IFA at its core sees itself as the major annual “show” for all things consumer electronics, there’s everything here from dishwashers, to stick vacuum cleaners, to smartphones and IoT gadgets – IFA is even beginning to expand into the connected car. As a trade show, IFA has many faces, there’s the side we show of products launches, quirks and fun, there’s also serious multi-billion Euro business conducted and there is market analysis and discourse on where the industry is going.
At this year’s opening address we took a quick tour around the consumer electronics (CE) industry and the global marketplace. While the specifics of each market segment isn’t something we would necessarily cover here there were some larger overall themes for CE that are of interest. Here’s our recap of the state of play for consumer electronics in 2018.
Smart devices and the services model
No one will be surprised that Artificial Intelligence and voice platforms are becoming major disruptions to the CE industry. Both of these emerging trends offer significant areas for both growth and opportunity to innovate on existing product categories. The APAC (Asia Pacific) region is actually leading the way with demand for smart connected major domestic appliances growing year on year – I like to think my smart device habit assisted with this!
As we have been hearing generally in the “tech sphere” the CE market is seeing the need to pivot from a pure hardware sales based business to a combined hardware services model. That’s right, toasters as a service may be coming your way soon. If we look at products like smart ovens that could incorporate subscriptions to recipes and ingredients through local providers all of a sudden the “services market” offers traditional CE OEMs a huge opportunity.
Unfortunately, for Australia when these “as a service” companies or products launch and if they incorporate a physical component it makes the likelihood of such devices seeing our golden shores very small. The infrastructure for international distribution just still doesn’t seem to be attractive to many companies, perhaps Amazon launching in Australia COULD be the catalyst to start that change?
The other issue with “as a service” models is that it promotes OEMs to seek customer lock-in to maintain their revenue. Are we going to get DRM carrots for my voice controlled smart juicer? Will I only be able to use recipes from “partner” website when my oven integrates to the recipe my Google Smart Display is walking me through? We all know they would do it if they could, just look at messaging and music streaming services and you can see what “market forces” can influence a company to do.
Smartphones
What about smartphones I hear you say. Overall the smartphone market actually had negative growth in handsets sold. Despite that profits seem to be continuing to rise. According to the market analysis, these seemingly confounding stats reflect what we all think is happening.
Firstly the smartphone market is saturated within most western markets, add to that, that many consumers are now keeping their devices longer, and the second-hand market growth and it makes sense why there isn’t GROWTH in the market. That said they are still selling lots of devices, sales haven’t dropped, they’re just not increasing.
Why all the profits then? The market is moving more and more towards premium and high priced devices, the market research highlights that this is the reverse trend to that which the CE market has traditionally observed when products become commoditised, typically prices drop and features increase in a product category.
Research has shown that people are now using branded and luxury consumer tech as status symbols. While there has always been a luxury appliance/CE market the relatively low cost of some CE devices and the daily utility of devices like mobile phones combined with clever carrier marketing and payment structures have seen an upturn in luxury and fashion-minded purchases.
This drive towards the high priced end of the market may be good for companies but ultimately it will be consumers who miss out or will just have to keep spending more. Without the market forcing OEMs to seriously compete in the mid-range I’m not sure we will see companies roll down features like excellent cameras with computational photography on mass to the mid and lower tiers, at least not until there is another wanted feature they can use to differentiate their premium offerings.
Developing markets affect on the market
We must not forget the growth opportunities in developing markets. While the West may have achieved a level of product saturation the developing markets are just starting their ascent through the smartphone market. Will they take the same path to fetishising their devices into symbols of status, luxury and fashion? Or could perhaps the economic factors in some of these markets actually drive innovation and performance away from the $1500-$1800AUD end of the market? I’ll be interested to watch.
Overall fellow tech nerds, the short term future is bright for those wanting to consumer tech toys. With the opportunities of machine learning (AI), voice as a platform, augmented reality and the ever-growing “smart” and IoT markets we are going to see new products hit the shelves with the cadence we’ve become used to.
**Disclaimer: Duncan has travelled to Berlin as a guest of Huawei Australia
What does “IFA” stand for..? This is not a trade show I’m familiar with