Go shopping for consumer electronics today and you’ll find products that use Intel processors, run Microsoft operating systems, and feature brand names like Dell and HP. It’s remarkable to see so many familiar names from the PC world showing up in consumer electronics-remarkable, but not surprising. The PC market once drove the digital revolution, but the PC market is now fairly mature and stable. Today, the action is in consumer electronics, where growth is strong and innovation abounds.
This shift affects a broad swath of the electronics industry. Chip suppliers, retailers, and everyone in between are trying to use their experience in PCs to jump-start their consumer electronics businesses. It’s interesting that some players have been able to translate their PC strengths into success in consumer electronics, while others seem to gain nothing from their PC strengths.
Apple is one company that has made a successful transition. In the first quarter of this year, it sold more iPods than computers. In contrast, Intel has not parlayed its dominance in PCs into a lead position in consumer products. Intel’s communications division, which sells chips for mobile devices like PDAs and cell phones, lost around $850 million in 2003.
Why have some PC-oriented companies like Apple done well in consumer electronics while others like Intel have struggled? Part of the answer is that PC buyers care more about the underlying technology than buyers of consumer electronics do. For example, PC buyers often compare computers on the basis of processor clock speed, but consumers don’t care how fast the processors in their MP3 players are.
What does matter in consumer electronics is design: the products must look good and be easy to use. In contrast, PC users have put up with ugly, hard-to-use machines for decades. This distinction may explain Apple’s success selling iPods. Apple is as much an industrial-design company as it is a high-tech company, and its ability to make slick-looking, user-friendly machines is a great match for the demands of consumer electronics.
To succeed in consumer electronics, companies must deliver features consumers care about. This is a tough challenge for semiconductor vendors, who have only limited influence over the user experience. Nonetheless, semiconductor vendors hoping to succeed in consumer electronics markets must carefully consider consumers’ needs when designing and promoting their chips. And they cannot assume that success in other markets assures them any success in consumer electronics.
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