6M DVD players to ship WW in 1999. C-Cube's chief chip guy believes it will grow........................................
electronicnews.com
From Electronic News--January 4, 1998
Consumer Market: DVD Delivers
All signs say double-digit growth despite an industry in flux
By Peter Brown
San Jose--After nearly two years of disappointing sales, 1999 is set to be the year that Digital Versatile Disc (DVD) breaks out of the doldrums and emerges as a major growth opportunity for semiconductor makers.
While other digital consumer electronics products are expected to enjoy strong sales growth for the year--including video game consoles, digital still cameras, digital cable set-top boxes and digital televisions (DTVs)--all the pieces are in place for DVD to be the hottest product in 1999.
In its first two years on the market, DVD gathered enough clout to make it a viable emerging market for the future. Although DVD struggled initially out of the gates with content issues, format wars and high prices, indications in the market suggest these concerns are under control.
There are now more than 3,000 DVD movie titles on the market. Video rental houses have stocked-up on DVD titles and have moved to have DVD content roll-outs coincide with VHS tape content roll-outs.Prices of DVD players have fallen to affordable levels.
"DVD is the main ticket in 1999," said Gerry Kaufhold, principal analyst at In-Stat, a market research firm based in Scottsdale, Ariz.
Worldwide production of DVD players is expected to grow to 6 million units in 1999, up from 2.2 million units in 1998, according to the market research firm Dataquest, San Jose Calif. The associated semiconductor market will grow to $1.3 billion in 1999, up from $579 million in 1998, Dataquest predicts.
Kevin Hause, an analyst at Framingham, Mass.-based research firm International Data Corp. (IDC), believes DVD will also be the biggest growth driver in consumer electronic unit volumes as the price pressure continues to decrease, DVD titles reach the 3,000 mark and DVD becomes more available for rental in such places as Blockbuster Video and Hollywood Video.
Speeding the acceptance of DVD players is the fact that movie studios are no longer holding back on producing DVD content. Almost all movie studios are now producing DVD content for rental and sale in the market, analysts said.
Umesh Padval, president of the semiconductor division at C-Cube Microsystems, agrees that DVD volumes will substantially increase in the second half of 1999.
"We could have a big year if the price continues to drop, the rental model picks up and studios start to deliver DVD movies at the same time as VHS movies," Padval noted. Padval said he believes long-term growth in the DVD market will be spurred by the advent of VHS replacement technology such as DVD-RAM, that allows a user to record content onto a DVD disc.
DVD already has a strong foothold in the U.S. market but there is plenty of room for growth in other regions of the world, said Simon Dolan, vice president of marketing for the consumer division at LSI Logic. There may be other markets such as China "where there will be significant growth as the transition from Super VideoCD (VCD) and VCD players to DVD takes place," he said.
Other Hot Products
The success of DVD will be only the tip of the iceberg, as DVD--along with numerous other consumer products--begin to challenge PCs as the highest volume supplier in the electronics industry in the near future. Hause predicted that shipments of digital consumer products will outstrip desktop PCs in the U.S. in the year 2001, with volumes reaching approximately 24 million units. However, due to a higher selling price, PCs will still command higher revenue than digital consumer products for the foreseeable future.
Besides DVD, some of the other digital consumer electronics products that will be winners in 1999 include video game consoles. The video game console market is well established with the Sony Playstation and Nintendo 64. Sega will also climb its way back into the market this year with its Dreamcast gaming console that uses NEC's PowerVR graphics accelerator.
Digital still cameras are also slated to make some substantial growth in 1999 with prices on megapixel cameras coming down to more affordable levels. Some megapixel cameras are already being sold for less than $500. The digital camera market also will be helped by the advent of new interfaces to PCs such as USB and FireWire 1394.
Digital cable boxes may also take shape as a volume leader next year as well as more and more cable companies switch to digital technology and boxes start to be sold through retail outlets.
On Nov. 1, 1998, the first digital signals started to be broadcast over the terrestrial airwaves in the U.S. in the 10 largest viewing markets. However, this doesn't mean most people will be able to view digital signals right away. Actually, according to In-Stat's Kaufhold, DTV won't make a dent in the consumer space until the year 2000. Everything up until then will be only hype, he noted.
"DVD will lead the way in 2000 and make inroads into the VCR world around 2002, after that we should all be seeing digital television come into play prominently," said Kaufhold. This will include set-top boxes, PC/DTV, add-in card tuners and the digital televisions and combo boxes that all will enable consumers to receive digital signals.
The big question regarding DTV is what it will bring to consumers besides enhanced audio and video. According LSI Logic's Dolan, audio and video isn't enough to sell people on paying high prices for television. More value needs to be added. That is where more of the combining of technologies, or convergence, takes place. Combining various functions from different products will drive DTV's success, Dolan said.
The Convergence Equation
The combination of consumer, communications and computer products into one single appliance allows many companies to enter into new markets they may have not been able to enter before. However, with the advancement in process technology, fundamental additions to semiconductors are becoming essential with larger amounts of real estate to fill each and every geometry shrink.
One widely adopted form of convergence is the addition of Internet capability to television. Others forms of convergence include television on computers, or combining the global positioning system (GPS) to cell phones. These types of products are driving many semiconductor companies to get involved in digital consumer products.
"The PC space is so unfriendly that more and more semiconductor vendors are avoiding this area and moving to a safer environment in the consumer market," said Dolan.
Although the emerging consumer market will see major PC companies enter along with major consumer companies already entrenched in the market, there might still be room for small start-up companies to "establish a leadership role or manage the migration to digital products," Hause said.
"PC companies have no choice but to move to consumer products because PCs are flattening out and the only market that can put up the same kind of numbers as the PC is the consumer market," Kaufhold said.
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