Consumer electronics comes of age at IFA show

Sebastian from Germany is looking for a high definition (HD) television set, IT engineer Armin is after a media-centre computer, software developer Jens wants a digital photoframe, and Italian civil servant Anna a new phone.

At the IFA electronics show, consumers are not just browsing for traditional home-entertainment products like TVs and Hi-Fis, but also for MP3 players, route-finders, mobile phones, cameras and computers, showing how this technology segment has developed into a $312 billion-a-year industry.

Ten years into the digital consumer age, consumers are losing their fear of technology, with increasing numbers knowing how to rip music from CDs, swap videos over the Web and burn holiday movies on a DVD.

Claudio Topani, an Italian musician visiting the world's top consumer electronics show, lists the acronyms he wants in his Christmas stocking: an HD-DVD player or a Samsung HD-TV, products to store and display television and video with five times more picture detail than standard TV.

British electronics retail chain Comet said this week that the top three items on a first-year student's shopping list are an MP3 player, a PC and a printer. The three items together cost less than 500 pounds ($952.20).

A decent TV, a stereo and a kettle would be considered good going for students in 1996. Modern students are now able to download research data wirelessly and listen to lectures on podcasts. The number of gadgets in student houses has tripled, said Anna Burleigh, head of marketing.

TELEVISION STILL IMPORTANT

Electronics companies are branching out in new directions.

For those who like to feel to be fully involved in their video games, amBX speakers from Philips will emit light and smoke to match the action in the game.

The Dutch electronics company also showcased clothes with LED lights woven into the fabric that can display moving images in changing colors.

After the first decade of digital convergence, which was about connecting the previously separate worlds of computers, telecommunications and consumer electronics, the trend is now to make things easier to use and more enjoyable.

Samsung Electronics' Chief Executive of the Digital Media Business, Gee Sung Choi, predicted a Digital Renaissance with resurging growth. European consumer electronics sales growth is accelerating to 8 percent in 2006, from 6 percent in 2005 and 4 percent in 2004, according to market research groups.

We'll move to an era of rich digital experiences that will be more satisfying than anything we've seen before, Choi said.

Philips' Rudy Provoost speaks of the new convergence, as opposed to the old convergence of connecting separate technologies. New convergence should enable consumer electronics companies that currently barely scrape a profit to achieve higher margins with unique products.

Philips and LG Electronics had operating profit margins of less than 2 percent at their consumer electronics units, while Samsung's digital media business made a small loss.

STAND OUT FROM THE CROWD

With all TV makers offering the same flat displays and image enhancing software, they need something extra to stand out.

Philips struck gold by putting colored ambilight backlights on its TVs, LG turned an ordinary mobile phone into the popular chocolate handset through slick design, and Toshiba is playing the technology innovation card by being first to market with High Definition DVD players.

We changed our product development approach. It's now: design first, engineer later. It used to be: engineer first and then design the product around it, LG's European president James Kim told Reuters.

Philips believes that, ultimately, the real value is in the services and that design and technology features are not enough to command premium prices for devices. Healthcare, fitness, navigation and security are examples of new services that will be offered to consumers in and outside their homes.

I find it remarkable that many companies are still talking the language of technology. Trying to differentiate on different specifications is not the right way, he said.