Consumer Electronics Show - in Shanghai?

I have real affection for the Consumer Electronics Show held every January in Las Vegas. I have attended it off and on since 1982 when I first made the trek as an executive at Atari.  Unfortunately, this year I was not among the 130,000 people who descended on the city for the show.  Watching from afar, I was struck by what was not covered as much as by what was covered.  The media paid lots of attention to the keynotes by tech leaders and gave lots of coverage of the latest gadgets.

One thing that the media failed to cover was the continuing shift in production and design of more and more of consumer electronics devices to Taiwan and mainland China. It would have been interesting to do an analysis of how many of the products on display in Las Vegas were manufactured in Taiwan or mainland China and then to determine how many of these products were also designed in those countries.

A good news hook for the story might have been the recent announcement that “China has replaced America as the world’s largest exporter of IT goods” according to new figures released by the OECD.  Actually, this happened in 2004, but it was just reported last month. Also, the statistic applies to all IT goods, not just consumer electronics. 

OK, I know all the objections.  Most of China’s exports are in low-end IT products.  A lot of the exports are sub-systems and components that get integrated into IT devices sold by US companies.

Granted.  But those of you who read my writings know that my focus is not on the snapshot.  My focus instead is on the trajectory and relative pace of change. This is what the Economist had to say about the dynamics:

Given China’s importance as a centre of low-cost manufacturing, its rise as an industrial power in technology goods is hardly surprising. What is startling is the speed of its ascent. From $36 billion in 1996, its world trade in tech goods – both imports and exports – has grown as much as 32% a year, to reach $329 billion in 2004.

China’s rising share of the market has been matched by a fall in the dominance of America – which invented the electronic computer and transistor that launched the digital era.

The contrast would be even starker if we focused on consumer electronics where the relative competitor would have been Japan.  China surpassed Japan as a global exporter of IT goods even earlier – in 2003. The impact of China’s competition with Japan was aptly summarized in a Financial Times editorial (registration required) last November 22 headlined “Threat of oblivion in consumer electronics: Japan’s once invincible giants are fighting a losing battle.”  The editorial observed:

How the mighty have fallen.  Two decades after Japan’s once invincible consumer electronics industry consigned most western competitors to the graveyard, it too is fighting to avoid oblivion – and for many of the same reasons.

Pioneer yesterday became the latest company to be forced into emergency restructuring after plunging into heavy loss, following Sony and Sanyo.  Others, such as JVC, Toshiba and NEC are struggling.  So poor is the industry’s health that Japanese media have started publishing league tables of the companies most likely to go bankrupt.

The main cause of the industry’s woes are Chinese competition and the switch from analogue to digital technology. . . . .

Of course, if the reporters wanted to take an even broader lens, they might have also built upon the news that broke in late December indicating that China’s economy was actually bigger than previously believed.  The New York Times ran an article (purchase required) on December 21, 2005 headlined “That Blur? It’s China Moving Up In the Pack.”  The reporters suggested that:

With China’s announcement on Tuesday that its economy was considerably bigger than previously estimated, economists and financial prognosticators are scrambling to rethink their assessment of China’s rise and its role on the world stage.  China’s new figures suggest that it probably has passed France, Italy and Britain to become the world’s fourth-largest economy.

Some economists are even accelerating their timetables for when China may eclipse the United States as the world’s biggest economy.  With the new figures offering a more expansive view of economic activity, some said China could overtake the United States as early as 2035, at least five years earlier than previous projections.

Now that would have been a story with global dimensions from CES.  Add it all up and I expect that we may not see CES in Las Vegas that much longer.  Any bets on when it will move to Shanghai?

Comments

[steven davies]

That is the best consumer electronics show I have ever seen:)
But I tend to agree with Vinnie that US is the wprld leader:)

[Vinnie Mirchandani]

John, not entirely true. In software and tech services, the US is still a world leader but India and China have started their assault there too.

BTW - if you want a spreadsheet of all the 2,700 exhibitors at CES last week to do an analysis by country I can send it to you...

[Alexander Osterwalder]

It's probably a little similar to the story of disruptive innovations - starting out in areas neglected by the big players by lowering costs. And then, out of nowhere... competing in the prime market. Warm regards from Chiang Mai, Alex.