***CES 2005
By John Latta
Las Vegas, NV
January 6 – 9, 2005
Big trade shows are a pain. Places to stay are hard to find.
Taxis are everywhere but hard to get. A 20% tip is greeted
with disgust. Floor aisles are crowded. Everything is
expensive. But at CES it is worth it. CES is Gary Shapiro, the
President and CEO of CEA. Gary is enthusiastic, optimistic and
loves technology.
So why is CES exciting? This is where the market action is.
Innovation is everywhere. The market is huge - $113b in the US
in 2004. Technology is the foundation for the market dynamics.
Market share battles are like large battleships in combat in
the night. Buzzing around in this combat zone are the start-up
insects. They are great fun to watch. At any corner in the
countless aisles of the show floor there could be something
new and unique. This is like the old West Coast Computer Faire
but on a scale 1000X as big.
The battleships are Sony, Samsung, Intel, Microsoft and many
others. Only two things matter: Market share and growth. The
market is big and gross margins terrible. The winners are
frequently the innovators. Agile battleships are another
oxymoron. Sony has sold 340m units of Walkman in 25 years. It
is an agile battleship. Intel and Microsoft want to be seen as
CE companies. Yet, they are still wantabees compared to Sony.
The problem is that they both are still picking at the market.
The CE market is not their core business while it is at Sony.
With the exception of xBox, neither Intel nor Microsoft
directly participate on the CE battlefield. With platforms,
processors, software and “concepts,” the public does not
directly buy the products of either company. One transformed
competitor is not here – Apple. It has a low price CE product
and is transforming the market. Innovation is the winner and
neither Microsoft nor Intel has an iPod class innovation to
point to.
All of this makes for a great spectator sport. CES is the
amphitheater where the battleships maneuver.
Is PC and CE Convergence Real or Virtual?
Van Baker of the Gartner Group gave a talk on the CE/PC market
entitled Consumer Electronics: An Industry in Flux. Not the
normal pitch about how these markets will converge when
everything goes digital. Van brought an interesting viewpoint
worth consideration.
Van’s premise is that:
CE has just begun a fundamental restructuring.
This process will create new companies that appear to be
manufacturers and then face a rapid decline.
Many surprises lie ahead.
Van issues a challenge that this change is not just about
analog to digital. In fact, he stated it is not about
products, features or customer choice. The change is about
business models. A key factor is also significant change in
the impact of the channel. This is best seen in the light of
the driving force that China has in the manufacturer of
everything including CE. Taiwan is also a strong player from
what it has learned in how to manage design to production in
China. Thus, the ODM is a significant factor in the ability to
produce CE. Virtually any company can brand products from a
first class manufacturer. Thus, brand and brand expectations
will be increasingly important.
The elements which will drive the new business model are:
Shorter product cycles;
Short development cycles;
Faster inventory turns
Off the shelf software tools;
Use of industry standard silicon and less ASICs
Van feels that the best example of the future business model
of CE will be like the PC but he cautions that the PC industry
will not necessary be able to displace the CE industry. It
also does not mean that Intel and Microsoft will be able to
control all the margin in the CE business.
He then addressed the question – who will win and lose?
Because of the ODM model, many companies will enter the
market. One example cited was WalMart – it can create its own
brand and is, even today, not reliant on the brands of others.
Here is an example where distribution and control of the
channel is a significant advantage. He cautioned that the
companies which expect the distribution channel to protect
them will lose. That is, the traditional path to market, such
as Best Buy will not be sufficient.
His predictions including the following:
There will be a near term increase in the number of major
CE companies by at least 5.
Private label suppliers will proliferate but over the
long term will not be sustainable.
Consumer confusion will delay the transition to HD and
the change to digital television.
Home networking will be important but in the short term
it will not gain mass market traction until the setup and
use issues are fully addressed.
He forecast that the companies on the dark side include
Philips and Thompson. LG can be added to the list as a Korean
company which is not listening to these trends. It is not
clear that Samsung gets it but Sony is showing signs.
Microsoft and Intel Keynotes
The keynotes by Microsoft and Intel were extravaganzas on how
money can be spent. When in Las Vegas the mantra is to spend
money the way the local casinos spend it. This is consistent
with the big gamble of entering and gaining share in the CE
market by a software and chip company. But there is more. We
are drawn into a comparison between Microsoft and Intel, just
based on the keynotes.
Microsoft is about platform integration – tying different
platforms together: media, internet and cell phones. Some
of the results were impressive and a strength of
Microsoft.
With the notable exception of xBox, Microsoft is reliant
on what others can do with its technology. The Spot watch
is an excellent example of this. The content partners
with IP TV is another example.
Intel has a global message. Its market message was much
more global than Microsoft’s.
Intel is increasingly less reliant on Microsoft. Only a
passing reference is made to Microsoft and all the
software demos were with non-Microsoft products.
