pattern in that as packaged media continue to be attractive, wireless contents downloadable from the web is the direction content retrieval is heading.

Interoperability – Cords, Cables, Digital Formats

The introduction of HDMI (High Definition Multimedia Interface) has enabled plug-and-play of CE devices, providing the basic building block for the anywhere, anytime uses of CE products. Overtime, as technology evolves and digital contents and features improve, interoperability too will need to evolve to go beyond audio and video distribution and device control. The challenge of getting DTV data services over HDMI will soon become a ripe economic opportunity; already it is attracting semiconductor giant such as Intel to get behind this technological evolution in driving and participating in industry joint efforts to create necessary standards and guidelines.

Innovation/Agile Process/ Channel Leverage

Manufacturing will continue to compete globally for lower costs. This will drive the need for innovation in every aspect of a CE producer’s business and operation. While sustainable innovation in product design will breed the most immediate and greatest reward, the same creative energy has become mandatory along every phase of a product development and production cycle to meet the evolving consumer demands that have greatly shortened the CE product lifecycle. The challenge is further complicated by the proliferation of channel options many of which do not complement, and product packaging with CE products nowadays often containing service or content components.

Virtual Reality

It’s hard to say why Linden Lab’s Second Life (secondlife.com) would take off the way it did and is today a formidable marketplace for many competing businesses, but what is certain is that virtual world is here to stay and consumers are welcoming it. According to the same CEA report, the video gaming segment of the CE industry continues its strong growth in 2007, surpassing its result from a year ago by 28%. For companies that are targeting the gamer demographics, the virtual world represents a serious playground to not only market their products and services, but also to maintain a very real virtual presence where they may service and interact with their potentially very real customers – the game developers.

Green, Solar, and Global Warming

Breaking global warming down to the regional level so preventative and reactive measures can be taken locally is a big undertaking that has yet to be determined. However, a recent Forrester Research report confirmed that 12% of US adults, representing 25 million of the population, are ready to do their part by committing more of their own dollars to buy products from companies that are environmentally conscious. While these 25 million individuals hardly represent a majority, another 90 million of them, or 41%, share the same concern of a gradually endangered planet from excessive energy use and electronics that contain hazardous materials.

Aging Populations – A Global Phenomenon

A territory that has traditionally been overlooked by major businesses is now gaining ground not only in the U.S., but also in other technologically advanced countries such as Japan and China. According to a Boomer Project analysis, more than 90 million Americans today are over the age of 50, and the number is expected to increase by 25% in ten years to 113 million. Contrasting this to the 1% growth projected for the 18-49 age bracket typically favored by consumer marketers, the time is now for CE industry to begin cultivating the graying boomer market.

Regardless of how the digital world evolves around us, and how it may shape our lives going forward, a few CE product fundamentals will remain constant. Consumer electronics products must continue to “delight” their targeted users, going beyond the working/not-working state. They must operate intuitively and are therefore easy to use. And finally, they must project a sense of who the user is because today’s consumer electronics truly are lifestyle choices.

Jane Lin-Li is Managing Editor of Embedded Intel® Solutions, both the North American and the Chinese editions.