Consumer Electronics Embrace Digital Era

NEW YORK (Reuters) - The digital revolution in consumer electronics, including personal computer gadgets, began to gain attention in 1998, and it is expected to take a stronger hold of the market in the coming year. In 1998 the consumer electronics industry set the groundwork for the switch to digital products from analog products, as companies formed alliances and introduced new products in the personal computer gadget, digital camera and digital television arenas. Digital technology produces sharper, higher-resolution images and crisper sound. ``Everything is going from analog to digital,'' said Kevin Hause, an analyst at International Data Corp. He added the shift will drive the consumer electronics market for the next five to six years.

Personal computer-type gadgets are perhaps most reflective of the oncoming digital age, and 3Com Corp.'s Palm Pilot is everyone's favorite example. It offers calendar and address book functions and the latest version will allow access to the Internet and real-time data such as stock quotes. ``These products let you take pieces from the Internet away with you,'' said Matthew Nordan, an analyst at Forrester Research. In 1999, 3.5 million units of devices similar to 3Com's Palm Pilot, smart phones and near-personal computers will be sold in the U.S., with a vast majority of them pocket-sized, Forrester predicts. As PC gadgets become hot items, home networking will grow, and may down the line reach a ``Jetsons-esque'' level, in which everything in the home is computerized.

In the near-term, however, networks that enable users to connect multiple PCs to printers and other PC gadgets in the home will grow, especially as users get broadband Internet access, analysts said. Other digital products that have gotten attention recently include CD-writeable products, which allow consumers to record on compact discs, and minidisc players. Diamond Multimedia Systems Inc. (Nasdaq:DIMD - news) has elicited an uproar from record studios with its device that allows music to be downloaded from the Internet. ``We will see more varieties of products and different storage capacities coming to market -- provided Diamond survives the litigation process here,'' Hause said. ``It's going to be an interesting race to watch.''

On the video end there is DVD, which is entering the home entertainment realm. However, PaineWebber said in its 1999 technology forecast that DVD will not make major progress in the market against CD-ROM's due to continued vendor wrangling over standardizations. Still, the products are attracting users. In the first 18 months of sales, 365,000 people started using CD's, 394,000 VCR's and 1.07 million DVD, said Jeff Joseph of the Consumer Electronics Manufacturing Association (CEMA). Digital VCR's are expected to be the next hot video item, as consumers become attracted to their real-time pause and personalized viewing abilities.

Although digital cameras are still mostly practical for advanced personal computer users, according to International Data analyst Ron Glaz, sales are picking up and manufacturers are coming out with more types of products at lower prices, especially in the higher-resolution megapixel varieties. Manufacturers have introduced digital camera products that are not dependent on PC's, such as printers that allow digital cameras to print their pictures sans computer. ``(Buyers) won't be the individuals who bought a VCR and still have the light blinking. The product is still for the above-average PC user,'' Glaz said. For kids, some of the hottest gadgets have been interactive toys, as Hasbro Inc. (AMEX:HAS - news)'s Furby has penetrated many households this season. Forrester analyst Seema Williams expects interactive toys to continue to be a hit with kids.

``I do not see the underlying technology (sensors, infrared) in these machines getting much cheaper, but rather the way they use the technology getting smarter,'' Williams said. And then there was this past autumn's high-definition TV launch. The year 1998 witnessed digital TV's first steps toward the mainstream, with manufacturers and networks putting forth high-resolution HDTV. In November, digital signals were transmitted in major U.S. markets and stores began carrying high-priced HDTV sets for curious consumers. Although some in the industry are pegging the advent of digital TV to be as momentous as the introduction of color TV, many industry analysts expect it to be a long time for the now-costly technology to have any impact on the mainstream consumer.

CEMA expects the industry to have sold about 150,000 HDTV sets by the end of 1999. However, other analysts are more conservative, saying it will take at least until 2002 or 2003 for all the issues involved to be settled and standardization to occur.

Source: Reuters

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