eTForecasts - Executive Summary, Information Appliances

INFORMATION APPLIANCES
Computer Platforms Invade Electronic Devices

Abstract

During the Internet bubble years, information or Internet appliances were perceived as a new product category that would severely impact the PC and other industries. This clearly is not happening. Instead nearly the opposite is taking place. Computer hardware and software platforms are invading the fixed function electronic devices in the telecommunication, consumer electronics, auto electronics and related industries. The long-term trend is clear: most electronics devices will sooner or later be based on microprocessors, software, networking and other computer hardware technologies. Why? Because the cost decline, capability growth and flexibility of computer platform-based designs eventually becomes the best solution. The key question is not if this will happen, but when will it happen in the various product segments. The most crucial question is who will control the leading computer platforms that will become entrenched in each electronic device segment?

This report explores every aspect of computer platform-based information appliances:

What are information appliances?
What are the key IA computer platforms?
What are technologies will impact information appliances?
What are the main market and product segments?
How big are the markets for information appliances?
Which electronic devices will see impact from information appliances?
How will IAs affect PC and other industries?

Table of Contents
List of Tables and Figures
Executive Summary
What are Information Appliances?
What are the driving forces?
Information Appliance variety
What are the market dynamics?
Information Appliance Technology Trends
Information Appliance Market Forecast
Information Appliance Market Impact
Information Appliance Summary

Table of Contents

	Information Appliances: Table of Contents	2
	Information Appliances: List of Figures and Tables	4
1.0	Information Appliance Executive Summary	8
1.1	What Are Information Appliances?	8
1.2	What Are the Driving Forces?	9
1.3	Information Appliance Variety	10
1.4	What Are the Market Dynamics?	12
1.5	Information Appliance Technology Trends	13
1.6	Information Appliance Market Forecast	15
1.7	Information Appliance Market Impact	18
1.8	PCs and Information Appliances	19
1.9	Information Appliance Summary	20
2.0	Information Appliance Overview	21
2.1	Information Appliance Definition	21
2.2	Information Appliance Segments	22
2.3	New IA Devices vs. Add-on IA functions	25
2.4	Why Are Information Appliances Emerging?	27
2.5	Information Appliance Functions	28
2.6	Information Appliance Features	31
2.7	Information Appliance Services	33
2.8	Products Excluded	35
2.9	Future Information Appliances	35
3.0	Information Appliance Industry and Business Models	38
3.1	Information Appliance Industry Structure	38
3.1.1	Wireless Information Appliance Industry Structure	39
3.2	Information Appliance Business Models	41
3.2.1	Information Appliance Revenue Flow	43
3.3	Information Appliances as a Computing Platform	45
3.4	Information Appliance Overlap	46
3.5	Information Appliance Vendors	47
3.6	IA Geographical Differences	48
3.7	What Are the IA Killer Apps?	50
3.8	Emerging Internet Segments	51
4.0	Information Appliance Technology Trends	54
4.1	Semiconductor Trends	57
4.2	PC Technology Trends	59
4.3	Mass Storage Technology Trends	60
4.4	Printer Technology Trends	62
4.5	Display Technology Trends	63
4.6	Networking Technology Trends	64
4.7	Input/Output Technology Trends	66
4.8	Software Technology Trends	66
4.9	Information Appliance Capability Factors	67
4.10	Key Information Appliance Technologies	70
4.11	Year 2008 Information Appliance Features	74
5.0	Information Appliance Platform Trends	78
5.1	Computer Platform Overview	78
5.2	Information Appliance Standards Battles	79
5.3	Consortia/Organizations/Initiatives	82
5.4	IA Platform Candidates	83
5.5	Palm OS	85
5.6	Symbian	88
5.7	Microsoft IA Platforms	90
5.8	Sun Microsystems IA Platforms	96
5.9	Linux IA Platforms	99
5.10	IA Platform Summary	103
6.0	Internet Appliance Vendors	107
6.1	Information Appliance Hardware Vendors	107
6.2	Information Appliance Software Vendors	110
6.3	Information Appliance Service Vendors	112
6.4	Information Appliance Distribution Channels	114
6.5	Publicly Traded Information Appliance Companies	116
7.0	Internet Appliance Forecast Methodology	118
7.1	IA Market Estimate Fundamentals	119
7.2	Current Sales Trends and Potential	122
7.3	Information Appliance Scenario: 2015	124
7.4	Forecast Assumptions	128
7.5	Why Do Information Appliance Forecasts Differ?	129
8.0	Information Appliance Forecast Results	131
8.1	Summary of Spreadsheet Forecast Data	131
8.2	Information Appliance Spreadsheet Details	132
8.3	Web Information Appliance Forecast	133
8.3.1	Web IA: Home versus Office Sales	134
8.3.2	Web IA: Handheld/Pad versus Desktop Sales	135
8.4	Communications Information Appliance Forecast	136
8.4.1	Communications IA: Home versus Office Sales	137
8.4.2	Communications IA: Handheld/Pad versus Desktop Sales	138
8.5	Web Cell Phone Forecast	138
8.5.1	Web Cellular Phones: Home versus Office Sales	141
8.6	Entertainment Information Appliance Forecast	141
8.6.1	Entertainment IA: Home versus Office Sales	143
8.6.2	Entertainment IA: Handheld/Pad versus Desktop Sales	144
8.7	Computing Information Appliance Forecast	144
8.7.1	Computing IA: Home versus Office Sales	146
8.7.2	Computing IA: Handheld/Pad versus Desktop Sales	146
8.8	PDA & Handheld Computer Forecast	147
8.8.1	PDA & Handheld Computers: Home and Office Sales	148
8.9	Other Information Appliance Forecast	149
8.9.1	Other IA: Home versus Office Sales	150
8.9.2	Other IA: Handheld/Pad versus Desktop Sales	151
8.10	Total Information Appliance Forecast	151
8.10.1	Total IA: Home versus Office Sales	154
8.10.2	Total IA: Handheld/Pad versus Desktop Sales	154
8.11	Information Appliance Service Potential	155
9.0	Information Appliance Impact on Other Industries	157
9.1	Information Appliance Impact on PCs	157
9.2	PC Opportunities in the IA Market	158
9.3	Information Appliance Impact on Other Industries	160
10.0	Information Appliance Resources	164
10.1	IA-Related Newsletters	164
10.2	IA-Related Magazines and Books	164
10.3	IA-Related Websites	165
10.4	IA-Related Organizations	167
10.5	Information Appliance Hardware Companies	170
10.6	Information Appliance Software and Service Companies	172
10.7	Information Appliance Glossary	174
10.8	Author Bio	181
10.9	Other eTForecasts Research Reports	181
11.0	Information Appliance Forecast	182

