International Consumer Electronics Show (CES) 2003

- Summary -

Global Emerging Technology Institute

Thousands of industry executives from 100 countries gathered in the U.S. this past week in Las Vegas in order to discuss this year's technology trends and expectations for the coming year. It was evident that the convergence of technologies will continue to be an important trend and the key to growth for various sectors within the broader technology arena. The event not only show-cased commercialized technologies but also discussed the potential of new emerging technologies that will play a key role in the development of new systems and new markets. CES is especially known for introducing the market place to new, innovative consumer electronic products. The key themes for this year's CES included home networking, games, DVD technologies, Bluetooth devices, digital imaging, digital Hollywood entertainment platforms, wireless technologies, and digital radio receivers.

One major theme related to the above was developing seamless wireless connections between small, multi-functional devices in the home. Texas Instrument's President Tom Engibous believes that signal-processing technology is the choice for digital audio, video, cell phones and broadband and wireless communications. Federal Communications Commission (FCC) Chairman Michael Powell was quoted as saying that the access to broadband technology must be made a national priority, and that the FCC will hold key meetings this year in order to move forward on this front and to also focus on spectrum issues. This includes developing policies that promotes more efficient sharing of spectrum. In the realm of digital content, Powell believed that Real Network's Helix DRM digital rights management system platform, the first for both standards-based and internet formats showed a great deal of promise. Such a system should promote the release of a large amount of new digital content accessible to consumers, making devices more attractive. The latest trends in wireless and electronic gaming were also highlighted at the event. The expansion of broadband and high-speed wireless networks is believed to be a key factor in the future proliferation of gaming, an industry that is larger than the film industry in terms of revenues in the US. Advances in gaming graphics and software, coupled with the potential of the wireless market and online gaming, presents a very enticing opportunity for the gaming industry, electronics manufacturers and software houses and growth is expected to continue at a very strong pace. It is expected that more content made available over such networks and more engaging applications for the user will lead to the development of larger commercial markets.

The consumer electronics industry, in short, is entering a new era based on the promise of utilizing broadband and wireless technologies to promote the more wide-spread use of electronic devices. Advanced in micro-electronics further enhances the potential for consumer electronic devices to proliferate and be utilized well beyond what is in the market today. The personal computer led to a revolution in terms of how data could be managed and manipulated. The internet enhanced this function by providing direct access to more data. Mobile wireless and wideband provides the consumer with all of the above in more places with greater access. The trend is leading many markets that were traditionally separate on a competitive collision course.

In an interesting development, the convergence trend is leading both hardware and software companies to become, well, both hardware and software companies. During the conference, Microsoft unveiled its new Smart Personal Objects Technology (SPOT). Chips in the devices pick up signals from a radio network built on the under-used FM spectrum. It is part of the firm's strategy to produce a wide range of software for the new devices of the future beyond (and perhaps tethered) to a PC, as well as such common consumer electronics products as watches, clocks and even keychains. Microsoft has already developed special software for Pocket and Tablet PCs (a derivative of laptops) in the US in order to participate in the wireless market. Clearly, this approach appears to be a copy of what Sony and other Japanese electronics firms decided to do toward the beginning of the 1990s. Sony sought to develop seamless networks of electronic devices for the home connected through wireless systems. Kunitake Ando, President and COO of Sony, in his keynote address, commented on the company's efforts to establish the Linux operating system as the (global, open) standard for transferring digital entertainment from device to device in the home as the use of broadband expands. The PC may be useful in transmitting downloaded content to the TV, mentioned Ando, but he also believes that the TV could bypass the PC entirely and get its content from devices like Sony's proposed Cocoon set-top box, which has already been tested in Japan. Cocoon is a Linux-based, Internet-connected set-top box with a hard-disk drive that can transfer and play movies on devices connected to a home network.

Microsoft, along with Dell, Hewlett Packard and Gateway, are interested in expanding into the consumer electronics business. Bill Gates announced at CES that Microsoft, which produces such products as the as the Xbox, is now a consumer electronics manufacturer. Companies in the increasingly commoditized PC business are seeking to expand into consumer electronics by entering into product categories that compliment or are tethered to the PC via "gateways", especially home entertainment devices. The gateways can take the shape of a PC-centric system, a set-top box, or a handheld computer containing special software that allows the user to control a variety of devices throughout the home. It should be interesting to see future competition between firms such as Microsoft that are developing proprietary standards for networked electronic appliances versus firms such as Sony that support more open standards. It is evident that firms that have specialized in producing electronic devices for the rest of the world, especially those in Japan and Asia, may benefit greatly from the aforementioned trends. Such a trend may provide an advantage to hardware makers over software companies and those that excel at branding and the farming out production to other firms.

New emerging technologies were showcased at the Emerging Technologies Launchpad, the Embedded Technologies Pavilion and the TechHome Pavilion that featured new, innovative products. In a special CES Wireless SuperSession there was a focus on the convergence and consumer adoption of 3G, highlighting the growth potential after discussing the success of the Asian and European market introduction of GSM. In the U.S., 58% of wireless phone owners prefer converged wireless phone/PDA devices to two stand-alone products capable of performing the same functions. More advanced phones are made for more advanced networks. Many advances in wireless technologies may develop first overseas where there are more established consumer markets for next-gen wireless systems, often being sold in places like Japan before they reach the U.S. market. This year, there has been a marked increase in the number of Japanese, Asian made and European designed phones in the U.S. market, especially smart phones with high-definition screens, camera functionality and those that double for PDAs. This has resulted due to better, faster networks being setup and strong demand from consumers.