The Consumer Technology Association (CTA) projects that despite a third straight year of declines in U.S.
hardware revenues, overall retail revenues for the U.S. consumer technology industry will finally grow 1% in 2024 to $505 billion, followed by 4.4% growth in 2025 to $527 billion.
That growth follows the shrinking of the U.S. consumer tech market in 2023 and 2022 as a result of high inflation, slow economic growth and supply chain effects due to the pandemic, according to the CTA, which stages the CES tech trade show every year in Las Vegas.
The new prediction is a downward revision from 2.8% predicted back in January, in terms of percentage growth.
Rick Kowalski, senior director of business intelligence at the CTA, said in an interview with GamesBeat that the group updates the forecast twice a year. He said services will help prop industry sales in 2024, before a potential bounce back year for hardware in 2025.
Lil Snack & GamesBeat
GamesBeat is excited to partner with Lil Snack to have customized games just for our audience! We know as gamers ourselves, this is an exciting way to engage through play with the GamesBeat content you have already come to love. Start playing games now!
“The industry’s seen some growth again, after two consecutive new declines,” Kowalski said. “A lot of those declines [happened in years of hardware sales declines], but now we’re seeing growth, looking at pretty good 4.4% growth in 2025.”
The growth is possible in part because inflation has fallen, giving consumers a breather and the ability to spend a bit more on products. In 2024, inflation is expected to be 3%, compared to 3.4% in 2023. In 2022, inflation was 6.5% and it was 7% in 2021, compared to 1.4% in 2020.
The 2025 cycle and subsequent years will represent the beginning of a broad replacement cycle for tech. As that means that equipment bought during the pandemic — part of a boom in tech spending spurred by the work-from-home movement — will start to get old and ready to be replaced, Kowalski said.
Deflationary tech products
More features plus falling prices in many technology categories reflect the deflationary nature of the technology industry on the domestic economy. Over 750 million connected consumer tech devices will ship to the U.S. market this year.
“Technology is deflationary by nature,” said Kowalski. “Value pricing of tech products like TVs, wireless earbuds and gaming hardware is impossible to ignore. Technological innovation helps industries explore more efficient strategies, fostering cost reduction and deflation. Looking ahead, we expect progress in
artificial intelligence to spur growth in consumer and enterprise technology sectors, increasing efficiency and meeting more consumer needs.”
Tech has been deflationary in part because of Moore’s Law, the 1965 forecast by former Intel CEO Gordon Moore, who predicted the number of components on a chip would double every couple of years due to tech advances. By miniaturizing semiconductor chip features, the distance between circuits became smaller. This meant electrical signals had shorter distances to travel and so the performance was faster. And with smaller circuits, the chips could become smaller and consumed less material. That means that the advances in chips — the foundation of modern electronics — meant that chips could become faster, smaller, and cheaper all at the same time.
Of course, amid the crazy supply chain whips of the pandemic, prices stayed high or rose because of severe parts shortages. Tech product price deflation is a sign that Moore’s Law is getting back to normal.
While U.S. inflation overall was 3.4% in 2023, a number of consumer technology products decreased in price during that same year. Tech devices are among the most deflationary items in the U.S. consumer price index, consistently tracking below core inflation.
The CTA said that 4K Ultra HDTVs declined 12% in price in 2023, while smart doorbells fell 6%, wireless earbuds fell 5%, and home game consoles fell 5%.
“Price declines on hardware are par for the course for the industry,” Kowalski said. That also makes it harder for growth to happen.
Consumer spending on software and services makes up a third (33%) of total consumer technology. Six of the twelve major hardware categories profiled are expected to ship more units than 2023, including computing (+3.6%), digital health devices (+1.2%), and digital cameras (+6.2%).
“Production replacement or replenishment from devices people purchased in the pandemic — we’re starting to see an uptick in activity right now,” Kowalski said.
The other possible reason for product refreshes is that AI is making its way into almost every product. AI PCs could be popular because the processing of AI programs and data happens at the edge of the network, where privacy is easier to implement, than in centralized data centers. Other kinds of products from smart glasses to massagers are also implementing AI, making them more attractive.
“AI-enabled laptops are going to be popular this year with new models coming out,” Kowalski said. “We’re seeing all the major processor manufacturers talk about how their neural processing units are AI enabled.”
Those AI PCs may not be a lot more expensive, but the new features may keep the prices from falling faster.
Noteworthy trends
Dozens of AI-enabled laptops will be released in 2024, with 53 million laptops shipping to the U.S. market, up 4% over 2023. PCs are a saturated market, Kowalski said, but laptops are often one of the bestsellers. PC makers always tout a new gimmick to sell new products each year — and AI processing is hot this year.
Popular sporting events and greater availability of sports content across video platforms will push spending on live TV streaming services up 11% this year, to nearly $11.8 billion.
A rise in cross-platform games, indie titles and growth in demand for subscription gaming services will drive gaming spending to over $50 billion, up 3% over 2023, the CTA said.
Methodology
Twice each year since 1967, CTA updates its forecast of more than 125 consumer technology products and services. This forecast serves as the benchmark for the consumer technology industry, charting the size and growth of underlying categories and the industry. It is used by manufacturers and retailers for creating product development plans; financial analysts for sizing market opportunities; industry and general media for providing context in their coverage; government staff for understanding the scope of the industry to guide policy decisions; and CTA itself for highlighting the successes and challenges of the industry.
Source link
