Web Pads May Lead Internet Appliance Market Out of Spin

Product withdrawals, changing business models and company closures have marked the past year in the Internet appliance market, but the long-term opportunity remains in good shape, according to a report by eTForecasts.

Going forward, Internet-only or Web terminals will remain a small part of the market because they are not cost competitive with low-end PCs unless they are subsidized by service contracts. Subsidized service contracts have limited potential in the United States and are more viable in countries where Internet access costs have per minute phone charges. The best opportunity for Internet-only device growth, according to eTForecasts is the emerging Web pad, which offers easier portability than PCs because Web pads offer wireless connectivity within homes and buildings. Strong Web pad growth is expected in a few years when the deives become affordable.

The vast majority of Web appliances will be part of existing or new devices that provide Internet access as one of several functions. Examples include PDAs, cellular phones, set-top boxes, TVs, satellite receivers, DVDs and many other products. Cellular phones with Web access, PDAs and TV/video-based products are expected to have the largest volume sales, according to eTForecasts’ report “Information Appliances: Technology, Trends & Markets.”

“Internet-only devices will have some success in the USA, but low-cost PCs will limit Web terminal growth in the next five years,” said Dr. Egil Juliussen, author of the reports for eTForecasts. “Internet-only devices will do much better in countries with low PC penetration.”

Research by Allied Business Intelligence (ABI) also found that mobile Web pads and digital audio receivers will help validate the Internet appliance space. Mobile Web pad worldwide shipments are forecast to grow to 23.1 million units by 2006, a market worth $7.8 billion. Digital audio receivers shipments will reach 23.2 million units by 2006, a market worth $3.4 billion.

“There are over two dozen companies actively developing mobile Web pads, and a number of major companies are banking on this representing a legitimate market segment,” said Navin Sabharwal, vice president of residential and networking technologies for ABI. “Digital audio receivers also have excellent growth prospects with the rise of online digital music.”

Mobile Web pads will begin intermediate volume shipments this year, according to ABI, with many units being targeted at vertical markets such as healthcare and enterprises where cost is not a primary issue. In 2002 there should be significant volume targeted to consumer markets, particularly as large companies such as Microsoft and Intel make good on their product plans.

Both mobile Web pads and digital audio receivers are beginning to benefit from home networking technologies that allow these devices to be used virtually anywhere in the home. With cost reduction in wireless networking technologies such as 802.11b and HomeRF, it is becoming possible to market mobile Web pads including the access point for less than $700, and eventually for less than $500.

Annual Sales of Internet Appliances
Web Terminals
(Internet-only devices)
2000 2002 2005
US 0.2 1.9 8.2
W. Europe 0.06 1.2 7.6
Asia-Pacific 0.1 1.9 13.4
Worldwide 0.4 6.5 42.0
Web Appliances
(Internet & other functions)
US 1.4 9.0 54.2
W. Europe 1.5 13.2 78.4
Asia-Pacific 19.9 69.9 153.8
Worldwide 24.6 101.4 322.5
Source: eTForecasts

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