Behind the Missing $13 Billion at CES 2014
The Consumer Electronics Show is as much a place to drum up hype for new gadgets as it is an annual celebration of all things tech. But the trade group that puts on the oversized convention in Las Vegas kind of killed the mood at one of its opening ceremonies.
Steve Koenig, the director of industry analysis at the Consumer Electronics Association, presented research showing that global spending on technology by consumers will drop this year to $1.06 trillion, a decrease of about $13 billion from last year. Considering global tech spending grew 3 percent from 2012 to 2013, to $1.07 trillion, the industry has good reason to drink extra hard in Vegas this week.
Why the decline? Just about everyone who wants and can afford a high-end smartphone already has one. In 2014, the industry should sell more mobile devices than last year but at lower prices to grab customers in emerging markets, according to the CEA.
Samsung Electronics served as a visible example this week of the challenges facing the tech industry. The South Korean electronics giant posted its first profit decline since 2011. Samsung is the world's biggest smartphone maker, with product lines that run the price gamut. It's selling lots of those low-margin phones, and having to spend more on marketing to drive Galaxy device sales.
"Profitability was hit by all of the marketing costs," Pelham Smithers, a managing director at research firm Pelham Smithers Associates, told Bloomberg TV.
Samsung has also spent a lot to market its Galaxy Gear smartwatch. And despite the poor reviews the device received, the industry is ridiculously optimistic about wearable electronics. Emerging product categories, which wearables are a part of, are expected to grow 107 percent this year, though they'll only account for 3 percent of revenue, according to CEA research.
Smithers's advice for Samsung: "They need to resolve the wearable electronics problem. This is clearly where everyone is looking."
Now, if only the industry can get everyone to wear them.