October 31, 2006 – The year-end holiday season has become an even more bellwether period for the chip industry, which is increasingly tied to demand for consumer electronics. This year has seen a host of delays in rollouts for some hotly anticipated gadgets, noted an analyst for iSuppli Corp., but that doesn’t necessarily mean bad news for electronics and components suppliers.
Among the big-ticket items being delayed: Apple’s new iTV offering, which lets users transmit content such as iTunes from their PC to a TV, via a Wi-Fi link. Originally scheduled to be a holiday release, benefiting sales of digital TVs, iTV has been pushed back to January. New HD-video DVD players were also hoped to provide a boost to DTV and high-definition sales, but battles over standards (Blu-Ray vs. HD-DVD) has hampered growth, and customers seem wary to buy the devices until things shake out, either resulting in a clear winner or (more likely) dual-standard players ready by next year’s holiday season.
iSuppli analyst Chris Crotty admitted that the shift in product availability really only makes the holiday sales watch a bit less interesting, not a “sound the alarms” warning. “Consumers always find something to spend their money on,” he said, suggesting that without that new DVD player or lots of Sony Playstation 3 consoles flooding the market (only 2.2-2.4 million shipments are planned), buyers might look to “buy an even bigger TV, or replace their digital camera, or buy a second iPod.” Those chip component suppliers who would be most affected by consumer gadget demand, e.g. memory and analog, find their technology used in all sorts of products anyway (e.g. MP3 players, digital cameras), Crotty noted.
However, for some product platforms, the consumer year-end period is more than just a sales frenzy. “The PS3 is not only important as a new video game console, it’s also something that Blu-ray proponents are hoping to spur interest,” he said. Blu-ray companies doubtless are hoping that the PS3 will do for their tech spec what the PS2 did for DVD player ubiquity, he pointed out.
Crotty acknowledged that holiday seasonal electronics sales could end up suffering because of a lack of sparklingly new product offerings, and the delay in more anticipated offerings such as Blu-ray systems and Apple’s iTV could push more end-use demand into an unusually big 1Q07 or 2Q07 period. “That gets to the heart of the question: How informed are consumers these days, and how patient are they,” Crotty explained. It remains to be seen if consumers will save money to wait for a new Vista-ready PC, or new Apple iPod, or if they’re impatient and just want to buy something during the holidays. “I’d be a little surprised if consumers defer purchasing into the first quarter,” he said. “People like to shop — it’s not just a necessity, it’s a hobby.”
And don’t give up hope yet for a last-minute holiday gadget splash — Crotty suggested “50/50” odds that Apple could, in typical dramatic fashion, announce a new video-capable iPod in time for holiday sales — with features such as a larger landscape-oriented screen and a new interface besides the clickwheel. “Last year, we didn’t see the first video iPod until later in the season — and it seems like Apple introduced its other iPods this year awful early,” he said. And perhaps the axiom “absence of evidence is not evidence of absence” holds true — Apple is notoriously strict with its suppliers about confidentiality, so if such a device is indeed in the works, rumors would be unlikely to trickle out, Crotty pointed out, noting that Samsung found itself in Apple’s doghouse last year when it preliminarily crowed about an iPod design win for its flash controller.