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CEATEC ’09 May Illustrate An Industry In Transition

SOMEWHERE ABOVE THE PACIFIC – I’m returning to New York from an eventful week in Japan. In covering this business over the years I’ve been fortunate enough to go to cover CEATEC, held just outside of Tokyo, more than a half-dozen times.

I was invited by Panasonic to attend this year, mainly to see its 3D HD introduction at CEATEC. If you’ve been visiting, receiving our daily newsletter and news blasts, then you’ve probably read about the keynote speech by president Fumio Ohtsubo; what he had to say, along with several of Panasonic’s top executives, about major industry issues; and what I saw when I visited the show floor on its opening day, Tuesday.

I’ve been to CEATEC several times over the years, the last in 2007. At least one of our editors has been there annually during this decade, so we have a pretty good institutional memory about CEATEC and what to expect.

What we tend to see are existing or brand-new A/V and handheld products, some home office too, all configured for the Japanese market with a good percentage being earmarked for an International CES introduction the following January and U.S. shipments later on.

In that way, CEATEC 2009 was typical. It will be remembered as the “3D HD” show, and I don’t doubt because of the support of Hollywood and the displays by Panasonic, Toshiba, Sharp and Sony we’ll see and hear plenty about it in the U.S. during 2010.

But that was about it. At the end of the digital decade, where the CE industry moved from analog to digital products if you were a U.S. retailer here (this really is more of a show for the Japanese and Asian markets), you’d say, “Is that all there is?”

In past years one would see the first flash-memory cards, digital camera introductions, optical disc unveilings, MP3 players of all shapes and sizes, personal organizers, PCs, and cellphone developments. Even if these products weren’t immediately set for the U.S. market.

Then there would be the format battles across one or more categories and, of course, all types, sizes and formats of HDTVs for the Japanese market that might – just might – end up in the U.S.

After 3D HD, which will be coming to the U.S. next year, that was about it for traditional the CE categories. I guess after 10 years of revolutionary innovation, the major Japanese manufacturers seemed to have taken a collective break. Not that there aren’t plenty of legitimate reasons for such a move.

First and foremost is the worldwide recession that hit the big name Japanese CE manufacturers just as hard as anyone else. Sanyo is close to being acquired by Panasonic, Pioneer is exiting the plasma TV market, and just about every major CE maker has recorded either disappointing or dismal quarterly financials in the past year and a half.

Now, one could theorize, and it was mentioned at the show this year, that maybe manufacturers are holding off on introducing new categories and formats until the world economy rebounds. Few say it is due to R&D budgets taking on the chin.

The worldwide recession hit just as the DTV transition was about to occur in the U.S. Brian Dunn, CEO of Best Buy, said for consumers, HDTV is only “in the early innings” of its development during a New York press briefing last week. Dunn added that the introduction of HDTV and flat-panel displays is a once in a 25 years or so happening where “everyone” had to buy a TV or at least had to think about buying one and that much more HD content will become available.

The same might be said for a few other familiar categories that the industry produces, again due to the transition to digital.

But what the entire industry has to consider is that it may be entering an evolutionary and not revolutionary phase. This may be a time where there will be improvements – significant ones such as 3D for HDTV – and many smaller ones across established categories. But there may be fewer “must have” hot new categories.

That’s got to be a pretty frightening scenario for many, because in the past decade the industry could relatively easily demonstrate and sell good old “demonstrable differences” in the new digital products that have rolled out annually.

This type of “evolutionary, not revolutionary” phase has happened in the past. Remember in the late 1980s when everyone in the industry was “waiting for the next VCR” to drive growth? It was also a time of widespread commodity pricing and thin (if any) margins, an era no one wants to return to.

In the past 25 or so years CE growth has come from entertainment products in home and car A/V, video games and the like; communications products, such as home and wireless phones; and home office/education products led by computers of all shapes and sizes.

But all is not gloom and doom. Retailers, especially ones we spoke to during recent buying group meetings and CEDIA Expo, are all looking for what they call “non-traditional” categories to make up for the lost margins in home entertainment.

And manufacturers seemed to have listed if you took at look at some of the CEATEC booths. Ecologically friendly CE categories involving “lifestyle” systems for families that save energy and the environment, and health-related products were highlighted. In many cases they are individual products working in a system that will cut energy usage, cut a home’s CO2 emissions and other products that will either keep us healthy or monitor our vital signs. At least a couple of these categories would involve major appliances and the skills of custom installers.

The CE industry is going to be involved in energy use and home medical technology? That’s a far cry from the audio components, turntables, tape decks and the like that many baby boomers loved, and drew them into careers in CE.

But as we quickly approach a new decade in less than three months the economy, the environment and demographics have changed. Environmental concerns, energy use and health care have become just as high on the list as products designed for entertainment, education and communication.

Consumer needs have changed once again, seemingly just in time for the CE industry to offer technology products help meet those needs.

So, when some may now describe this year’s CEATEC as the “3D HD,” down the road it may be considered the first one where the CE industry began to transition into providing products dealing with the environment, energy and health.