List of Tables and Figures

Table 1.1	Information Appliance Industry	9
Table 1.2	Information Appliance Categories	10
Table 1.3	Information Appliance Segments	11
Table 1.4	PC and Information Appliance Market Dynamics	12
Table 1.5	Handheld Information Appliance Capabilities	13
Table 1.6	Information Appliance Platforms	14
Table 1.7	Information Appliance Market Forecast Elements	15
Figure 1.1	U.S. IA Sales	16
Figure 1.2	Worldwide IA Sales	16
Table 1.8	Information Appliance Installed Base	17
Table 1.9	Information Appliance versus PC Unit Sales	17
Table 1.10	Information Appliance Market Impact	18
Table 1.11	Information Appliance Summary	20
Table 2.1	Information Appliance Categories	22
Table 2.2	Information Appliance Segmentation	22
Table 2.3	Information Appliance Form Factors	23
Figure 2.1	IA Product Overlaps	24
Table 2.4	Add-On versus New Information Appliances	26
Table 2.5	Information Appliance Driving Forces	27
Table 2.6	Information Appliance Goals	28
Table 2.7	IA Home/Personal Activities	29
Table 2.8	IA Business/Enterprise Tasks	30
Table 2.9	Smart Phones and PDA-Phone Capabilities	31
Table 2.10	PDA Capabilities	32
Table 2.11	Web Set-Top Box Capabilities	32
Table 2.12	Information Appliance Services	33
Table 2.13	Information Appliance Service Categories	34
Table 2.14	Products Excluded	35
Table 2.15	Potential Future Information Appliances	36
Figure 3.1	Information Appliance Industry Structure	39
Figure 3.2	Wireless IA Industry Structure	40
Table 3.1	Basic IA Business Models	41
Table 3.2	Walled Garden Versus Open Access	42
Table 3.3	Recurring Revenue Categories	43
Figure 3.3	IA Revenue Flow	44
Table 3.4	IA Revenue Flow Estimate	44
Figure 3.5	IA Revenue Flow Shares	45
Table 3.5	Information Appliance Computing Platform Choices	46
Table 3.6	Information Appliance Overlap Products	47
Table 3.7	Information Appliance Vendors	47
Table 3.8	Products In-Use per Capita	48
Table 3.9	IA Potential by Region	49
Table 3.10	Potential IA Killer Apps	50
Table 3.11	The Many Different Internets	51
Figure 3.6	Internet Segment Content Growth	53
Figure 4.1	Technologies for IAs	54
Figure 4.2	Technology Price-Performance Wedge	54
Table 4.1	Technology Wedge Impact	55
Figure 4.3	Technology Wedge Families	56
Table 4.2	Moore's Law	57
Table 4.3	PC Technology Trends	59
Table 4.4	Storage Technology Trends	60
Table 4.5	Small Form Factor Memory Cards	61
Table 4.6	Network-Communications Technologies	64
Table 4.7	Information Appliance Capability Factors	68
Table 4.8	Technology Impact on PDAs & IAs	70
Table 4.9	Wireless Technologies	73
Table 4.10	Computing Platforms in 2008	75
Table 4.11	Handheld Information Appliances in 2008	76
Table 4.12	Consumer Information Appliances in 2008	77
Figure 5.1	Computer Platform Overview	78
Table 5.1	Current and Emerging Standards	80
Table 5.2	Consortia/Organizations/Initiatives	82
Table 5.3	Key IA Platform Candidates	83
Table 5.4	Palm OS Supporters	85
Table 5.5	Symbian OS Licensees	88
Table 5.6	Symbian OS Platforms	89
Table 5.7	Microsoft's IA Platforms	91
Table 5.8	Microsoft's Mobile Device Platforms	93
Table 5.9	Win CE & Pocket PC Mobile Products	95
Table 5.10	Java 2 Micro Edition Platform Elements	97
Table 5.11	Java IA Platforms	97
Table 5.12	Linux Software for Information Appliances	99
Table 5.13	Emerging Linux IA Platforms	100
Table 5.14	Linux-based Information Appliances	101
Table 5.15	Mobile Device Computer Platform Summary	103
Table 5.16	Digital and Web TV Platform Summary	105
Table 5.17	IA Platform Summary	106
Table 6.1	Information Appliance Start-up Hardware Companies	107
Table 6.2	Information Appliance/PC Hardware Companies	108
Table 6.3	Other Information Appliance Hardware Companies	109
Table 6.4	Information Appliance Start-up Software Companies	110
Table 6.5	Information Appliance Software Companies	111
Table 6.6	Information Appliance Service Companies	113
Table 6.7	Information Appliance Distribution Channels	114
Table 6.8	Key Information Appliance Resellers	115
Table 6.9	Revenues of Public IA Companies	116
