CES: Consumer electronics to stay ahead of other sectors in recession

Downturns can spark innovation, CES economist notes

LAS VEGAS -- The 2009 International Consumer Electronics Show officially kicks off tomorrow, bringing the latest in global technology ingenuity to the forefront in the midst of a recession that some economists believe will extend at least into midyear.

The bad economy hasn't put that much of a crimp on the show, however, which organizers believe will bring about 130,000 visitors to Las Vegas, down from about 140,000 who came last year, CES officials said. But the trade show is among the livelier events in this party town, which appears fairly quiet, judging by the number of mostly empty gambling casinos.

But CES officials put a good face on matters during a presentation to reporters yesterday. The long-term trend in the U.S., going back to the 1960s, shows that consumers are continuing to spend more of their money on technology products such as cell phones, TVs and laptops as a percentage of their total spending on durable goods, they said.

Last year, 17% of total consumer spending on durable goods, which includes washing machines and automobiles, went to electronics, up from the single digits in the 1970s, said Shawn DuBravac, an economist for the Consumer Electronics Association in Arlington, Va., the group sponsoring CES.

"Consumer electronics [has become] a necessity, not a luxury," added Steven Loenig, CEA's director of industry analysis.

DuBravac was realistic about the dreary economic outlook for 2009, but noted that consumer technology spending will fare better than other segments of the economy. "2009 will remain a very bad year," he said, and estimated that the current recession started in December 2007 and should last through June 2009. "In 2010, we start to get back on track," he said.

Still, periods of economic downturn can help spur innovation, DuBravac noted, pointing out how the founders of Google Inc. bought surplus servers off the backs of trucks after the Internet bubble burst in 2001. In technology fields, the newly unemployed "can be the ones who get the new ideas" and put them into practical technologies. "We could see tremendous innovation in the next five years," he said.

While the recession will have an impact on electronics and audio products sold in cars and digital TVs sold for homes, smart phones will continue to be a strong product segment, DuBravac and Loenig said. Netbooks, which emerged in 2007, hit 10 million units sold in 2008, and will mushroom to 18 million in 2009, they said.

Of all consumer electronics purchased, cell phones, including smart phones, are the biggest sellers, and had about $23 billion in sales in 2008, CES officials said. In the U.S., about 124 million units should ship this year, DuBravac said, an increase of 2.6% over 2008.

Cell phones and smart phones are devices that bring together all the innovations of electronics technology, because of users' desire to work or play anywhere, said Tim Herbert, a global analyst for CEA. He estimated that cell phones represented about 27% of the worldwide consumer electronics market in 2008, while laptops were 11% of the total.

Mobile phones innovations include provisions for connections to faster networks with a range of applications, but also innovations for user needs. As one example, Koenig noted that LG Electronics will be announcing a wristwatch phone at CES. (LG confirmed the device would be shown after the show opens.)

Globally, consumer electronics products should result in total retail sales of $724 billion in 2009, up from $694 billion in 2008, Herbert said. About 2.5 billion electronics products were sold in 2008, he added.

Copyright © 2009 IDG Communications, Inc.

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