Forget the so-called second screen, tablet computers may be on their way to becoming the true primary screen.The devices appear to be cannibalizing the market for both notebook computers and small television sets, as both sectors have declined as tablets sales have strengthened. Compared with the introduction of such innovations as color TV, DVD and CD players, “none of the growth rates match those that tablets have seen in this market,” said CEA director of analysis Steve Koenig. Koenig reflected on the growing dominance of tablets as the central theme of the Consumer Electronics Assn.’s annual State of the Consumer Electronics Industry and CES Trends to Watch presentations ahead of this week’s Consumer Electronics Show, in Las Vegas. Sales grosses for smartphones and tablets are far ahead of other traditional market drivers such as videogame consoles, TVs and notebook computers, despite price deflation for those devices. “On the one hand yes, (mobile devices) are cannibalizing to some degree, but on the other hand they have helped transform global markets and continue to generate growth,” said Steve Bambridge, business director at GFK Boutique Research, who presented with Koenig on Sunday. That upward trend of tablet sales reflects a “collapse of devices,” said Koenig, as consumers replace single-use devices with multi-use smartphones and tablets. “I think over time we’ll own fewer and fewer devices” said Koenig, who noted new form factors will be seen on the CES floor to reflect that. “A lot of these other product categories are turning into apps,” said Koenig. “It goes back to the app-lification of our industry. … If we’re just going to talk about hardware, our entire industry could turn negative. Over time it’s going to be less about hardware and more about software, cloud, et cetera.” In a separate trends-to-watch presentation, Consumer Electronics Assn. chief economist and director of research Shawn Dubravac noted that as ownership rates for tablets and smartphones increase, and as consumers become used to moving among many devices, the “second screen” could become the primary screen where consumers first sample content before they decide whether to engage with it on the TV or another screen. Dubravac said that trend will be reflected first in hardware, including the gadgets on the CES show floor, before other parts of the content ecosystem pick it up. He reported that tablet ownership is not only growing among households, but within households. The average number of tablets per household in the U.S. is still only around half the number of TVs (now around 2.9 per household), but he said tablets could approach that number in time. At the same time, while consumers seem to be losing interest in small TVs in favor of tablets, in some markets, especially in the U.S., Japan and China, they’re showing more interest in “jumbo-sized” televisions — 60-inches and above. By 2016, about 12% of units sold in the U.S. will be 60-inches or larger, predicts the CEA. However the size of such units makes them less attractive in Western Europe, where houses are smaller, and the high price of such units limits their appeal in developing markets. Samsung, for example, plans to roll out a new line of smart TVs ranging from 60- to 110-inches and in between, this year. Koenig said the near-term market opportunity for Ultra High Definition TV, which broadcasts in 4K, is “very small” because of the high-price of the sets that will roll out to retailers this year. The CEA is predicting UHD will reach 5% of TV sales in the U.S. in 2016 but “it will take some time for this to get traction,” said Koenig Videogame console sales have contracted, cannibalized like other sectors by mobile devices, but Bambridge said he expects console sales to pop in 2013, driven by new product introductions like Nintendo’s Wii U, and upcoming devices from Sony and Microsoft to replace the aging PlayStation 3 and Xbox 360. The overall picture for consumer electronics sales was somewhat gloomy. Sales lagged behind forecasts in 2012 thanks to ongoing economic problems and soft GDP growth in the developed world, and those same economic problems are expected to restrain CE sales for 2013. Western Europe is projected to have only barely positive GDP growth for 2013, if not an outright contraction. Japan continues to have low or no growth and stagflation, according to the CEA. The U.S. may reach 2% growth, “a hell of a lot better than any other developed economy but not a very heathy situation,” Bambridge said. Developing markets are expected to lead the way back to growth for the CE industry. Even in strong categories like smartphones and tablets, Koenig said the rate of growth of sales in developing markets is around six times that of developed markets.
Data provided by:Nielsen Media Research (Preliminary Results)