More Connected Than Ever: 6 Billion New Internet-Enabled Devices to be Produced This Year

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El Segundo, Calif. (Feb. 12, 2014)—The global market for connected devices that allow users to access the Internet is set to surpass 6 billion units this year, as new products including cellphones, tablets and computers enter the electronics ecosystem, according to a new report from IHS Technology (NYSE: IHS).

Worldwide production of connected equipment will amount to 6.18 billion units this year, up a solid 6 percent from 5.82 billion in 2013. This will be the largest increase for the market in four years, surpassed only by the 10 percent hike in production during 2010, a year after the global economic recession ended.  

Production growth rates will then slow in the next few years, even though total units produced will continue to rise in absolute numbers. Between 2015 and 2017, an estimated 19.42 billion new devices will flood the planet, as shown in the attached figure.

"The improved growth this year of the connected devices industry marks the return of higher production as manufacturers deliver all sorts of connectivity equipment to users," said Jagdish Rebello, Ph.D., senior director for information technology at IHS. "Given the voracious appetite of consumers for social media and their yen for always-on connectivity, it's little surprise that makers will continue to turn out such devices to keep buyers engaged."

Connected devices are defined as equipment that allow users to interact with the Internet in some fashion, from as passive an activity as simply looking at photos in social media or streaming media content for consumption, to a livelier form of engagement, such as gaming in real time. The devices must possess embedded connectivity, made possible through built-in semiconductors.

Among connected devices, those expected to enjoy higher production numbers this year include video game consoles, media tablets, mobile handsets, liquid-crystal display televisions (LCD TVs), set-top boxes and mobile PCs.

In contrast, equipment markets that will suffer reduced production this year are digital still cameras, camcorders, desktop PCs, DVD players/records and portable media players.

The biggest surge in production took place in the earlier years of the connected devices era in the first seven years after the new millennium, when production spiked by as much as 27 percent annually and yearly growth rates frequently hovered in the 20 percent range, Rebello noted.

These findings are contained in the report, "WLAN 802.11ac: Commercial Product Introductions Start to Ramp Up," from the Telecommunications service of IHS.

Winning segments boast strengthened numbers

Game consoles are forecast to enjoy the largest growth among all segments, up a mighty 45 percent this year in light of a major product refresh late last year following a seven-year drought of new models. The main products here are the PlayStation 4 from Sony and the Xbox One from Microsoft.

Media tablets and cellphones also will thrive this year, with production up 25 percent for the former and 7 percent for the latter. In particular, the outsize presence of market leaders Apple and Samsung will keep average selling prices elevated as a whole, resulting in larger factory revenue projections.

Also expected to do well is the mobile PC segment, including tablet PCs, although production for all personal computers is forecast to rise by a much more modest 2 percent. A new generation of processors from chipmakers Intel and AMD will enable a new class of entry-level pricing for PC tablets previously kept in the higher-end price range.

Two other major equipment segments for the connected devices market that will enjoy greater production in 2014 are LCD TVs, up 5 percent; and set-top boxes, up 7 percent. LCD TV growth will be driven by the emerging markets, while cable digitization will spur set-top box shipments. 

Losing segments continue to atrophy

Compared to the healthy production of the winners, the connected device categories that will lose ground in 2014 have been out of public favor for some time, their primary functions absorbed by more versatile replacements such as smartphones and tablets.

One such device is the digital still camera, which has suffered a drop in sales of point-and-shoot models because of consumers switching to camera phones. And while higher-end digital single-lens reflex cameras continue to flourish in the industry, their strength is not enough to offset the larger loss incurred by the point-and-shoot segment. Worldwide production of digital still cameras will be down 13 percent this year from 2013.

A related device, the camcorder, will also lose out in production this year. Traditionally sensitive to economic downturns and with their replacement cycles now lengthening more than ever, the camcorder market is forecast for a substantial decline through 2017. Worldwide production this year will be 21 percent smaller than in 2013.

Among the largest declines in production this year for the connected devices market is the MP3 player, down 27 percent. Even Apple, which launched the iPod in 2001 that set the company on a new industry-leading consumer electronics path, has confirmed the decline of the segment, the music functions of the player co-opted by mobile handsets and now tablets.

Other connected devices tracked by IHS include headphones, e-book readers, portable navigation devices, automotive head units, digital picture frames, personal stereos, modems and wireless local-area-network equipment. ________________________________________________________________________________

About IHS (www.ihs.com)

IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today's business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs approximately 8,000 people in 31 countries around the world.

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