Electronic Design

The Pulse Of Our Industry

One of the strongest industries in terms of actual growth and the ability to continually create new, innovative products is consumer electronics. Sales this year should top $125 billion.

"We are hot," says Gary Shapiro, president and CEO of the Consumer Electronics Association (CEA). "Our industry may be dramatically changing the way consumers receive information and entertainment."

Home networking is one example. Digital radio represents another arena with popular new products and applications. For example, carmakers are teaming with Apple Computer so drivers can play iPods through their car stereo. Even more exciting, perhaps, is that each new product generation introduces new forms and styles.

There's no shortage of highly innovative products hitting the market. Wireless phones now operate as content command centers. Also, multisystem HDTV-capable media servers and DVRs are becoming mainstream. Nearly half of all consumers plan to make their next TV purchase a high-definition (HD) set, according to a new consumer survey by the CEA. Voice-over-Internet-Protocol, HD, satellite radio, vehicle navigation, and next-generation gaming also seem to be on a meteoric ascent.

But Shapiro and the industry he represents also are mindful of potential legislation that could put a huge crimp in the CE companies' efforts to continue to offer innovative products. Immediate concerns include proposals for new recycling fees on products, as well as requirements that video products be sold with digital TV tuners. Another major issue under current debate in the consumer electronics industry is IP and how it's affecting new product designs and content protection.

RACING TO BE MORE HIGH-TECH
Cars can do just about everything but drive themselves... for now. But automobile manufacturers are just warming up to new high-tech features that help differentiate their vehicles, ultimately giving them a more competitive edge.

"The automotive electronics market is tough to compete in due to stringent automotive performance specs and pricing pressures," says Chris Webber, an industry analyst and vice president of automotive practice with Strategy Analytics. "However, the attraction of automotive electronics to electronic-module, semiconductor, and sensor vendors is clear when you look at the growth of electronic content in cars and light trucks. There are no boom and bust cycles like in telecom or PCs."

Automakers are feeling the technology-investment pressures as electronic content expands in cars. Current and emerging applications include in-vehicle entertainment and wireless systems (e.g., satellite radio and Bluetooth), navigation and position-location services, displays, keyless ignitions, cameras, biometrics, text-to-speech voice recognition, radar, fuel economy control, tire pressure, and other driver safety and assistance devices. Some luxury cars now come with as many as 18 antennas.

One recent concern revolves around event data recorders (EDRs), which resemble the "black boxes" of the airline industry. These devices now reside in millions of American cars to record speed, seat-belt use, and other driving data. Privacy advocates have been trying to put the brakes on EDRs.

The main fear among auto manufacturers is that states, rather than the federal government, will begin passing legislation covering EDRs. If these bills get through, then there's the potential that carmakers would have to build different systems for different states.

PCs ARE BACK
Demand for computer hardware is on the upswing after about five years of rapidly dropping or flat sales, with IT departments at many large companies beginning system upgrades. Consumers also seem primed for a new PC upgrade cycle, moving to more powerful models with flat-screen monitors and color printers. Popular features include security and antivirus software. Of course, Internet connectivity is critical, especially if it's wireless.

Notebook computers reign as the hottest items within the PC market. IDC says shipments of portable PCs will jump 26% this year, while overall PC unit sales will be up 11.4% to 169.9 million. But most industry analysts, as well as the CEA, expect PC total sales in dollars and average selling price will decline in 2005.

No surprise here: Telecommunications is on fire. Revenue totaled $2.1 trillion in 2004, up 9.4% from 2003. The U.S. market accounted for $785 billion, with equipment revenue registering its first gain after three consecutive years of decline, according to the Telecommunications Industry Association (TIA).

The wireless segment continues to present one of the best opportunities as a market and for technical innovation despite its occasional volatility. For example, "smart" cell phones have punished PDA sales, since they integrate many PDA functions.

The U.S. wireless market, including carrier services, handsets, capital expenditures, and infrastructure equipment, along with several fast-growing markets like Wi-Fi and broadband access, totaled $145.1 billion in 2004, according to the TIA. That's up 11.6% over 2003. Additional growth is anticipated from new cell-phone models and emerging services like WiMAX, a last-mile broadband wireless Internet access solution, and mobile communication satellites.

The TIA's 2005 Market Review and Forecast indicates that it's waiting to see how WiMAX develops. Despite the caution, it projects spending for WiMAX-based products and services to reach $115 million in 2005, with a jump to $290 million by 2008 (a 109.7% compound annual increase).

MEDICAL GETS A SHOT IN THE ARM
The rapid advances in medical electronics can be seen on several fronts. Doctors now can view their patients' x-rays, MRIs, and CT scans from any computer. They also have instant access to patients' medical records. Robotic pharmacies automatically read and fill prescriptions. And many new, more advanced medical devices seek to improve patient care.

