Electronic Design

Some Markets Have Hit Saturation, But Room For Growth Remains

As the volume of PCs produced almost levels off and the number of cell phones manufactured has dropped considerably, it might seem that the industry has begun a cycle of consumer saturation. Of course, a slowing in the economy also influences the quantities of products. But for this moment in time, have we penetrated the market as far as the market permits? When this happens, I expect that designers will save the day with some innovative circuits, which coupled with some astute marketing, can open new market segments and keep the industry moving forward.

For instance, at today's current price points, have PCs been purchased by most consumers who want a system? And if that's the case, will lower prices spur on the market to start yet another wave of PC purchases? Or will a new software application (some new game perhaps) or a new hardware angle (USB 2.0) create a groundswell of demand for new hardware? I'm sure that PC manufacturers and software vendors are pursuing both options.

Meanwhile, PC demand is lackluster. Corporate spending has decreased, so fewer new machines are being purchased. Staff reductions have put a considerable number of previous-generation systems back into the corporate supply chain, or else into the surplus market where they're refurbished and resold. Systems that stay in the corporation usually fill the gap until budgets permit new hardware purchases. However, numerous companies are finding that the performance of many "older" systems—those with CPUs running at 500 MHz to 1.2 GHz—is more than adequate to handle 90% to 95% of most corporate tasks. So there's little incentive to purchase large numbers of the new 1.5- to 2.5-GHz systems coming off of today's assembly lines.

In the consumer market, the first level of saturation has already taken place, but there's still room for growth. A significant percentage of new computer sales now aims at the addition of a second or even third computer to the household. There also is a focus on upgrading from a relatively old system (typically pre-Pentium II) to a 1.2-GHz or faster system. To make that happen, PC costs must drop significantly, even from today's low levels. Additionally, systems must offer features that differentiate and add value to the hardware.

Although speed isn't an issue with cell phones, and cost is almost a nonissue as many phones are underwritten by the service providers, here exists another area where the market has seen a significant slowdown. While phone sales are still strong, a significant percentage of new phone sales are going into the "replacement" market for existing users. They may want an upgrade with more features or longer battery life, or to replace a lost or damaged phone, or to move from analog to digital or to multiband phones.

Most people who need phones have signed up for a plan. The market has been going after the personal-use folks with family-plan deals that allow up to four phones to share a pool of minutes, pay-as-you-go phones that can be "recharged" with prepaid airtime minutes, and even disposable phones. One way that companies are attempting to expand their market is by bringing in younger and younger users.

Already, many cell phones cater to the teenage consumer, offering colorful styles, changeable tones, built-in games, and more. Now marketing is further expanding by creating a "pull" from the preteen generation. But I'm not so sure about equipping such young children with cell phones.

These two examples of saturated markets prove that there are still ways to expand such markets by applying new technology and meeting the changing consumer needs. Can we apply the same principles to stimulate the OEM side of the industry? Will we be able to craft more cost-effective products and create new systems that offer better price/performance opportunities? I think we have that capability.

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