Consumer Electronics: Future Looks Bright

I'm writing from Istanbul, Turkey, but before I arrived in Istanbul, I spent a couple of days at the IFA (Internationale Funkausstellung) international press conference in Majorca, Spain, where I spoke on a panel.

The event I attended was a preview of the giant IFA consumer electronics show that takes place in Berlin in late August. One of the other speakers was Jürgen Boyny, a consumer electronics analyst for the European market research institute GfK.

Despite the as-yet undeclared recession in the United States and the economic downturn in many other countries, Boyny painted a generally optimistic picture of the global consumer electronics market. In the brick-and-mortar retail stores in the 194 countries Boyny follows, he reported a 14 percent annual growth in spending for both 2006 and 2007. His 2008 projections are a bit less bullish with a growth of about 8 percent.

Mobile phones will make up about 25 percent of the 2008 consumer electronics market, he said. Flat-panel TVs will account for about 19 percent with desktop and laptop PCs accounting for about 17 percent and digital cameras slightly less than 6 percent.

Growth in the United States and Western Europe will be 10 percent and 12 percent, respectively, but look to China (22 percent), the Middle East (20 percent), Russia (20 percent) and South America (17 percent) for the biggest growth.

A presentation I found on the Web from Microsoft's Turkey general manager Caglayan Arkan estimated a 70 percent market penetration of cell phones in 2005 with a growth rate of about 14 percent a year. That means that by now virtually everyone here has a mobile phone. Unlike in U.S. cities, you still see a lot of pay phones around but you don't see a lot of people using them.

While cell phone use is nearly universal, smart-phones are just starting to catch on. My BlackBerry rang as I was perusing the gift shop at the famed Hagia Sophia Museum, and the clerk stared in delight. He had never seen a smart-phone before but he had definitely heard of a BlackBerry. I didn't see anyone on the street using a BlackBerry or any other smart-phone but I did see a BlackBerry ad on the side of a bus and heard from a Turkish friend that BlackBerrys and other smart-phones are just starting to gain acceptance in Turkey.

But that doesn't stop people from texting using ordinary cell phones. I see a lot of people texting. Americans in their teens, 20s and early 30s are doing a lot texting but it doesn't seem to have caught on in the business world in America as much as it has here, in the United Kingdom and in Europe. Sending a quick SMS expresses more urgency than e-mail because it arrives directly to the handset that people carry in their pocket. And as millions of adults over here and much of the rest of the world have discovered, sending a text message from a telephone keypad is easier than many would imagine.

When I first started texting, I found it incredibly hard to type in words using the letters associated with the phone's numeric keys. But after a few months, it's become second nature - not quite as fast or easy as typing from a keyboard but certainly tolerable for relatively short messages. But I'm still an amateur compared with many European adults and many American teenagers and young adults. I marvel at how fast my kids can type from the phones, and the same goes for a lot of older folks over here.

Ironically, just as people are learning to text and send e-mail with numeric keyboards, many may not have to thanks to lower-cost smart-phones, at least in the American market.

The major U.S. carriers are selling BlackBerrys for as little as $149 (of course with the usual two-year contract). The Palm Centro that sports a tiny little QWERTY keyboard typically costs $99, which is also the AT&T price for the Windows Mobile Samsung BlackJack II. Sprint is offering the Windows Mobile Motorola Moto Q for only $29.99 after rebate.

If this trend continues, people will be able to get smart-phones at the same free or cheap basis as regular cell phones. Cell phone makers know there is money to be made in data services and it's in their interest to get smarter and more capable handsets into people's pockets.

Americans are also starting to see more reasonable pricing plans. Verizon now has an unlimited plan for $139, but Sprint beats that with a $99 everything plan that also includes unlimited e-mail, photo sharing, texting, Web browsing and other data service (except with BlackBerry devices). That's still a lot of money, but it does relieve users of the anxiety of having to limit their use of the phone or worrying about how big their next bill might be.

The next revolution in cell phones will be their use in financial transactions. We've already seen experiments where people use cell phones to pay for soft drinks and other items from vending machines and we're also starting to see phones turn into virtual banking terminals. PayPal and Obopay, for example, have created systems to use phones to transfer money between individuals or to pay merchants.

I could have used a service like this when I discovered I was short of Turkish lires when trying to pay a cab fare. Fortunately, I had some good old American greenbacks in my wallet. The American dollar may be shrinking in value but it's still widely accepted. I'm glad I didn't leave home without some.

By Larry Magid