PC Makers Tune Into TVs

Say good-bye to traditional notions of a PC company. Times have changed: 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 of Philips Semiconductor International B.V., which supplies chips to both computer makers and consumer electronics companies.

Lines Blur

The blurring distinction between the PC and consumer electronics industries is a trend that has been underway for a couple of years, led by the release of Apple Computer's IPod music player in 2001 and the entry of consumer electronics companies such as Sony into the PC market. Cellular handset makers, like Nokia and Sony Ericsson Mobile Communications, 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 raised eyebrows among analysts by announcing plans to offer a range of consumer electronics devices, including Microsoft's Xbox game console, flat-panel LCD 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, 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, 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.

Going Digital

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 and 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, which has announced a range of flat-panel television sets in Japan that incorporate an IEEE 1394 (FireWire) interface and slots for Smart Media, Secure Digital, MultimediaCard, and Memory Stick memory card as well as Ethernet connectivity to allow for firmware upgrades. The first planned firmware upgrade for the TV sets includes a Web browser.

Sony is another company that has led the development of consumer electronics products that offer capabilities more often associated with PCs. The company recently 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 1000 minutes on a 1GB Memory Stick) can be played back on a Clie PDA from Sony.

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

Strong Demand

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 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, chair and CEO of BenQ, a Taiwanese company that offers a range of products that are targeted at consumers, including LCD TVs, MP3 players, digital cameras, notebook PCs, and digital projectors.

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. They would like to stick with the [basic] TV features," Hsieh said.

Pushing Into PCs

One consumer electronics company that has not shied away from making a push into the computer market is Teac, based in Tokyo.

Teac unveiled its TMM-2020 home entertainment PC at the recent Internationale Funkausstellung show in Berlin. Based on a 1-GHz C3 processor from Via Technologies 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 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 way to go," Brown said. "It's a three-to-five-year process."

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