Intel can argue it enables an infrastructure with its
communications products. The demo showing Las Vegas with
WiFi and WiMax was very effective. No matter what Intel
says about being complementary to competing markets this
is largely noise. They are masters at concealing market
aggression.
Intel was very effective at going between hardware and
software demos. It can play both markets and technologies
to its advantage.
Intel’s scope of market is very broad compared to
Microsoft. In this respect the, the platform creation
strategy at Microsoft is limiting – that is, relying on
others to build products based on Microsoft’s software.
For example, the China PC examples in the Intel
keynote were quite good and
the home care research by Intel excellent. Intel only
needs to point the way and they benefit when their
processors are bought.
Intel is putting money everywhere. When Robert Redford
cited the Intel involvement in the Sundance Festival this
was but another example where Intel is not just inside
but everywhere.
In many respects both companies are seeking to be an enabler
in the CE market and not a direct participant like Sony or
Samsung. Taken from the keynotes only, the Intel message was
quite broad in how it can be an enabler.
Logitech – The CES Press Event
Logitech is on a roll. Their news conference showcased 12
products of which 3 were new announcements. The star of the
show is the Harmony 880 Remote Control. The result of
acquiring the company Intrigue Technology, this is the first
joint product. In spite of a price of $249 we were impressed.
Logitech used its booth to hold the morning press conference.
They showed the following:
Lineup of Wireless Game Controllers
Cordless Headset for Xbox
Driving Force Pro
Play Link the Wireless Extension for game play
Mobil Freedom Headset
VideoCall
diNovo Cordless Desktop
V500 Cordless Notebook Mouse
MediaPlay Cordless Mouse
MX 3100 Cordless Desktop
2.4GH Cordless Presenter
Harmony 880 Advanced Report Control
They were most enthused about Harmony 880. It was claimed that
the earlier product, Harmony 680, has, according the NPD,
achieved #1 in sales in remotes above similar products by Sony
and Samsung. It is really hard to justify a $249 price tag for
a remote. Yet, the ID, functionality and integration was
superb. The color display and the docking station were
brilliant. The former president of Intrigue Technology and now
the VP for remote control division at Logitech gushed about
the impact of the acquisition on the ID. During the conference
it was indicated that the design cycle was only 9 months.
During the announcement of the MX 3100 Cordless Desktop which
includes the MX 1000 laser mouse it was stated that Logitech
expects all their mouse products to go to laser.
Mobil Freedom is a Bluetooth headset. It has 7 hours of talk
time and noise reduction from wind. However, the claim is that
this is done with a WindStop microphone. As the press release
states this is not a DSP based approach:
WindStop…surrounds the microphone in an “acoustical controlled
porosity barrier” to reduce the disruptive effects of wind
noise, enabling clear conversations in adverse conditions.
What’s more, WindStop not only offers better wind-noise
reduction than expensive DSP (digital signal processor)
solutions, but also does so without adding weight, power
consumption or expense.
VideoCall is still an experiment with a service business
model. The pricing is at $6.99/month.
The MediaPlay Cordless Mouse was a very cute extension to the
functionality of the mouse. This can be a normal mouse and it
can also be a Media PC controller. There are buttons on the
top and lights that activate when it operates in the
controller mode.
The 2.4GH Cordless Presenter had one feature we were impressed
with. One can program the controller to the time the end of
the presentation. 5 and 2 minutes before the end the
controller vibrates to tell the presenter the time coming up
to end the presentation. Cool.
DEXIN – Can it Deliver on Glass?
The WAVE Report often probes the mouse business – we found an
interesting one at CES. We note that the mouse business is in
the process of another technology transition – laser
illumination.
The booth poster claims are significant:
Navigates on most surfaces including transparent glass
and plastic.
Getting details was another matter but the WAVE Report learned
much.
DEXIN is a computer input device design and manufacturing
company. They stress their technical depth including many with
US engineering degrees. The company only sells as an ODM.
Customers include Best Buy, Circuit City, CompUSA, Fry’s
Electronics, Office Depot, Office Max, Staples and Radio
Shack. Apparently the company is public in Taiwan.
The WAVE spoke with Paul Lu about the laser mouse.
DEXIN filed a patent in the US at the end of 2003.
There is no optics in the mouse. It uses a VSEL for
illumination. The equivalent resolution is 1200 cpi.
Two chips are used – Agilent and either PixArt or @Lab.
The chips being used are not specifically designed for
laser illumination. It was stated that the Agilent laser
mouse chip will be available to all chip buyers in June.
The processing is done on the “wavefront” and this
apparently does not track speckle.
It is assumed that the optical surface is not optically
flat – by implication the variations of the glass surface
are less than a wavelength of the imaging source. This
seems to align with the wavefront comment.
The mouse only takes 20ma and will run 6 months on 2 X
AAA batteries.
The wireless version runs at 27MHz.