Table 6.10	Estimated IA Shipments/Installed Base	117
Table 7.1	Information Appliance Forecast Segments	118
Table 7.2	Forecast Development Methodologies	119
Figure 7.1	Information Appliance Market Size Fundamentals	121
Table 7.3	Current Sales Rate and Installed Base Estimates	122
Table 7.4	Devices In-Use	123
Table 7.5	Devices In-Use per 1,000 People	123
Table 7.6	Web IA Market Scenario—2015	124
Table 7.7	Communications IA Market Scenario—2015	124
Table 7.8	Entertainment IA Market Scenario—2015	125
Table 7.9	Computing IA Market Scenario—2015	126
Table 7.10	Other IA Market Scenario—2015	126
Table 7.11	Total IA Market Scenario—2015	127
Table 7.12	Information Appliance Market Phases	128
Table 7.13	Information Appliance Forecast Segment Overlaps	130
Table 8.1	IA Forecast Information	131
Table 8.2	IA Forecast Details for Each Geographic Region	132
Table 8.3	Web Information Appliance Unit Sales	133
Table 8.4	Web Information Appliance Installed Base	134
Table 8.5	Web Information Appliance Revenues	134
Table 8.6	Web Information Appliance: Home & Office Sales	135
Table 8.7	Web Information Appliance: Handheld/Pad & Desktop Sales	135
Table 8.8	Communications Information Appliance Unit Sales	136
Table 8.9	Communications Information Appliance Installed Base	136
Table 8.10	Communications Information Appliance Revenues	137
Table 8.11	Communications IA: Home and Office Sales	137
Table 8.12	Communications IA: Handheld and Desktop Sales	138
Table 8.13	Web-Enabled Cell Phone Unit Sales	138
Table 8.14	Installed Base of Web-Enabled Cell Phones	139
Table 8.15	Web Cell Phone Subscribers	140
Table 8.16	Web-Enabled Cell Phone Revenue	140
Table 8.17	Web-Enabled Cell Phones: Home and Office Sales	141
Table 8.18	Entertainment Information Appliance Unit Sales	142
Table 8.19	Entertainment Information Appliance Installed Base	142
Table 8.20	Entertainment Information Appliance Revenue	143
Table 8.21	Entertainment Information Appliance: Home & Office Sales	143
Table 8.22	Entertainment IA: Handheld and Desktop/Pad Sales	144
Table 8.23	Computing Information Appliance Unit Sales	144
Table 8.24	Computing Information Appliance Installed Base	145
Table 8.25	Computing Information Appliance Revenues	145
Table 8.26	Computing Information Appliance: Home & Office Sales	146
Table 8.27	Computing IA: Handheld/Pad and Desktop Sales	147
Table 8.28	PDA & Handheld Computer Unit Sales	147
Table 8.29	PDA & Handheld Computer Installed Base	147
Table 8.30	PDA & Handheld Computer Revenues	148
Table 8.31	PDA & Handheld Computers: Home and Office Sales	148
Table 8.32	Other Information Appliance Unit Sales	149
Table 8.33	Other Information Appliance Installed Base	150
Table 8.34	Other Information Appliance Revenues	150
Table 8.35	Other Information Appliance: Home and Office Sales	150
Table 8.36	Other IA: Handheld/Pad and Desktop Sales	151
Table 8.37	Total Information Appliance Unit Sales	152
Table 8.38	Information Appliances In Use By Regions	152
Table 8.39	Information Appliances In Use By Type	153
Table 8.40	Total Information Appliance Revenues	153
Table 8.41	Web Information Appliance: Home and Office Sales	154
Table 8.42	Total IA: Handheld/Pad and Desktop Sales	155
Table 8.43	Information Appliance Service Potential: $5/Month/User	155
Table 8.44	Information Appliance Service Potential: $8/Month/User	156
Table 8.45	Information Appliance Service Potential: $12/Month/User	156
Table 9.1	PC Opportunities in the IA Market	158
Table 9.2	PC Opportunities by Segment	159
Table 9.3	IAs: PC Replacements or Supplemental Products	160
Figure 9.1	Evolution to Information Appliances	161
Table 9.4	Information Appliance Impact	162
Table 10.1	IA-Related Newsletters	164
Table 10.2	IA-Related Magazines & Books	165
Table 10.3	IA-Related Websites	165
Table 10.4	IA-Related Organizations	167
Table 10.5	Information Appliance Hardware Companies	170
Table 10.6	Information Appliance Software and Service Companies	172
Table 11.1	Information Appliance Forecast Table of Content	182

