Consumer electronics industry facing disaster

Digital convergence could in fact lead to the disintegration of the consumer electronics industry as we know it a senior academic has warned.

The impending era of digitally networked homes will cause potentially devastating problems as well as golden opportunities for the consumer electronics industry, a senior academic said at a conference on Monday.

After an initial bonanza from new generations of products and services, commoditization could lead to the disintegration of the electronics industry as we know it, Eli Noam, professor of economics and finance at Columbia Business School, told an audience attending the Global Information Summit 2005 (GIS 2005) that was held in Tokyo on Monday and Tuesday.

The digitalization of nearly every device from TVs to audio devices, mobile phones and cameras holds electronics makers hostage to Moore's Law -- the idea proposed by Intel's Gordon Moore that computer chip power doubles every 18 months or so. As chips become more powerful, many stand-alone products such as Blu-ray Disc players, TVs and PCs may not be needed and "disappear," Noam said.

A glance at today's consumer electronics products shows this is already happening. Consumer PCs now come equipped with TV and recording functions. Vendors have combined DVD, CD and VHS players into single units that have hard-disk drives. This week, not satisfied with adding cameras to their products, mobile phone vendors Nokia and Sony Ericsson Mobile Communications have announced that they will equip handsets with sophisticated music player functions.

The market for networked products for the home, which includes home servers, flat panel displays and next-generation optical recorder and player equipment, could be worth hundreds of billions of dollars for vendors over the next seven years, Noam said.

But after that, profits could "disintegrate" for consumer electronics companies because many of networked products now being developed will be replaced by a single box or hub. Around the home, people will perhaps only interact with a few thin clients that will be wirelessly connected to a central computing system, he said.

"The good news is that this will mean an initial spike in demand for makers. But it also means fewer hardware boxes being sold," Noam said.

At some point even the thin clients and hubs will become commodity items mass produced by any number of companies, not just consumer electronics giants such as Sony or Matsushita Electric Industrial. So, after spending billions of dollars developing ever more powerful chips, technologies and products, electronics companies will find it difficult to make profits, Noam said.

"Twenty years ago IBM offered a home network, and it cost US$20,000. Now it costs a few hundred. Chronic price deflation shows no sign of abating," he said.

Because they will be used in the home, home networks and products will have to be reliable, easy to use, and glitch-free, he said. This will create new opportunities because businesses will develop from the need to service home networks, he said.

A breed of specialized service vendors, called 'CSPs,' or 'Consumer Electronics Service Providers' could emerge, Noam said They will knit together home, community and work-based networks, providing services based around contents provision, security and assurance, he said.

But, eventually, those services will also be commoditized, spelling more difficulties for industry, Noam said.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Paul Kallender

IDG News Service
Show Comments


James Cook University - Master of Data Science Online Course

Learn more >


Sansai 6-Outlet Power Board + 4-Port USB Charging Station

Learn more >



Back To Business Guide

Click for more ›

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?