Computers, Consumers & Connectors
By John MacWilliams, Bishop & Associates Inc.

Hundreds of companies and 200,000 attendees celebrated yet another Consumer Electronics Show in Las Vegas in early January. A smaller, but no less enthusiastic contingent, will be in San Francisco for Mac World. The underlying theme at both of these events will be computer technology in consumer and communications products—with the worldwide web as one of the new killer applications in a digital convergent marketplace.

 Aside from this very important consumer theme, there are also a large number of B2B applications in computers, which have driven the profitability of companies who play in this market. Now, with all these consumer “toys,” it will remain to be seen who makes money on it.

The computer industry encompasses a huge range of products and businesses involved in software, hardware, and a vast array of peripheral products sold into all end-user markets. Now, even automotive is included.

Some notable consumer-oriented computer products include:

• PDAs and notebooks (mobile products)

• Desktop PCs

• Printers

• Displays

• Portable Hard Disks and Flash Disks

• Wireless LANs

• New 3G Data Networks for Notebooks and Palmtops

Basically, consumer electronics used to be about radio and TV. But now that category includes many new products resulting from the digital convergence of computer, consumer, and communications technologies—and the convergence of these three marketplaces. This trend has been at a fever pitch over the past few years, with major new products being introduced regularly. These include:

• Digital Cameras and Camcorders

• GPS Navigation Systems

• Wireless Networks—including the first free metropolitan area LANs

• High Definition TV, Flat Panel TV—Plasma, LCD, DLP and LCOS

• Set-Top Boxes, HD Recorders and DVD Players—Blu-Ray and HD-DVD

• iPods, MP3 and Media Players

• Game Machines

• Hard Disks and Flash Memory Cards for Media Players, Cameras and Set-Top Boxes.

Communication products represent the highest volume product category of them all, one billion units strong in 2006, and include: mobile phones, smart phones, camera phones, and MP3 phones.

Arguably, many high-volume segments of consumer, computer, and communications markets have already converged as consumers have driven demand for new high-tech devices. There is an evolving set of OEM players, backed by a large contingent of CMs and ODMs. Below is a list of some systems OEMs, which is by no means complete. However, it does illustrate that the number of key players in this marketplace is finite, and perhaps getting smaller as the stakes in this market escalate.

Those stakes include large investments in research and design, a global presence, and sophisticated marketing expertise.

The list:

The Converging Computer-Consumer-Communication OEMs

Three significant products were announced at the Consumer Electronics Show (see HP TouchSmart above):

HP Windows Home Server

• Windows Vista

• AMD Athlon 64 bit CPU

• < 4GB of DDR2

• (Probable) 1207 pin socket F LGA

• Up to 6 TB of SATA storage in 4 drive bays

• Remote Internet access

• TV connectivity via digital media adapter

  Apple Breakaway iPhone

• Quad band GSM + edge mobile phone

• 2 Mp camera

• iPod

• Speaker/Mic

• Wireless web communicator w/Safari

• 11.6mm 0.46” Thick (!)

• Mac OSX

• 3.5” LCD

• Finger-controlled multi-touch

• WiFi and Bluetooth

• PC/Mac Sync

• Visual voice mail

• May or may not have a docking connector

• Want one? Try Cingular.

Focus on the Computer Industry
The computer and peripheral industry is considered a growth/cyclical industry, a definition that was readily apparent during the 2000–2006 business cycle. This included the boom-bust cycle of 2000-2001 and the predictions of maturity and even decline. But the market recovered—mainly due to consumer demand. 2006 was another record year, with well over 200 million PCs sold.

In addition, assembly has shifted to Asia, with China and the Asia Pacific region having gone from 20 percent of the world electronics production in 1995, to 38 percent in 2005, and 45 percent in 2006. Previous forecasts of regional usage now look more like product consumption forecasts, not hardware manufacturing.

2006 Events and Trends
mputer sales were strong in 2006, although they may now be cooling somewhat. RISC servers continue under pressure from low-cost PC/Linux server architecture, with even Sun now making a successful push with AMD Athlon. Digital convergence continues to spark new developments. Generally, the market is healthy, vibrant, and continues to hold promise. Here are some trends to look for:  

• Notebooks continue to gain ground on desktops with mobile broadband wireless being a major new development.

• Desktops are slimming down ala the iMac design approach.

• Media center PCs are emerging and will become more visible in 2007—with a push toward Internet TV.

• There is movement toward X86 servers, with strong Intel competition from AMD.

• Servers are moving toward rack/blade configurations.

• Developing world demand will begin to rival Western sales of computers, albeit with lower-cost systems.

• Apple Computer’s switch to Intel adds new excitement to the PC market.

• There are several wireless standards developments—including WUSB.

• PC sales are approaching 230 million units, and desktops are fairing quite well.

• Sales in Asia increased 20-25 percent in 2005, signaling the importance of that market’s future.