1.0 Information Appliance Executive Summary

Why are computer platforms being used in electronic devices? Because the cost decline, capability growth and flexibility of computer platform-based designs eventually becomes the best solution. The key question is not if this will happen, but when will it happen in the various product segments. The most crucial question is who will control the leading computer platforms that will become entrenched in each electronic device segment?

Microsoft certainly understands this trend and is busy expanding its Windows-based platforms to nearly every products segment. The cell phone manufacturers also understand, because they are busy developing their own platforms to counteract Microsoft. The TV and video industry also understand and are defining platforms and standards that are operating system agnostics. Many are using Linux and middleware standards to level the competitive playing field.

The information appliance (IA) is an emerging market that has tremendous potential. The information appliance industry is an exciting and complicated marketplace that straddles numerous industries. As is common in many new industries there has been an abundance of marketing hype that could not be met-especially since many of the start-up companies were funded during the Internet bubble time period and were not able to deliver when the B2R (back-to-reality) business model became prevalent. The long-term prospects for information appliances remain healthy, but will not happen as rapidly as the view from the 2000 rose-colored glasses showed. The economic slowdown in 2001 and 2002 has further delayed the development of the information appliance industry. The IA industry remains immature and it will remain unsettled for many years.

This market research report provides a top down view and explains most aspects of the information appliance industry. The report covers product and technology trends, market size and evolution, business models and competing hardware/software platform and standards. The goal of the report is to give the reader a strategic understanding of the many different information appliance segments and how they are likely to evolve and how they will affect existing markets and industries. Throughout this report, the information appliance industry is compared to the PC industry.

1.1 What are Information Appliances?

An information appliance is an inexpensive, easy-to-use device based on computer technology that is dedicated to do one or a few similar functions. Many information appliances will be connected to service providers that provide various services for a monthly subscriber fee. Most information appliances will be connected to the Internet either continuously or occasionally. The various pieces of the information appliance industry are shown in the next table.

Table 1.1 Information Appliance Industry
Segments	Categories	Examples
Hardware	• Web appliances • Computing appliances • Communication appliances • Entertainment appliances • Other IAs	• Web terminal, Web pad • PDA, handheld computer • Web cell phone, Web screen phone • WebTV, web set-top, personal DVR • Car IA, medical IA, learning IA
Software	• Client system software • Client application software • Server application software	• Operating system, browser, middleware • Specific to usage • To deliver services/content to IA clients
Infrastructure	• Data communications • Broadcast • Internet	• Phone, cellular, broadband • TV, cable TV, satellite TV, radio • IP network, caching network
Services	• Communications • Information subscriptions • Entertainment • Transactions	• Email, paging, web, voice, data • News, databases, location-specific • Downloads, music, games • Financial, tickets, shopping

Information appliance functions involve collecting, analyzing, storing, communicating and managing "content" to help simplify and improve what an individual does in his personal or work life. Content includes but is not limited to email, data, text, documents, books, news, location-based information, music, pictures, games, video and transactions. Devices with web access used for control and management functions are not IAs, but are IP-connected or web-enabled devices. These IP-connected devices will proliferate, but are outside the scope of this report.

