After declining 1% in 2012, the consumer electronics industry is poised to make a modest 4% rebound this year, fueled largely by mobile devices, according to forecasts released this week at the annual Consumer Electronics Show.
Consumers are expected to spend $1.105 trillion this year on electronics, according to the Consumer Electronics Association and GFK Digital World, a global research firm that tracks sales at 340,000 retail stores in more than 90 countries. That's up from $1.058 trillion in 2012 and $1.069 trillion in 2011.
As people become digital content omnivores, they are looking to mobile devices to consume media wherever they happen to be. As a result, sales of tablets and smartphones will account for 40% of all consumer electronics spending worldwide this year, predicted GFK and CEA, the trade organization that hosts CES. Once laptops and notebook computers are added, that figure rises to about half of consumer spending devoted to mobile devices.
Tablets are already in 44% of U.S. households, up from just 8% at the beginning of 2011. Smartphones are now in 55% of U.S. hones, up from 39% two years ago. Those numbers are expected to continue to grow this year as revenue from the sale of tablets are forecast to grow 25% this year, with smartphones expected to grow 22%. The growth in units are expected to be even higher as prices come down.
That was the good news. The bad news is that just about every other category of consumer electronics -- with the possible exception of game consoles -- are expected to continue their downward slide this year. That includes entertainment product categories such as Blu-ray players, home audio gear, LCD TVs and portable media players.
Some categories are collapsing because their functionalities have been integrated into tablets and smartphones. Pocket point-and-shoot cameras, MP3 players, GPS navigation systems and handheld game consoles have suffered steep declines as consumers turn to the smartphone as a sort of Swiss Army Knife for their digital lives.
But that doesn't mean dedicated devices such as cameras are dead. They can still thrive in niche markets and applications. Woodman Labs, for example, has carved a $600 million niche in its GoPro line of tiny, rugged cameras used by action sports enthusiast (think head-mounted camera on a skateboarder or snowboarder).
Kazuo Hirai, the new chief executive of Sony Corp., acknowledged in an interview that smartphones and tablets are cannibalizing some product categories within his own company. But Sony prefers to take a proactive approach by, for example, embedding a 30-megapixel camera into its own newest Xperia Z smartphones.
The consumer electronics industry faces another potential peril - the "applification" of technology. GPS devices, for example, are rapidly being replaced by smartphone apps such as Waze and Google Maps for mobile. As the software, service and content get offloaded to remote servers to do the technical heavy lifting, devices may evolve into little more than connected displays and speakers that do little but stream content on demand.
For content providers, such a prospect means they need to build partnerships with the companies that are building the connective tissue between content and hardware. Want proof? Just about every major consumer electronics company that put on press conferences on Monday at CES mentioned they were working with Google, whose Android operating system powers hundreds of millions of mobile devices. For a company that doesn't even have an exhibit booth at the show, that's telling.