Dispatches from CES: Dour forecast for tech industry

Smartphones and tablets are taking the world by storm, but the consumer electronics industry as a whole is in a rut and is expected to stay there.

The dollar value of global sales of tech products fell 1 percent last year, according to joint research from the Consumer Electronics Association and GfK, a German market research firm. This year electronics sales are only expected to grow 4 percent.

“We’re really struggling to achieve any significant level of growth across mature markets,” said Steve Bambridge, business director of boutique research at GfK.

The forecast could put something of a damper on the Consumer Electronics Show, which is officially set to kick off here on Monday night with a keynote speech from Qualcomm CEO Paul Jacobs. The gigantic show serves as a platform for tech companies to show off their new products for the coming year.

And things may actually be worse than projected. Some reports indicate that holiday sales in the United States were worse than previously expected. If so, the estimated growth rate for North American tech sales — about 1 percent last year and 3 percent this year — would have to come down, said Steve Koenig, director of industry analysis at CEA.

“It was a relatively weak holiday,” he said.

Last year, the two organizations predicted that tech sales would grow 5 percent in 2012. But economic troubles in major markets, including the United States, Western Europe and Japan, weighed on the sector last year and will continue to do so in 2013.

Tech spending was also affected by relatively sluggish economies in emerging markets such as China, India and Brazil, the organizations said. Sales of tech products grew just 3 percent in those developing markets last year and is expected to grow 9 percent this year. That’s down markedly from the double-digit growth rates those markets posted in previous years.

Two bright spots for the tech industry have been smartphones and tablets. The dollar value of tablet sales grew 60 percent in 2012 from the year before, while smartphones grew 38 percent. Together, the two products now account for some 40 percent of spending on electronics worldwide.

But the success of those products has been something of a double-edge sword for the industry as a whole. Sales of essentially every other major technology product, from feature phones to flat-screen televisions to car navigation devices, fell last year. In many cases, those declines can be attributed or linked to the success of smartphones and tablets.

In some cases, tablets and smartphones are directly replacing other-screen based devices, such as televisions and computers. Bambridge noted that during the holiday season, sales of laptops plunged 20 percent or more in Western Europe, while tablet sales grew more than 100 percent. The success of tablets has also come amid plunging sales of small-screen televisions, those with display sizes of 20-inches or less.

“Are they cannibalizing the purchase of other tech devices? To some extent that’s true,” said Bambridge.

In other cases, smartphones and tablets are using apps to assume the roles of other devices, including cameras, navigation devices, music players and portable gaming devices. CEA’s Koenig noted that the tech industry has seen a consolidation in product categories as the lines between computers, phones and other devices have blurred and as smartphones and tablet have become more capable.

“You have these two products that can do any number of things through accessories and apps,” Koenig said.

Troy Wolverton Troy Wolverton (249 Posts)

Troy writes the Tech Files column as the Personal Technology Columnist at the San Jose Mercury News. He also covers the digital media, mobile and video game industries and writes occasionally about Apple, chips, social networking and other aspects of technology. Previously, Troy covered Apple and the consumer electronics industry. Prior to joining the Mercury News, Troy reported on technology, business and financial issues for TheStreet.com and CNET News.com.