Growth in consumer electronics will downshift during the next five years, a trend that should push companies to focus on hot mobile apps, such as Personal Media Players/MP3 players, according to iSuppli Corp.
The market researcher believes a "significant slowdown" is coming, deflating compound annual growth rate (CAGR) of OEM factory revenue in the CE space to 3.6 percent for the period from 2007 through 2011. That's down from 8.9 percent from 2001 through 2006. The deceleration will drag down chips as well. Growth in that sector will slow to 4.4 percent for the period from 2001 to 2011, down from 10.7 percent from 2001 through 2006.
Isuppli expects revenue from OEMs to hit $393.4 billion in 2011, up from $349.9 billion in 2007. Related chip revenue will increase to $69.1 billion in 2011, up from $58.1 billion in 2007.
Despite the overall slowdown in growth, there will still be hot spots. Mobile devives, such as PMPs will stand out, driven by new designs from Apple, Sony and Samsung, who will continue to dominate the market and likely force the rest of the industry into consolidation.
Increasing Internet connectivity, growing content availability and declining prices for key components like NAND flash memory and System-on-Chip controllers will also help fuel the industry, said Chris Crotty, a senior analyst for iSuppli.
Shipments of PMP/MP3 players will total 268.6 million units in 2011, expanding at a CAGR of 13 percent from 128.7 million units in 2005, iSuppli said. PMP/MP3 factory revenue will rise to $21.5 billion by 2011, growing at a CAGR of 7.4 percent from $14 billion in 2005.
But it won't be all about PMPs. Media-centric cell phones will still be a major competitor for the hearts and wallets of consumers looking for mobile content. In 2007, phones that play music will out-sell PMP/MP3 players by nearly 3:1, iSuppli said. By 2011, the lead will widen to 4.5:1.
Still, PMP/MP3 players will hold their own. "There are many factors other than technology at play in the competition between PMP/MP3 players and mobile phones," Crotty said. "There are also other issues ranging from ergonomics to social status. So-called convergence historically happens much slower than initially predicted by technology enthusiasts."