IDC views the future

Electronic News, March 9, 1998 by Carolyn Whelan

Market research firm sees analog modems, DVD ROMs, 10-Gbyte drives in industry's future. Bandwidth is the key

Boston--Over the next five years, analog modems will continue to dominate the consumer Internet market, despite the plethora of new technologies currently vying to take over that space, says Sean Kaldor, VP of PC Tracking and Consumer Device Research. In the fight between ISDN, xDSL and cable modems to deliver Internet to U.S. homes, xDSL will have moderate adoption, but over 80 percent of households will still access the Internet through analog modems by 2002.

Other major trends to expect in the PC market over the next five years, says Mr. Kaldor, are DVD ROMS replacing CD ROMs when the prices merge. Additionally, he says, expect 10 gigabyte drives to be standard. Also, USB will be ubiquitous, and the touchpad will dominate.

Most changes in the PC industry are being driven by improvements in communications industry, says IDC, particularly bandwidth growth. Due to bandwidth and voice improvements, a plug-and-play set-top device will probably be the medium for full-motion video and graphics. Expect a move towards home networking, says Mr. Kaldor, with one central computer in households. The product will be one that is low cost to connect and power. Peripherals like notebooks, keyboards and mice will be plug-and-play.

"Technology (in the PC market) is evolutionary, not revolutionary," says Mr. Kaldor. "And bandwidth is the hottest area." In the multimedia and peripherals area, voice audio recording and docking stations are now common, and color printers are set to come down in price. Information appliances will also take hold around the year 2000. Key to the shift to information appliances is the drop in the cost of integrated semiconductor designs, minimalist operating systems, lower-cost semiconductors and lower priced systems designs. Those lower-cost applications are changing the technology mix and driving development activities. Clients that will do well in competing and coexisting product families, according to Mr. Kaldor, are those targeted at specific market opportunities.

"Many in the industry are ignorant of the developments under way at the software and semiconductor levels making these new low-cost technologies more powerful than ever," said Mr. Kaldor. "(And)Vendors that have much to lose by the growth of the information appliances market have been very pessimistic, echoing the skepticism once heard about the expansion of the PC market," he added.

However, other technological advancements means that high-end developments will continue. Those advancements--faster PCI, 1394, DVD, 3D audio and graphics, WindowsNT and faster Pentium II--will impact displays, storage, communications, input/output, multimedia/peripherals, and form factors.

In the display systems area, says Mr. Kaldor, desktop CRTs will migrate from 14-in. to 15-in. and 17-in., while low cost systems stay at 14-in. Portable LCDs will grow to 14.1-in. and stop, while portable DSTN carries on. Integrated graphics, 3D as well as TV displays (NTSC) will probably come in at the low end.

Laptops continue to get thinner, lighter and easier to use--but not smaller. Meanwhile, personal workstations are "letting PCs out of their shell," and eating market share in the server market. Last year alone PC server revenues jumped 35 percent for revenues of more than $10.5 billion on shipments of 1.75 million units, says IDC. In 1997, the high-performance mid-range segment saw 42 percent revenue growth of more than $1.7 billion over 1996. Those revenues should reach $2.1 billion this year.

Another trend to watch is the popularity of the "manageable PC," which is an outgrowth of the Net PC idea.

What's been hyped? Desktop 19-,20-, and 21-in. CRTs, device bays, desktop LCDs, dual monitors, wireless corporate networking, TV tuners built into PCs, Ultra Portable PCs, and Windows CE Portables. By the year 2000, pricing for notebooks will fall to the $999 range. Because prices of smart handheld devices currently sit around $1,100, consumers have not bought into those.

The Net PC idea has died, Mr. Kaldor says, because it offered less performance but didn't change the price. The concept is now being rolled into the PC line as new technologies are adopted. "The PC market is splitting into form factors," he said.

Among consumer electronics, sales of digital cameras, Internet games, scanners, and playback stations are set to take off.

Looking ahead, sales of user-friendly information access devices including Net TVs from companies like TCI and Scientific Atlanta, along with screen phones with full graphics and E-mail should do well. Consumer interviews that IDC conducted indicate 53 percent of U.S. households want to browse the Web, and 42 percent of all U.S. homes want to do so without a personal computer. Additionally, 39 percent want to send/receive E-mail without a PC. IDC forecasts Net TV and screen phones to have annual sales of 7 million units each by 2001.

Among emerging products that could catch on are Brother's Word Processor, with E-mail access; a presentation camera enabling powerpoint presentations from URL's at home; and video conferencing via set-top boxes or phones.