CES 2015 Observations

International CES – the annual gadget fest is a cauldron of hopes and aspirations of big and small entrepreneurs, crazy and whacky ideas, the place where roadmaps are laid bare – some obliterated by the time the show is over while others benefit from the infusion of interest and inspiration. The promise of the Connected Intelligence Era was in full display last week in Vegas where the faithful converge to get a glimpse of what’s to come. More than anything else it is the time to meet friends and colleagues that provide much more insights than any of the booths, launches, and press conferences could disseminate.

Here is the summary of our observations from 2015 CES.

Transcendence – Coincidentally my trip started by watching Transcendence – a story about the metamorphosis of man and machine. It was interesting to view the show from this angle and try to connect the dots of the future.

First, let’s do the numbers – CEA expects the overall electronics market to grow by 3% primarily because of growth in the new category of connected and emerging devices (also includes 4K Ultra HDTV) which are likely to reach $11 billion in revenue in the US market.

Connected Intelligence Landscape – CES lay bare the evolution of the connected intelligence landscape. Millions of end-points are propping up that communicate and interact in ways unexpected. We are all grapple with what it means to progress of technology and humanity and how can we harness the power of “connectivity” and “intelligence.” Some things are moving forward at a much faster pace for e.g. autonomous vehicles, self-watering plants, cancer detecting pills are all examples of connected computing and actionable intelligence. Selfie sticks – not so much.

The IoT Show – If CEA had switched its name to the “The IoT Show,” it won’t be too far off for all the major discussions at the show were around the promise of IoT. The number of companies having something to do with IoT grew manifold this year. Though nothing significant has emerged from the level tricks and trinkets, the overarching theme is that one will see hundreds of these floating around each consumer to prepare an aura of information and intelligence around them that anticipates problems, provides guidance, and keeps them from getting into trouble. But where is the money? As usual, it seems pretty clear that the money will be in the tools and components and not the actual end points. Big winners will be the component suppliers and software players who can tie all of the complexity together in an easy to use human language and interface. There is probably more money in battery packs right now than IoT sensors.

Wearables – Humankind’s first rendezvous with a wearable was back in 1286 in Italy when the Dominican friar figured out the art of making glasses. More progress has been made in this segment in the last 12 months than all the centuries’ prior. In my last year’s CES note, I surmised that the market will segment into high-end luxury (Apple, etc.) and low-end commodity (Chinese OEMs). This theory is unraveling in front of our eyes. Apple is due for its Apple watch splash this quarter and the Chinese are flooding the market. For every $150 fitbit, there was a $20 identical unit from a Shenzhen vendor. For every $200 basis watch, there was an identical watch for a fraction of the cost. Obviously, the Chinese firms need distribution to the western markets and it is not an easy problem to solve. On top of that zero marketing and brand loyalty means there is an opportunity for someone to step in a distribution platform and make a killing.

The value is in the intelligence – As I outlined in my Connected Intelligence paper, the “sensing” part of the ecosystem is going to be commodity. Any new performance enhancements will last only a few months if not days so the value has to be built beyond “sensing” and in “making sense of the data” part. The two big aggregation islands at the OS layers are obviously Android and iOS but there is room for someone to congregate these data points in hubs that control a home or an office, an airport or the mall. Historically, each new wave brings in its own set of aggregation pods – windows for PCs and Android/iOS for smartphones. So, it is likely we will see new plays in the IoT space.

Ma, the Robot is home now – the Robots are getting real in how they interact with humans that some of the science fiction movies look very real today. The Japanese are leading the way with robots and what can be done with them especially in the consumer environment.

Handsets – Just when we thought the market for > $5K mobile handsets was over, Lamborghini launches a $6.5K handset. One sale to an unsuspecting Saudi sheikh has been confirmed. For the rest of us, the market stays flooded with innumerable choices. As I mentioned in my year-end update, the Chinese OEMs control over 40% of the smartphone market now. It is going to be over 50% this year and strolling the show floor you can see why. The market is getting flooded with cheap Android devices. With some really good-looking Android smartphones at $25, the ability to charge more uniformly around the world is virtually gone. I even saw some Samsung look-alikes with 14K gold for only $120. You can’t tell the difference between the brands.

Autonomous Cars – Last year’s show was about connected cars. This year we moved to very possibility of autonomous cars. It is quite likely that a kid born this decade might never need a driver’s license. Thanks to the market push by Google and Tesla, this segment is moving incredibly and excitingly fast and we are going to see some fascinating science fiction concepts come to life over the course of the next 5 years. Regulations obviously need to be figured out but this train is moving so fast that we better get on board. On the operator front, AT&T continues to corner the US market with OEM deals.

3D printing – Is there anything you can’t print with 3D printers – organs, food, rockets, fuel – you name it, you got it. But will you?

Connected Home – Continuing the theme of IoT, connected home innovators were in full display mode. Solutions are starting to come together though they are still cumbersome, work only in silos, battery life is a problem, security is iffy, and the pricing is not attractive just yet for it to be a mass market but slowly and steadily we are cracking the code.

Healthcare – The CES highlight for me was to attend the talk by Dr. Eric Topol (if you haven’t read his new book, do so now). He is a great champion of technology transforming the health care system and as a result changing the doctor-patient relationship forever and for good. As he mentioned in his address, the healthcare profession hasn’t been challenged since the 200 BC. He listed an endless stream of companies who are changing how various aspects of health and wellness gets measured and analyzed that lays bare the futility of today’s healthcare system.

Security and privacy – Last year, we released paper on “IoT Data Privacy Framework.” FTC seems to agree with many of the arguments and concepts laid out in the paper for connected device privacy and security. The agency is expected to release its recommendations in a paper later this year. In general, security continues to be a hot topic with every keynote addressing it. Even President Obama is expected to make cyber security as one of the key themes of this year’s state of the union address.

Dish $20 – Probably the biggest surprise of the show came from the most unlikeliest quarters of the industry. Dish announced a $20 service that provides basic set of channels + the prized ESPN channel. Consumers are likely to switch in droves to accelerate the cord-cutting trend.

TV – What will be a CES show without some TV splash? 3D TVs have been a flop but consumers still crave for high-res and slim designs. Samsung, LG, Sony, and others continue to impress with new designs however pixel based strategy is getting old.

Samsung’s strategy – Samsung has taken the expected hit in the second half of 2014. At CES, some of the early elements of a strategy could be sensed out from the tea leaves – Tizen led IoT strategy, convergence of Samsung products glued by common interfaces, and rethink of the smartphone product lines around the globe. The company still needs to do a better job of telling its story.

Virtual Reality – There are many more players jumping into the VR space after the spectacular rise of Occulus last year.

Enterprise – A well-organized AT&T developer summit kicks off CES every year. As you might have gathered from my past writings, the new mobile money is flowing into the enterprises. Vertical industries and players who serve them are utilizing mobility, IoT, and cloud to change how they design their own business processes and instruments, manage their employees and engage with the customers. I am always impressed with what developers are able to come up with during Hackathons. It is surprising that the governments and corporations around the world don’t invest more in bringing entrepreneurs under a common umbrella to see the possibilities. AT&T also opened up its digital life platform for partners in the ecosystem.

Coolest keynote – Intel – Brian Krzanich excelled in driving home his three points around computing unleashed, intelligence, and wearable revolution. The new Realsense technology can expand the use cases from desktops to drones. Diamler’s Zetsche also scored points for bringing a cool looking autonomous concept car on the stage.

Overall, CES is a good show to sense the pulse of the industry at the start of the year and catch-up with colleagues who provide real insights into what’s going to be important.

Have a fabulous 2015

Chetan Sharma