The Top 10 Industry Trends 

Trend #5: The 5Cs
The electronics industry, with its constant technologic advancements, is traveling at a rapid pace through the first decade of the 21st century.

It has evolved and been changed by a multi-faceted digital technology growth engine. This engine is primarily silicon-based, and has evolved from many developments in semiconductors, system design, industry standardization, and of course, globalization.

Companies and market segments have risen. Others have declined or failed in the intense, high-stakes battle for market share in this worldwide industry.

Market Convergence + Digital Convergence
Nowhere is this change more evident than in the current dynamics of the connector markets. One could make the case that automotive also belongs on the 5C list—and it probably does. But three markets stand out with both market and digital convergence: Computers and Peripherals, Consumer Electronics, and Communications (CCC).

Digital technology is changing and expanding the breadth of electronic products and applications in these markets, limited only by the creativity and market savvy of participants. It is also creating cross-industry competition between market segments and companies—and makes a case for redefining where some products fit in their market classifications. Examples: a large and increasing share of PCs, printers, and other peripherals could be considered consumer products. Perhaps 75 percent of one billion cell phones (10 billion connectors) are consumer. Many devices use cross-platform technologies such as microprocessors, DRAM, Flash memory, PCI Express, USB, SATA HDDs, LCD, WiFi, Bluetooth, camera modules, and RJ45.

Apple Computer probably typifies the trend to digital convergence and could win a contest for being the most successful practitioner of it. Many of Apple’s newer products span all three CCC markets, leveraging cross-platform digital technologies. Apple’s latest product, the iPhone, is a classic example of this. It’s a PDA, phone, media player, Internet appliance, and digital camera, all in one seamless device that fits in the palm of your hand. It also has some of the most challenging small form factor (SFF) packaging of any device, yet it is a $400 consumer electronics product that is projected to sell 15 to 17 million units in three years, making it the most successful mobile phone introduction ever.

High-volume segments of CCC are increasingly served by a discrete set of OEM players who have survived and grown, both internally and by acquisition, such as HP and Apple. HP successfully absorbed Compaq after much controversy. Apple went through rough times when it lost its initial lead in PCs to Wintel, but was later able to successfully regain its reputation as a premier innovator.

These and many other companies have mastered successive paradigm shifts in digital convergence, globalization, and waves of industry consolidation. A supply chain of Electronic Manufacturing Services providers (EMS) and Original Design Manufacturers (ODM) back most of these large OEMs. Below is a list of some major OEMs. It illustrates that the number of key players in this marketplace is finite, as technology, globalization, and competition escalates.

Some OEM CCC Players¹

Notes:

1. In all three CCC markets, traditional players, while challenged, retain their lead in core markets.

2. Resurgent with Intel CPU, iPod, iPhone, MacBook, and other convergent products.

3. Acer acquired Gateway, who bought E-Machines.

4. Dell may be going the ODM/EMS route vs. its own U.S.-Malaysia system assembly plants.

5. HP bought Compaq—resurgent to #1 spot in PCs and matching IBM in total revenues.

6. IBM is still a technology leader in servers, HP is close behind. IBM-PC is now Lenovo (Legend Group).

7. Intel combating AMD surge to 20 percent market share.

8. Lenovo China bought IBM PC 2005 and is becoming a Lenovo Thinkpad success.

9. Microsoft Vista is not a breakthrough, but Xbox 360 is a hit with Microsoft-subsidized pricing.

10. Toshiba is a HD-DVD format producer, along with Microsoft and others. Some say this is a losing battle.

11. Responding to history-making paradigm shift in film.

12. Launches Blu-Ray HD format with Play Station 3, projected to sell 35 million units by 2009 with major support from Hollywood studios.

In addition to these major players, there are many other innovators, such as Alienware, shown earlier.

Computer Industry
PCs, including Apple OS-X, represent a large segment of the computer industry. Its leading players include:

There are a large number of other companies—specialty PC suppliers and peripheral equipment manufacturers—that have taken digital convergence to new heights, primarily because digital electronics standards were put in place that assured industry-wide adoption.

Consumer Electronics
Consumer electronics (CE) is a very broad market, with products ranging from audio to video to electronic games, home appliances, digital cameras, and aftermarket auto electronics. There is a common thread to the current CE product base—a digital convergence with a wide range of CCC industry developments including HDTV, HDMI, 802.11, Bluetooth, and USB. Perhaps the next major happening will be in DVDs, wireless USB, WiMax, and 4G Wireless Web.

Communications
The mobile handset market exceeded the one billion unit sales mark in 2006—not including the telecom OEM equipment segment, including Cisco, Alcatel/Lucent, and others. Handsets include PDAs, cell phones, and smart phone manufacturers, as the market morphs to wireless web appliances. The next shoe to drop will be the widespread use of high-speed wireless access, including data, voice, and video on ultra-mobile notebook PCs—and an emerging PC for the masses that will use wireless access.

Implications of the 5Cs for the Connector Market
You could argue that market convergence and competition between computer, consumer, and communications markets has resulted in the “consumerization,” and to some extent the “commoditization,” of these important market segments for connector products.

Industry consolidation has reduced the number of customers in one sense, but other new companies and applications have surfaced to offset this reduction.

Outsourcing, while not a direct result of digital convergence, has certainly benefited from it. Along with outsourcing, the drive to reduce cost and the growth of global markets has resulted in a high degree of offshore manufacturing, particularly to mainland China.

Cost reductions, enabled by higher digital silicon content, have opened these markets to emerging economies where huge potential exists. It is anticipated that Asia Pacific, China, India, and ROW unit volume in CCC (and thus connector consumption) will surpass developed Western economies within the next 10 years. Digital convergence has helped speed the adoption of industry standards, which in turn, up and down the food chain, has resulted in higher volumes.

Below are some other important aspects of this change, applied to the connector industry: 

• All of these markets have (and will) enjoy double-digit growth, barring a global recession.

• They are among the most important markets for connectors—exceeding 25 billion units combined.

• CE historically became unattractive due to its commodity/low-price nature.

• This is changing with new products via digital technology and exploding consumer demand.

• This consumer demand has been the growth engine for PCs, including notebooks.

• Wireless technology will impact I/O connectors, but overall growth will be higher.

• However, cable assemblies will be impacted.

• Many high-volume applications require SFF packaging and interconnect.

• As digital silicon evolves, it is moving toward System-in-Package (SiP), System-on-Chip (SoC), and 3D m-packaging. This bears close scrutiny for potential profound changes in the connector regime, including more SFF subminiature/thin connectors with SMT, FEC, and other SFF technologies.