PC Makers Move Into Living Room

Say good-bye to traditional notions of a PC company. Times have changed and PC vendors will increasingly move away from selling just computers and peripherals to also offering consumer electronics products, including television sets, according to the chief executive at one of the world's largest semiconductor makers. The result is a home computing environment that will be more tightly tied into areas, such as entertainment, that were once considered the domain of consumer electronics companies.

"The computer manufacturers are all going into the consumer electronics space," said Scott McGregor, the president and chief executive officer (CEO) of Philips Semiconductor International B.V., which supplies chips to both computer makers and consumer electronics companies.

The blurring distinction between the PC and consumer electronics industries is a trend that has been under way for a couple of years, led by the release of Apple Computers Inc.'s iPod music player in 2001 and the entry of consumer electronics companies, like Sony Corp., into the PC market. Cellular handset makers, like Nokia Corp. and Sony Ericsson Mobile Communications AB, have also played their part, boosting the capabilities of handsets with features like MP3 playback and increasing their ability to be connected with PCs and the Internet.

In May, Gateway Inc., based in Poway, California, raised eyebrows among analysts by announcing plans to offer a range of consumer electronics devices, including Microsoft Corp.'s Xbox game console, flat-panel LCD (liquid crystal display) televisions and home theater systems, while it also works to build its enterprise computing and service businesses.

Other computer vendors are expected to push into the market for consumer electronics, including Dell Inc., which is expected to begin selling its own line of LCD TVs towards the end of this year, said David Hsieh, director of Taiwan market research at DisplaySearch Inc., a market research company that tracks the flat-panel display market, including LCD TVs.

"It's very clear that Dell wants to get more recognition in the (consumer) electronics area," Hsieh said, noting that Dell is working with LCD panel makers in South Korea and Taiwan on its plans to offer LCD TVs.

Dell's move into the market for LCD TVs is part of a wider industry trend among PC vendors, and more companies are expected to follow suit.
"Based on our customer information, we believe every major laptop maker is going into the consumer electronics space and will sell TVs," McGregor said.

At the heart of this shift in the nature of PC companies is the widening popularity of digital media, increased connectivity among consumer electronics devices, and the growing reach of broadband Internet access. In response to customer demand, LCD TV sets will be produced that offer Internet access, wireless network connectivity and include memory-card slots that allow users to view pictures taken using digital cameras, Hsieh said.

One such vendor is Toshiba Corp., which has announced a range of flat-panel television sets in Japan that incorporate an IEEE1394 interface and memory card slots for Smart Media, Secure Digital (SD), Multimedia Card (MMC) and Memory Stick as well as Ethernet connectivity to allow for firmware upgrades. The first planned firmware upgrade for the TV sets includes a Web browser that will allow users to surf the Internet from their TVs.

Another company that has led the development of consumer electronics products that offer capabilities more often associated with PCs is Sony. The company last week introduced its PEGA-VR100K video recorder, which can be connected to a television and contains a television tuner and connectors for a satellite receiver or DVD player. The PEGA-VR100K can record video in MPEG4 format on a Memory Stick card. The recorded video, between 250 minutes and 1,000 minutes on a 1G-byte Memory Stick, can be played back on a Clie personal digital assistant (PDA) from Sony.

"We believe that there's a change going on in consumer electronics, that in the past people thought of them as isolated boxes," McGregor said. "That's not going to be true any more."

Another reason for the convergence of the consumer electronics and PC industries is the continued strength of consumer demand for electronics and IT products, even while corporate demand has remained soft in recent years. Recognizing that consumers are still willing to spend money on new products, computing hardware makers have been quick to respond by developing new digital cameras, MP3 players, and home PCs designed to operate as entertainment systems.

"We believe the future growth of IT spending will come from individual consumers and the home," said K.Y. Chen, chairman and CEO of BenQ Corp., a Taiwanese company that offers a range of products, including LCD TVs, MP3 players, digital cameras, notebook PCs and digital projectors, that are targeted at consumers.

The PC industry's move into consumer electronics turns up the heat on traditional consumer electronics makers, which do not share their rivals' experience with integrating many of the functions found in desktop PCs and notebooks or with the pricing pressure faced by PC vendors that has consistently driven down prices as technology has advanced, Hsieh said. As a result, computer vendors will likely be the first to build more functions into consumer electronics devices, followed by consumer electronics companies, he said.

"Consumer electronics companies are not so familiar with the PC area and they would like to stick with the (basic) TV features," Hsieh said.
One consumer electronics company that has not shied away from making a push into the computer market is Teac Corp., based in Tokyo.
Teac unveiled its TMM-2020 home entertainment PC at the Internationale Funkausstellung show in Berlin, which ended last week. Based on a 1GHz C3 processor from Via Technologies Inc. that does not require a noisy cooling fan, the TMM-2020 runs Microsoft's Windows XP operating system and is designed to fit into a TV or stereo cabinet, according to a statement. It can be operated using a remote control or infrared keyboard and allows users to record television shows, watch DVDs or surf the Internet.

"In the longer term, we're going to see more and more of these devices being developed," said Richard Brown, Via's associate vice president of marketing.

Convergence between the consumer electronics and PC industries appears to be moving quickly but Brown cautioned that there's still a long way to go. While consumer electronics companies have to adapt to the technology integration and pricing pressures of the PC industry, PC makers will have to get used to working with many different types of devices rather than a stand-alone desktop PC or notebook, he said.

"For PC products in the home, say the living room, it's still quite a long ways to go," Brown said. "It's a three to five-year process."