Global tech market poised to shrink amid lack of new gadgets

January 6, 2014 5:13 am

Global tech market poised to shrink amid lack of new gadgets

By Hannah Kuchler in Las Vegas

The global technology market is forecast to shrink this year, as the sector’s strong growth in developing economies stalls and companies flounder in the search for a new innovation to replace the smartphone.Sales of technology products – buoyed during the financial crisis by the shift to mobile devices – is set to decline 1 per cent in 2014, according to forecasts released by the Consumer Electronics Association ahead of the International Consumer Electronics Show.

The show runs from Tuesday to Thursday in Las Vegas.

As multinationals and start-ups from across the world gathered to show off their latest gadgets, Steve Koenig, director of industry analysis at the CEA, warned the industry had not yet found a new growth driver that could replace smartphones and tablets.

Wearable devices such as smart watches and the WiFi-enabled thermostats that promise a new era of connected homes may be generating buzz at the trade fair, but they have yet to translate into a mass market.

“We’re waiting for the next wave of innovation to help lift it again,” he said on Sunday.

Technology companies had “taken the cream off the top” with the rapid adoption of high-end mobile devices in the west and major cities in developing markets, Mr Koenig said.

“The industry will be increasingly reliant on lower-end devices that are required to penetrate more deeply into emerging markets,” he said. Volume growth will continue to be robust but the price of the average smartphone is poised to fall from $444 in 2010 to $297 in 2014, according to CEA forecasts.

The CEA estimates the whole sector grew about 3 per cent in 2013 to $1.068tn, but has forecast a slight decline to $1.055tn this year. Sales in developed markets are expected to fall 4 per cent while those in emerging economies – which grew 9 per cent last year – will increase only 2 per cent.

Technology sales in emerging Asia grew 15 per cent in 2013 but that growth is predicted to slow to 1 per cent this year. The region, which includes China, grew so fast it overtook North America for the first time last year, spending $282bn on technology compared with the $257bn spent by the US and Canada.

Mr Koenig said the gap was only going to widen. “We have been talking about this shift coming for years. It happened in 2013 and will expand and amplify in 2014,” he said. “This is a massive shift in tech spending.”

As sales of flashy, often foreign, phones in cities such as Shanghai and Beijing slow, the next wave of growth will come in “middle tier” cities where less well-off consumers may opt for Chinese brands.

“There are a number of local brands in China feeding the market and they percolate outside of the region and influence others in the Middle East, Africa, Latin America and even Central Europe,” he said.

But Shawn DuBravac, chief economist at the CEA, was optimistic that wearable technology was about to “explode”, giving the industry another growth driver.

Five years ago, devices such as smartwatches were technically possible – and on display at the show – but now they are commercially viable, he said. The mass adoption of smartphones means much of the technology that had to be expensively packed on your wrist can now be held on your phone, which constantly communicates with the watch.

Mr DuBravac heralded a “third industrial revolution” to an era of “mass customisation” as connected devices communicate to come up with the perfect service for each individual. For example, he said Fitbits, fitness trackers worn on the wrist, will one day tell Netflix when someone is stressed, prompting the internet-streaming service to show movies to help them relax.

The number of mobile and connected devices is due to overtake laptops and desktop computers this year, “changing the entire internet experience”, Mr DuBravac forecast.

“We are just at the cusp of that change.”