• Server sales are up 10-20 percent in unit volume. Wintel shift is depressing revenue growth.

• The server and storage markets in Asia will grow as that region’s infrastructure builds.

• More systems will be assembled in Asia, as they take on PC characteristics.

• Dell and HP vie for the top in PC sales, with Dell having experienced problems in sales, profitability, and service.

• Dell has announced moving its worldwide supply chain and manufacturing operations to Singapore.

• The company now has over 50 percent of its 79,000 employees outside of the United States.

• IBM’s sale of its PC business, to China’s Legend Group – Levono, stabilized with the Levono brand now visible.

• PDAs have given ground to smart phones and mobile web communicators.

• Aerial density continues to give hard disk drives forward momentum and new applications.

• SAN, NAS, RAID, and other HDD-based solutions feed insatiable demand for storage.

 Also:

• Desktops are morphing. They will “adapt” and remain the volume leader for many reasons, including power.

• HDTV seems a logical merge. PCs will vie for the entertainment hub, including iTV.

• Wireless i.e. 802.11, 15, 16, WUSB, and 3G notebook wireless web mobility are additional killer applications.

• Cost is a major driver: Desktops > $299, notebooks > $499, software is the cost issue in consumer PCs.

• Technology spending is measured and takes its lead from IC developments.

• These include wireless Si, system-in-package, system-on-chip, and new multi-core CPUs.

• Intel and Microsoft continue to dominate, but there is increasing competition from AMD and Linux.

The Outlook for 2007
Demand in 2007 looks to be slightly lower than 2006. The downturn could be greater, depending on world events, including the price and supply of oil, and threats from North Korea, Iran, or Al Qaida. Anticipate the following:

• Single-digit growth in desktops.

• 10-12 percent growth in notebooks, with broadband wireless access beginning to take-off.

• Continued encroachment on PDAs from smart phones and mini-notebooks.

• 12-15 percent growth in blade servers.

• SATA becoming the defacto HDD standard in PCs.

• Continued emergence of new players in the server market, including Asian ODMs.

• Emergence of WUSB.

• Continuing transition to LGA sockets with Athlon Socket F 1207 pin BLGA.

Key Connector Types and Trends

& USB & IEEE1394-Firewire I/O connectors

( Docking connectors

" Audio/Video jacks

& FPC/FEC LCD display and SFF mobile interconnect applications

 " 802.11/WiFi

& RJ-45s, MagJacks, Gb Ethernet, Power-over-Ethernet

" Memory card slots

" VGA, DVI video connectors

" DIMM memory module sockets: DDR2 and 3

& CPU sockets: mPGA, LGA including 1207 pin socket F LGA designs

" ASIC sockets: PLCC

& PC board connectors, e.g. PCI Express, Express Card

& Serial ATA HDD interface

" WTB, ribbon cable connectors

& Power distribution connectors

" Thermal management hardware

& Blade server and HP backplane connectors

" Other high-performance PCB and B2B connectors

& High-performance cable assemblies—copper and fiber optic

Future Outlook
The computer industry is at the cutting edge of semiconductor technology. Its influence is felt across all other electronics markets and many electrical market segments where digital computing functionality is being employed. The direction here will be toward more embedded computer chips, more multi-core/multi-processing, and a cap on the increasing thermal management issue. 

• The world situation has become, perhaps, the #1 question for the future of this industry.

• Will Asian and ROW markets increase, as expected, to rival Western market volumes?

• Will manufacturing begin to stabilize around regional market demand—or will Asia dominate?

• Where will future centers of excellence in computer manufacturing be, and what roles will Western markets play?

• Will tensions in the Middle East, Asia, and elsewhere be controlled?

• Or, will one of these spill over into a conflict that will affect the business climate for years to come?

• Watch IC technology trends, which will drive future computer products.  

Computer Technology Influence on Top Electrical/Electronics Manufacturers

Seventeen of the top 30 electronics manufacturers, as listed by Business Week, Electronic Business and others, have stakes in the computer and peripherals industry. Nine are U.S.-based, 12 are Japanese, six are European, and only three are Asian Pacific. Interestingly, none are from China. Expect to see this change over the next decade. See below:

Top 30 Electronics Manufacturers
(Latest Sales Dollars x Million—Computer/Peripheral Players are Bold)

John MacWilliams
Senior Consultant and Analyst, Bishop & Associates Inc.
John MacWiIliams has been in the electronics industry for over 40 years. His main areas of experience have included: U.S. competitiveness programs, market research studies, authored articles, field sales and management, product marketing management, strategic marketing, new product planning, venture development, advertising and media relations, direct sales, manufacturers representative, distribution sales management, and international marketing. MacWilliams has worked with AMP, Diceon Electronics, TRW, and IRC in marketing management positions. Prior to joining Bishop & Associates, MacWilliams served as the group director of marketing and new product planning for AMP.

MacWilliams graduated from Lehigh University with degrees in business management and engineering.