Information appliances have several form factors. Battery-operated handheld units that can be used anywhere and they will be the most popular form factor. Stationary desktop units, which are tethered to power and communication sources will also be prevalent. A third common form factor is the pad or tablet with short-range wireless capability for use within a home or an office building and via nearby access points in public places.

1.2 What are the Driving Forces

There are five important driving forces for the information appliance industry.

1. PC functionality is needed at lower prices, with easier user interface or in smaller form factors. Better PC functionality has been with us from the beginning of the PC industry, and it has improved PCs dramatically in the last 25 years. However, current PCs are still not meeting the needs of many potential customers. The information appliance approach is emerging to meet these requirements.

2. Internet access is rapidly becoming a necessity for many people-not just in the office and at home but anywhere and anytime. The result is another pull for lower cost; easier user interfaces and smaller form factors-for Internet access devices.

3. The transition from analog to digital technology for all consumer electronics products and communications products provides an opportunity to make these devices smarter by adding extra functionality. The extra functionality is primarily Internet access, wireless communications and PC functionality.

4. Most developing countries lack communications infrastructure to make Internet access available to a large portion of the population. This creates a demand for Internet access via alternate networks such as cellular phone, cable TV and satellite TV.

5. Computer and communications technology advances are making it all possible: Shrink the size of the devices, add useful services via communications links and offer the products at prices and ease of use that are acceptable to millions of customers. Information appliances will be based on advancing PC, Internet and communications technologies.

These driving forces are often called convergence-convergence of the entertainment and media industries with Internet/PC industries, convergence of telecommunications and Internet/PC industries, convergence of consumer electronics products with Internet/PC industries. There will also be convergence with other industries as Internet and PC functionality will generate new products or will be built into cars, kitchen appliances, medical devices and many other products.

1.3 Information Appliance Variety

There are already a large variety of information appliances and more will follow. Many information appliances can be put in multiple product segments because they do several functions. A cellular phone with Internet access and PDA functions is a good example-especially since it can also be a music player that can download digital music files. This report will use a product segmentation based on the main or original function of the information appliances. This has the advantage of keeping the product segments mostly in the existing industries. The next table shows the product segmentation used for the market forecast in this report.

Table 1.2 Information Appliance Categories
Segments	Products	Comments
Web Devices	• Web Pad • Web Terminal	Products designed for Internet access. Many devices will also do other tasks.
Communication Devices	• Email Station • Web Cell Phone • Web Screen Phone	Products designed for communications. Nearly all devices will access the Internet and may do entertainment and computing tasks.
Entertainment Devices	•Web Set-top Box • Web Digital TV • Web Game Console • Web/Personal DVR • Web Music Player • Home Media Server	Products designed to deliver, store and manage entertainment: TV, video, music and games. Nearly all devices will access the Internet and will make the products interactive.
Computing Devices	• PDA & Web PDA • Thin Client • Storage/Data Collection IA • Vertical Market IA	Products designed to provide PC functionality for mobile, low-cost and simplified applications. Most devices will also access the Internet and may do entertainment and other tasks.
Other Devices	• Electronic Book • Learning IA • Kitchen IA • Medical IA • Other IAs	Products designed for new functions as stand-alone products or as built-in functions in existing products.

It is likely that some single function products will have short lives and will be absorbed by multifunction products due to technology advances. There will undoubtedly be future information appliances added to the list in this table.

Some information appliances will be current products with add-on IA functionality that will replace existing products with enhanced or revolutionary functionality. The add-on IA products will have the vast majority of IA shipment volume. Other information appliances will provide existing functionality at new price points or smaller form factors. Many IAs will have new functionality and there were no equivalent products. New functionality can be an add-on product to an existing device or self-contained units. The last category is products where information appliance functionality is a small part of the product and is a built-in element of the product.

Table 1.3 Information Appliance Segments
	Products	Comments
New Price or Form Factor	• Palm Computer • Web Companion • Web Pad	Mobility, pricing and ease-of-use are driving this category
Add-on or Enhanced Replacement	• Web Set-top Box • Web Digital TV • Web/Screen Phone • Web Cellular Phone • Web Game Console • Personal DVR	Most consumer electronics and communications products are in this category. Shipment volumes will build rapidly as an increasing portion of these products add IA functions
New Add-on Functionality	• TV and Web Access • Cell Phone with PDA • PDA with Cell Phone	New functions added to an existing product
New Self-contained Functionality	• Web Appliances • Electronic Book • Medical IA • Kitchen IA	Only a few products have emerged yet. Many more will follow in the next 10 years.
Built-in	• Car IA (telematics) • Appliances with web access • Systems with web access	IA functionality is a small part of the product. This will happen to many existing products.

