Net Appliances Booming, PCs Still Going Strong

Internet appliances, defined in the report “Internet Appliances and Universal Access” by Hambrecht & Quist as non-PC devices that leverage the capabilities of the Internet to extend content, services, and applications to their users, are a booming market according to several industry reports. But don’t bury the PC just yet.

By 2005, 91 percent of US homes will be online, according to the report “The Online Home — The Market for Internet and Online Appliances” by Strategy Analytics. Ninety percent of these homes will be using an Internet PC, but 73 percent will also have interactive TV or other Internet appliances. The report also found that online TV-based set-top boxes will become commonplace in the home, and that limited demand exists for a range of Internet terminals independent of the PC or TV, such as screenphones and Web terminals. Sales of such devices will reach $600 million in 2005, according to Strategy Analytics.

Sales of interactive TV appliances, such as online digital TV set-top boxes and advanced games consoles, will reach $2.4 billion in 2000, an increase of 107 percent. Sales will peak at $4.8 billion in 2003, before declining to $4.2 billion in 2005 under the impact of falling prices. Shipments, however, will reach 7.4 million units in 2000, and rise at an average growth rate of 44 percent a year, reaching 26.4 million units a year by 2005. In fact, the Strategy Analytics report found the average online home will have 2.7 online devices by 2005.

“The online home is about multiple devices for multiple applications,” said David Mercer, Senior Analyst with Strategy Analytics. “Consumers will be online all the time, and from many rooms in the home, although they may not even be aware of it.”

Wireless access devices will also be part of this trend. According to International Data Corp (IDC), the number of people using wireless devices to connect to the Internet will increase by 728 percent by 2003. That’s an increase from 7.4 million US users in 1999, to 61.5 million users.

Unit sales of Net devices will increase by more than eight times between now and 2004, according to research conducted by IDC. By 2002, IDC predicts device sales to surpass PC sales.

Research by eTForecasts found that sales of information appliances will grow from 12 million units in 1999 to more than 300 million units in 2005, for a compound annual growth rate of 71.8 percent. Helping this growth will be the addition of Web-access capabilities to many existing products in volume production such as set-top boxes, cellular phones, handheld computers, and others, according to the research.

The reports by both eTForecasts and Hambrecht & Quist say the Internet appliance industry will have little impact on PC sales. According to eTForecasts, worldwide PC sales will grow from 124 million units in 2000 to more than 217 million in 2005. The North American region, and its US subset, will remain the leading regions for PC sales for at least five more years. Mobile PCs, including notebook and handheld models, will grow from 26.5 million units in 1999 to nearly 59 million in 2005.

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