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January 6, 2009 11:07 PM

CES: State of the Consumer Electronics industry

Posted by Benjamin J. Romano

Here's a preview of a story running in tomorrow's paper on the outlook of the Consumer Electronics Association's own economist and analyst.

CEA consumer spending slide.JPG

LAS VEGAS -- The consumer electronics industry gave a sober assessment Tuesday of the hits its primary customers -- consumers -- have taken in the past year. But the industry's economists also had plenty to cheer about as their products are accounting for a growing share of consumer spending.

"As you'd expect, as consumers lost a tremendous amount of wealth in real estate and in equity holdings, you saw them cut back on what they were buying," Shawn DuBravac, economist with the Consumer Electronics Association trade group, said Tuesday as the International Consumer Electronics Show chugged to life here.

Discretionary spending decreased in the past few months of 2008 as consumers tried to "squeeze out those excess purchases," particularly such big-ticket items as cars and anything related to the housing market, including major home appliances and furniture, he said.

He expects that trend to continue in 2009 with a decrease in consumer spending of 0.3 percent. DuBravac sees a chance for recovery in the latter half of the year and early 2010 as an expected federal stimulus plan takes effect.

"The 2008-2009 two-year period will represent the worst two-year period we've seen since the early '80s," he said.

"On the brighter side, technology continues to outperform these other industries," he said.
In 2008, consumers channeled a greater share of their durable-goods purchases toward technology than ever before. The consumer technology category accounted for more than 15 percent of durable goods spending.

CEA technology spending slide.JPG

"Even though we have a backdrop of economic calamity and catastrophe, if you will, consumer demand in the United States for consumer technology remains robust," DuBravac said.

He expects to see more PCs, mobile phones, TVs and video games sold in 2009 than in 2008. Revenue may not surpass the previous year, "but we still see that growth curve continuing out into the opening years of the next decade," he said.

His forecast has video game console sales growing more slowly, about 2.8 percent, in 2009. The current generation of game consoles has been on the market for two to three years. "It's quite natural for shipments to start to turn the corner here and peak in 2009 as the industry waits for the next generation," he said, adding that observers are looking for new game consoles to arrive between 2013 and 2015.

Some of the big trends CEA is tracking in 2009 include:

"Greener" technology. Credible green features such as energy efficiency, recycled materials and fewer chemicals in products ranked above brand name in a CEA survey of consumer purchase decisions, said Steve Koenig, CEA's director of industry analysis. But the same survey revealed both confusion on green attributes and "a healthy dose of skepticism" of companies' environmental claims.

The evolution of electronics command and control. This trend includes natural user interfaces such as touch and voice recognition that are already becoming common on devices such as mobile phones. It also takes in devices being used for new purposes, such as a cellphone doubling as a television remote control.

Embedded Internet. "Even just 24 months ago the bulk of our time online was spent communicating," DuBravac said. "Now we spend the bulk of our time online engaging in content." In response, more consumer electronics are coming with built-in Internet connections, including a new line of "Broadband HDTVs" that LG Electronics announced on Monday.

Another notable development is the emergence of the low-cost, lightweight "netbook" category of PCs. By CEA's estimates, the category is exploding, going from about 300,000 to 400,000 units shipped in 2007 to 10 million in 2008. It's expected to hit 18 million units in 2009.

Many of these, including new models demonstrated Tuesday by Asus, are incorporating touch capabilities and swiveling screens, potentially giving new life to the Tablet PC concept.

Check out earlier CES coverage here.

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