Since the IA market has so many replacement products that already have a proven demand, the IA market have the potential to grow rapidly. Information appliances that provide new functionality will take off at a slower rate. Many new information appliances are difficult to predict and there will be many surprises in the next decade. Internet access will become very useful for all types of products.

Adding web access to a product is now inexpensive-less than $20 for minimal hardware functionality and this cost will continue to decline. Hence it will be economically viable to add web access to a wide range of products. Some products will only have web access for management functions. An example is a vending machine that can use the web as a communication network for sending inventory and pricing data. Other products will have information appliance functions built-in.

1.4 What are the Market Dynamics

The market dynamics in the information appliance industry is similar to the PC industry, but there are also important differences. The PC and IA industries are both driven by computer and Internet technologies. By definition information appliances are positioned at lower price points, lower functionality and simpler to use than PCs. Key characteristics of the PC and information appliance industries are summarized in the next table.

A big difference between the PC and IA industries is that information appliances have many of the characteristics of embedded computers instead of general-purpose computer characteristics. Embedded computers have limited hardware resources and expansion. This makes current PC standards too resource hungry for information appliances and limits the power that Intel and Microsoft can gain. Both Intel and Microsoft will become major players in the IA market, but they will not get the dominant shares they have in the PC industry. The PC industry will simplify current PC standards to make them more acceptable for use in information appliances.

The information appliances straddle several industries. This has numerous implications and adds variety to every aspect of the information appliance industry.

Information appliances will need standards and since the PCs standards will not dominate, the battle to set additional standards is in full swing. The Palm OS handheld computer is a new standard, but will get stronger competition from Microsoft's Pocket PC in the next five years. Windows CE and its derivatives are likely to have success in desktop-size devices and will be contending in handheld devices. Linux may also make inroads in the desktop and handheld information appliance market.

Table 1.4 PC and Information Appliance Market Dynamics
	Key Characteristics	Implications
PC	General purpose computers	• Software base drives industry • Dominant HW/SW standards emerge
	De facto standards	• Companies that control the standards dominate the PC industry
	Compatibility with previous hardware and software systems	• Adds HW and SW complexity • Decreases system reliability • Adds cost
	Internet is major driving force	• Weakens traditional PC standards
IA	Embedded computers and application-specific computers	• Low-level HW standards less important • Most PC standards are too complex • Larger microprocessor variety
	Content and services will drive the IA industry	• High-level SW and content standards • HW price may be included in service fees
	Wide spectrum of functionality	• Large variety of form factors • Large variety of devices • Large variety of content and services
	IAs from multiple industries	• Likely to be multiple standards • Large number of vendors • Large variety of distribution channels

The most lucrative segment is the web cell phone, which has three software platform contenders: Symbian, Palm OS and Microsoft Windows CE. Another question is whether future generations of IAs will add so much hardware and software capabilities that they follow PC market dynamics. If this happens, Microsoft and Intel could gain more influence in the IA market.

1.5 Information Appliance Technology Trends

Information appliances will follow the same technology advances that are driving the personal computer and communications industries. This means that all information appliances will have tremendous capabilities in five years whether they are handheld mobile devices or tethered desktop devices. The next table shows the projected high-end capabilities for handheld devices for 2003 and 2008. The price point of this capability will remain in the $400-$500 range. The 2003 capability shown in the next table will drop below $200 by 2008.

Table 1.5 Handheld Information Appliance Capabilities
	2003	2008
Functions	PDA, email, camera, MP3, 2.5G cellular	Multi-function: PDA, email, camera, cellular, web, music, scanner
Microprocessor	X86 or RISC, 400 MHz	X86 or RISC, 3-4 GHz
Cellular Communication	70-144 Kbps	150-384 Kbps
Short-range Wireless	Bluetooth and/or IEEE 802.11b	IEEE 802.11g, Bluetooth
Display Size	Color, 320x240	Color, 640x400
Program Memory	16-64 Mbytes	512-1024 Mbytes
Memory Card	64-256 Mbytes	1-4 Gbytes
Mass Storage	Memory card	10 GB hard disk
I/O	IrDA, Bluetooth, USB	IrDA, Bluetooth, USB
User Interface	Pen, small keyboard	Speech, pen, small keyboard
Content Interface	Browser, web access	Browser, speech

The capabilities of handheld IAs have increased substantially in the last three years and have become multi-function devices. High-end products may have PDA functions with 2.5G cell phone communications capabilities and may have short-range wireless communications such as Wi-Fi and Bluetooth. Some devices may also have a camera and MP3 music functions. These capabilities are rapidly advancing and by 2008, most handheld IAs will be multifunction devices with computing, communications, entertainment and web capabilities.