There are four customers of the first production of the
mouse. It will ship to Europe at the end of January. Two
of the customers are OEMs.
Pricing is expected to be $12 FOB and $29 retail for the
wireless version.
A Hot Company – Network Magic
Tucked away in the D-Link booth was Network Magic showing its
product. This is a home networking software package to find
and set up home networks. The demo area was always packed.
This software will be included with the D-Link routers and
there are many companies seeking to include it. It is
available for beta download at:
www.networkmagic.com
Headset Audio Market
Jabra
Jabra has the signature product – BT 800. They call it the
“the ultimate fully-featured Bluetooth headset.” It fits
around the ear, has a display that will show the caller ID,
has controls for jogging, answer and end, a mute button, the
ability to be charged over USB and most importantly a DSP. DSP
allows for dynamic noise reduction and dynamic sensitivity
adjustment. The headset adapts to the environment. The
audio/voice signal processing software is a key competitive
advantage of this product. Firmware and feature updates can be
accomplished over the Internet. It has been introduced in
Europe and will sell in the US in January for $149.
One only has to look at this product and respond: Wow! With
all these features it seems contradictory to keep it on one’s
ear. Jabra told us this is the case. The best place to use it
is to place it on the table or on one’s belt. When the phone
rings, just pick it up to look at the caller ID. If one wants
to answer the phone, hang it on your ear. Oh, yes, there seems
to be a weak spot with all the functionality – one cannot dial
the phone. Wrong. Use the phone voice recognition for dialing.
The BT 800 is well suited for this because of its superior
voice quality.
In context Bluetooth is a liberating technology. That is, once
the cord is cut on the audio interface to the phone a whole
new range of options are enabled. In a WAVE discussion with
Jabra, we characterized this as a platform play. They could
not agree more. This is how Jabra will go beyond their
traditional market of just ear pieces. It is an ASP liberator.
The potential for the BT-800 was stated best when they
characterized it as:
This makes the phone an accessory.
“Motorola hates us but the operators love us.”
For those of us that like the cutting edge this is it in
personal voice audio.
Where are PC Monitor Interfaces Going?
The WAVE was able to speak with Viewsonic about trends in
monitor interfaces.
Where is wireless in the monitor space?
Viewsonic has no wireless monitors. A technology
demonstration of a wireless display was being shown and
this could be seen as an indication of the future. This
was positioned as a large screen display that could be
used for both a monitor or television. Yet, in spite of
the fact that Viewsonic has no wireless monitors,
wireless is important because we have a range of wireless
media adapters. Another view is that wireless will be
important even for the PC monitor and the driver behind
this is set up. At Viewsonic we gat many calls on the
simplest of set up issues and properly implemented
wireless could be an improvement. But the move to
wireless monitors has not happened yet.
How is the PC Monitor interface likely to change?
As discussed at Display Interfaces the potential future
interface is NAVI. Today VGA is being used well beyond
what it was designed for. There is no possibility for
digital signals on the VGA lines but there are many
options with NAVI. The real issue is if the industry will
adopt NAVI. It is not clear, at this time, when and if
this will happen. Certainly the push to higher
resolutions will force NAVI but today’s resolutions, even
to 1920 X 1200 as seen in the booth, does not require
this transition.
The WAVE picked up the following:
There are no significant forces to change today’s PC
monitor interfaces. Yes, wireless can change the set up
but there is no need to eliminate the wire to the monitor
as there is with the television set in the home. The
distance between the A/V equipment and the television is
frequently much greater than that between the monitor and
the PC.
There is a standard in place called NAVI. This has much room
to grow in support of more sophisticated monitor interfaces.
But, at present, there is no market pressure to adopt NAVI.
This will likely become an issue at the next VESA Display
Interfaces meeting.
WAVE Comments
Product commodization results in brutal price wars, little to
discriminate products by and the decimation of suppliers that
cannot keep pace with the changes. At CES we also looked at
the event as a sample of the impact of commodization. It is
every where on the show floor. What is more important is that
companies continually develop strategies to respond to
commodization. We could see this in action in many of our
booth visits and discussions. We surmise our insights as
follows:
Commodization can be seen as the maturation of a market,
the end of the market growth and/or the elimination of
many suppliers. What was evident at CES is that many
companies deliberately enter commodized markets or work
to rise above the commodity level.
The evolution of products to commodization is frequently
accompanied by increased market velocity. That is, the
pace of change accelerates as the participants respond to
the changes, the suppliers are realigned and market exits
occur.
Failure to respond as markets are commodized is usually
the end of market participation. The change in rules and
price dynamics are such that the market is not longer
viable to the slow movers who cannot adjust to the new
market conditions.
Most important, at CES we saw that market commodization was
the spur to innovate. This is a significant gable but one that
many companies feel they have no choice but to make.
Wave Issue 0506 2/11/05 Article 1-01