Aging demographic patterns plus advancing wireless and sensor technologies will push U.S. demand for patient monitoring systems, with an anticipated 6.7% annual increase to $8.2 billion in 2008, according to market research by the Freedonia Group. Freedonia also projects the U.S. market for medical imaging equipment to climb 7.6% a year through 2008 to $9.5 billion, partly as a result of an aging population, but also as a reflection of advances in non-invasive imaging technology.

Big things are expected from medical sensors, with a steady stream of breakthroughs providing greater medical-instrumentation and -system performance. Forecasts show the sensor market doubling from $600 million in 2003 to $1.2 billion in 2013.

With several pockets of growth on the horizon, industrial electronics holds great promise. Look to robotics and radio-frequency identification (RFID) in particular.

North American manufacturing companies purchased 14,838 robots valued at nearly $1 billion in 2004. That's a 20% rise in unit sales over 2003 and the second best unit total ever, according to the Robotic Industries Association (RIA). As expected, most of the orders (64%) came from North American automotive manufacturers. That's down from 68% in 2003, though, an indication that robotics is gaining traction in other industries. In fact, North American orders for packaging and palleting robots grew 50% in 2004. But the RIA warns that market growth over the past two years was probably part of pent-up demand from 2001 and 2002.

"Whether or not growth continues in 2005 depends upon many economic factors," says Donald A. Vincent, the RIA's executive vice president. "However, the long-term prospects for the robotics industry remain outstanding."

While RFID is on the fast track for growth, it has run into a few snags over the past several months. Many critics believe that RFID technology will threaten privacy. Also, a series of patent infringement lawsuits has slowed adoption. Indeed, not one leading components distributor has yet to implement RFID tags as a supply-chain tool.

No one denies that RFID is great for finding things, like lost luggage. Commercial airlines, some of them already facing bankruptcy, essentially agree that RFID might be a good idea. But they don't want to spend tens of millions of dollars to adopt RFID luggage tracking, despite the fact that RFID vendors and some analysts believe this investment could be recouped fairly quickly. Still, the opportunities for RFID are vast, ranging from retailing to contactless commerce and pharmaceutical distribution applications.

Intel and SAP AG teamed up so companies could integrate RFID data directly into backend systems. This should make RFID easier to use and help companies overcome hurdles in creating viable business cases when implementing the technology (e.g., integrating proprietary and non-proprietary technologies and adopting to emerging standards).

Texas Instruments, in the RFID business for years, believes the market is poised to surge from millions to tens of billions of tags over the next five years. TI also expects a critical mass of the technology to spur innovation and new applications across the enterprise value chain.

"Wireless RFID data acquisition, value-chain applications, and storage networks will create new business models, much like the cell phone has shifted the market from voice-only to a range of messaging, data, and transaction services," says Julie England, vice president of TI and general manager of TI's RFID business. "At the edge of wireless and wireless sensor networks, RFID is converging with Electronic Product Code and sensor technology to unlock new applications that go beyond identification to include everything from authentication to temperature, time expiration, pressure, and condition monitoring."

SHOOT TO KILL (MILITARY PROGRAMS)
Lots of uncertainty swirls around defense spending over the near and long term, with anticipated cutbacks in some major weapons programs. The Government Electronics and Information Technology Association (GEIA), which updates its 10-year forecast of defense electronics spending annually, describes a range of scenarios in its latest report called "alternative futures." The GEIA also talks about "setting bounds of uncertainty."

In the war on terrorism, growing regional conflicts could add significantly to the Department of Defense's budget. But what does this mean for technology spending? To a large extent, that depends on Congress.

Part of the answer might be found in a new Government Accountability Office (GAO) report that warns of soaring DoD weapons-system costs over the next decade, costs it suggests must be brought under control. The Pentagon plans to build 70 major weapons systems at a cost of $1.3 trillion. But the GAO says that doesn't cover cost overruns, which historically add 20% to 50% in expenditures to new programs.

The GAO report notes other examples, including a five-satellite surveillance program called Space-Based Infrared System-High. Originally planned as a $9.9 billion program eight years ago, the GAO expects an increase of $1.2 billion a satellite by actual launch time.

The GEIA thinks that killing programs may become acceptable. Already, two major Army technology programs and four in the other services have been terminated or dramatically revised. And more than 40 smaller programs got the axe since 2001. Several more could be on the chopping block.

Another way to cut military spending, the GEIA believes, is to incorporate new technologies into legacy systems. Also being considered is a shift to joint procurements, which means potential for political battles between the military services. A further solution is to take everything upstairs.

"Over the next decade," says the GEIA, whose study is based on hundreds of interviews with DoD purchasing officials and other analysis, "some procurement power will rise for department-wide \[DoD-level\] solutions."

But technology may still win, even in the short term, because the Pentagon may have to move beyond the commercial technologies it acquires through commercial off-the-shelf (COTS) buying policies. "Competitive advantage may demand it," says the GEIA.

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