There are numerous hardware and software platforms that are competing to become the leaders in every information appliance segment. The next table is an overview of many of the computer platforms and where they are competing.

Table 1.6 Information Appliance Platforms
Segment	Key Platforms
PDAs	* Palm OS 4 & OS 5 * Microsoft Pocket PC * Linux & Qtopia
PDA-Phones (Data-Centric)	* Microsoft Pocket PC Phone Edition * Palm OS 4 & OS 5 * Symbian & Nokia Series 60 * Symbian & other middleware *Linux & Qtopia
Smart Phones (Voice-Centric)	* Symbian & Nokia Series 60 * Symbian & other middleware * Windows Powered Smartphone * Palm OS 5 * Linux & Qtopia, Java or BREW
Feature Phones	* Embedded OS & middleware * Java virtual machine: J2ME * Microsoft Pocket IE & Outlook * Qualcomm BREW
Set-Top Boxes	* Microsoft TV * TV Linux Alliance * ELC Platform Specifications * CableLabs middleware * DVB/MHP middleware
Entertainment Media Servers	* Windows XP Media Center * Sony Cocoon * Linux & middleware * CableLabs middleware * DVB/MHP middleware

From this table it is clear that each product segment have different leading candidates and the long term winners will also be different. It is also clear that Microsoft has the widest product spectrum and is competing in nearly every segment. Linux based platforms and industry specific middleware platforms are the main competitors to Microsoft. However, Microsoft's platforms work with the middleware platforms and Linux is the most important competitor for Microsoft. Chapter 5 has much more details and assessment of how well these computer platforms are likely to do.

1.6 Information Appliance Market Forecast

The IA market is already large due to the success of the PDA and web cellular phones. The IA market will grow very fast, because IAs are upgrading or replacing devices that already have shipments rates in the 10s of millions of units.

The information appliance market forecast in this report is comprehensive. The forecast includes five different IA categories, two form factors, two customer segments and seven geographic regions as summarized in the next table. The forecast spreadsheet is over 6,000 lines long and has estimates for the years 1999-2008.

Table 1.7 Information Appliance Market Forecast Elements
Product Segments	Form Factors	Customer Segments	Regions
• Web IA • Communications IA • Web Cell Phone • Computing IA • PDA/Handheld • Entertainment IA • Other IA • Total IA	• Handheld, Pad & Tablets • Desktop	• Home • Office	• USA • North America • W. Europe • E. Europe • S/C America • Asia Pacific • M. East/Africa • Worldwide

The forecast for the information appliance market is based on three methodologies.

1. Past history is based on sales estimates of the information appliances that have been available since 1996. Web-enabled cell phone sales have passed 100M units. PDA and handheld computer sales have surpassed 35M units.

2. The forecasts for information appliances that will replace existing devices are based on current sales and future projections for these devices. The key is making a realistic penetration of IA functions for these products. The devices with large volume shipments are TVs, set-top boxes, VCRs, video game consoles and cellular phones.

3. The forecast is based on making a long-term scenario for 2015. By looking 10+ years into the future, current limited functionality and market immaturity can be minimized and a realistic assessment of future potential is developed. The 2015 scenario includes the penetration rate for each product segment by households and by office workers for all geographic regions.

The installed base is also compared to the number of people, the number of households and the number of workers for each geographic region.

A summary of the U.S. information appliance market is shown in the next figure for the five information appliance categories. The scale is in millions of units. The communications IAs will dominate due to the high sales rate of web-enabled cell phones. The total U.S. information appliance sales will grow from 12.1M units in 2000, 22M in 2002 and to 115M units in 2008-a compound annual growth rate (CAGR) of 32.5%. If web-enabled cell phones are excluded, U.S. IA sales will increase from 8.3M units in 2000 to 50M+ in 2008.

Web IAs will grow from less than 0.14M units in 2002 to 1.9M in 2008. The web IA category has been a disappointment in the last four years and is expected to continue to grow slowly. The Smart Display product, which is a web pad and based on Windows CE, is the most promising new product in this category. Smart Display proliferation will require a price point in $500 range, which is not expected until 2005. U.S. computing IA sales, which are mostly PDA devices, will go from 8M in 2002 to over 23M units in 2008. The PDA will see increasing overlap with multi-function cell phones.

Figure 1.1 U.S. IA Sales

Communications IA unit sales, which is dominated by web-enabled cell phones, is projected to grow from 10.3M in 2002 to over 65M in 2008. Entertainment IA sales will grow from 3.4M devices in 2002 to nearly 21M in 2008. The entertainment IA category has substantial upside due to the emergence of a media center control device that is becoming a major battleground between the PC and consumer electronics industries. This battle will have a significant impact on the CE industry. The PC industry is viewing the media center PC as a major new segment and growth opportunity for the next decade.

