CES 2014 – Big show in little Vegas

CES has highlighted how difficult 2014 will be for some.

• CES 2014 is almost over but three important trends have clearly emerged:
• First: Android commoditisation is getting worse.
  • CES 2014 saw the launch of many devices but most people (including me) are struggling to remember them.
  • Outside of form factor innovation (like curved screens) Android devices are becoming indistinguishable from each other.
  • This means that the price race to the bottom will accelerate this year leaving the Android makers suffering from even greater margin pressure.
  • For the likes of HTC, LGE, Motorola this means more red ink and I fear that HTC may not make it to the end of the year in its current form.
  • Even Samsung could start feeling the heat as its Q4 profitability was not great and it is now starting to pull back on its strategy of putting unproven device features into multiple handsets.
  • I do not want to have Android exposure in my portfolio this year.
• Second: Wearables are a solution looking for a problem.
  • Wearables were everywhere at the show this year.
  • Devices that connect to smartphones were launched for many parts of the body but none of them have any real ability to make the user’s life easier or better.
  • Watches remain remote controls for smartphones and are not fashionable enough to make anyone proud to wear them.
  • Don’t get me wrong; I believe in the potential for wearables but that key piece of innovation that makes them a must have is still missing.
  • This segment is likely to remain all hype and no substance this year.
• Third: The TV industry is out of ideas.
  • This year the new launches are all about crazy resolution and crazy screen sizes.
  • The concept of the smart TV seems to have totally disappeared.
  • The smart TV was supposed to be how the TV manufacturers were going to lure users into using the TV for more than just a dumb screen.
  • If users had attached some value to these functions then the brutal commodity of the TV industry could have been broken.
  • From this year ‘s launches it is clear that this has been a total failure and the industry has returned to competing on size, pixels and price.
  • This is good news for likes of Sony and Microsoft who are trying to bring part of their ecosystems to the television and having the TV manufacturers give up is one hurdle less.
  • However, it is bad news for the TV wannabes outside of Korea.
  • Only the Koreans have the scale and the technology to really compete meaning that the market is likely to continue consolidating in their direction.

• Life in consumer electronics is not going to get easier this year meaning that one needs to look at the places where money can actually be made.
• This continues to lead me either to the ecosystem or to component suppliers that have a technological or scale advantage.
• In the ecosystem Microsoft and Yahoo! are likely to show the most improvement in 2014 while Qualcomm and MediaTek look set to dominate component supply.
• I would also not rule out a comeback by Intel.
• Intel is inextricably linked to the PC market where I have dared to suggest that 2014 will see a turnaround in its fortunes. (see here).