CES 2023 preview – Catch up

CES 2023 should be back to its usual mayhem.

• CES 2023 is shaping up to be a car show once again as this remains the category where there is the most change with both the migration to software and the shift from petrol to electric.
• However, the crash in technology valuations and sentiment is likely to cast a shadow over the event which I think will see many of the participants using the opportunity to try and raise capital.
• After the desert of 2022, CES 2023 is likely to be crammed with attendees (like me) who haven’t visited for 3 years although the Chinese delegation is likely to be very thin on the ground once again.
• Despite being very crowded, I suspect that the mood will be more subdued as the outlook for demand remain very uncertain going into 2023 and many of the companies who will be marketing their wares will be facing very challenging terms when they need to raise money.
• I expect that vehicles will once again play a leading role at the show followed by augmented reality which still needs a lot of improvement as well as solutions for enabling the Metaverse for the enterprise.
• Autonomous driving’s inability to reach commercial grade has disappointed many of its most ardent proponents, and so I expect that noise around autonomy will be much less this year.
• Instead, I think we will hear more about bringing digital life into the vehicle as well as the digitisation of vehicle data such that it can be made use of as well as monetised.
• Outside of this, I am also looking for improvements in consumer-oriented health sensors (as I do every year).
• This includes devices that can track blood pressure and blood sugar non-invasively which when perfected have the potential to have a meaningful impact on the cost of healthcare.
• Furthermore, lifestyle-related diseases also consume a large proportion of healthcare spending meaning that incentivising people to monitor their health and take early action could have a disproportionately large impact.
• There is no shortage of players in this space, but it is taking a very long time to come to market reinforcing the view that this is much harder than previously thought.
• Also top of mind is likely to be the worsening geopolitical relationship between the USA and China and with the Chinese largely absent again, the discussion is likely to be quite one-sided.
• RFM and Alavan Independent continue to see plenty of scope for further restrictions to be put in place (see here) and so I suspect there will be many electronics makers looking for alternative partners who are based outside of China.
• This creates a good opportunity for India, Vietnam, Malaysia, Thailand and so on and so I am expecting to see the gap left by the Chinese being filled by others looking to take their place in the manufacturing supply chain.
• With CES being a consumer show, the most resilient part of the technology sector is likely to be largely absent, but it is the enterprise that I think will fare best during at least H1 2023.
• For example, while the cloud has slowed in terms of its growth, it is still growing at 30% YoY while other areas such as data-based intelligence and security are likely to register better than 10% YoY in 2023.
• Outside of the good value technology names that one would look to hold through the downturn like Qualcomm or MediaTek, the enterprise is where I would look to deploy capital for 2023.