The next figure is a worldwide summary of IA sales by segments. The scale is in millions of units.

Figure 1.2 Worldwide IA Sales

Communications IAs will dominate due to the high sales rate of web-enabled cell phones. The total worldwide IA sales will grow from 61M units in 2000, 130M in 2002 and to 771M units in 2008-a compound annual growth rate of 37.2%. If web-enabled cell phones are excluded, worldwide IA sales will increase from 17M units in 2000 to 36.5M in 2002 and to 232M in 2008.

Worldwide communications IA sales will zoom from 94M units in 2002 to 546M+ devices in 2008-including 93M web-enabled cell phones in 2002 and 533M web-enabled cell phones in 2008. Web IA sales will grow from less than 0.5M units 2002 to over 10M devices in 2008. Entertainment IA sales will increase from 8M in 2001 to 120M units in 2008. Computing IA sales will jump from 17M units in 2001 to over 76M devices in 2008.

1.7 Information Appliance Market Impact

The information appliances will have a big impact on many different industries. In the next five years, the worldwide number of information appliances in use will reach several hundred million units. The information appliances will provide a target of opportunities for hardware, software, service and content companies. The next table summarizes the likely IA impact.

Table 1.8 Information Appliance Market Impact
Industry	Key Impact
PC Industry	* PC industry will embrace information appliances * PCs will improve faster due to IA competition * PC companies gets new opportunities in the CE industry * IAs will expand the market for PC servers * IAs will expand the market for PC printers * IAs will expand the market for PC peripherals * IAs will expand the market for PC software
Internet Industry	* IAs will expand the reach of the Internet * IAs will more than double the number of Internet users * ISPs will gain new customer and multi-account customers
Consumer Electronics Industry	* IA technology will expand the functionality of most CE products * IAs will expand the market for CE products * CE hardware companies will see service revenue potential * CE companies gets new opportunities in the PC industry
Communications Industry	* IA technology will expand the functionality of cell phones * IA functions will expand the market for cell phones * IAs will increase the need for broadband services
Media and Content Industry	* IAs will expand the market for many types of content * IAs will especially expand the market for web content * IAs will expand location-based information content
Automobile Industry	* IA functionality or telematics will be built-into most cars by 2015 * IA services will be a new revenue opportunity
Appliance Industry	* IA functionality will slowly appear in high-end products * Most appliances will be IP-connected, not IA functions
Other Industries	* IA products will impact the medical industry * IA products willimpact the learning industry * IA products will impact many other industries

It is clear that information appliances will have major impact on the computer, Internet, communications, consumer electronics, automobile and all media industries. Information appliances will also have significant impact on other industries. However, this impact is less clear and varies by industry.

1.8 Information Appliance Summary

The information appliance industry is in its infancy, but is destined to have significant impact on our lives in the next decade-despite a slower start than projected a few years ago. By 2015 the number of information appliances will rival and may surpass the number of PCs in use. The information appliance industry will be a tremendous battleground between multiple industries as summarized in the next table.

Table 1.9 Information Appliance Summary
Information Appliance Hardware	• A collision of the PC, telecommunications and consumer electronics industries
Information Appliance Software	• A collision of PC, Palm, Symbian, Linux & other software platforms • A new application software opportunity for current and start-up software companies
Information Appliance Content	• A collision of the walled-garden and open access business models • New Internet content segment opportunities: wireless Internet, entertainment Internet and possibly others

The segments of the IA industry will evolve rapidly and it is impossible to predict its long-term evolution. But here are a few common sense rules and projections that will guide the IA industry.

An overwhelming portion of information appliances will have Internet access
No company will dominate and control standards in the IA industry
There will be several de facto computing platform standards. Most will be set by consortiums
The IA market will grow fast because most IAs will be enhanced replacement or add-on functionality for existing product categories which have high current sales rates
The web-enabled cell phone will be the largest information appliance segment
Long term, the information appliance service will become the most important and largest revenue segment, but this will take another decade to play out.
Information appliances will have large sales to home and office market segments
Information appliances will have the most impact on countries with low PC usage
U.S. companies get a new opportunity to enter the consumer electronics hardware market
Asian and European consumer electronics companies get new opportunity to enter the computer business
The first IA era will have products that are variations and improvements of existing products
The second IA era will have products with new functions and multiple functions
The third information appliance era will connect most of the IA products into systems that gain tremendous additional functions due to the power of connectivity

In summary, information appliances will bring the Internet and computer technology to the next level of user penetration.

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eTForecasts ej@etforecasts.com		Updated December 22, 2004