REALITY CATCHES UP TO HYPE

Tech’s latest innovations struggle to live up to the hype
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The Consumer Electronics Show in Las Vegas attracts thousands of exhibitors and attendees searching for the next big thing, with this year set to feature a cornucopia of technological innovation from connected fridges to drones, smartwatches and virtual reality headsets.

Yet as the annual gadget jamboree gets under way again this week, many in the tech industry are now facing the reality that there may never be another innovation like the smartphone. Apple’s original iPhone was unveiled by Steve Jobs the same week as the event exactly a decade ago — and the worry is that the industry’s most overhyped gadgets are failing to establish a similar connection with consumers.

“We are just not seeing huge swings of growth anywhere,” says Ben Bajarin, analyst at Creative Strategies. “We’re really not going to see a category that is a true ‘hockey stick’, and a long sustainable one, like the ones we’ve seen with phones and PCs.”

It is a puzzle that even Apple itself has not yet been able to solve. The iPad saw rapid growth soon after its introduction in 2010 but sales have declined year-on-year since the peak in 2013. New hardware such as Apple Watch and its TV set-top box were not enough to offset the iPhone’s decline last year as the smartphone market has slowed.

Hype around the Apple Watch when it was launched in 2014 set expectations racing that wearable technology was the next hot market, attracting established players including Samsung, Huawei and Motorola as well as start-ups such as Pebble.

Now, however, analysts are slashing their forecasts for wearables, as some manufacturers bow out of the market altogether. Pebble’s main assets were snapped up by Fitbit in a fire sale while Motorola has said it has no near-term plans to launch another smartwatch, saying wearables “do not have broad enough appeal”.

Ahead of the holiday sales season, researchers at IDC found the wearables market grew just 3.1 per cent in the third quarter, with basic, low-cost fitness trackers outpacing more sophisticated smartwatches.

James Park, chief executive of Fitbit, which is the market leader by sales, is more optimistic about the wearables industry. “Our point of view is there is room to further penetrate the market,” he says, pointing to Fitbit research that shows while 66 per cent of US adults who own a smartphone are interested in fitness, only 15 to 20 per cent own a wearable tracker.

Closing that gap will be a “multiyear story”, Mr Park says. “The next step in the evolution will be more personalised coaching and guidance. As we integrate more closely with the healthcare industry, the device becomes a need-to-have.”

Instead of pumping out more and more devices in the hopes that one will catch consumers’ attention, many technology companies are now focusing on improving the software and services behind the hardware.

At CES this week, many manufacturers will add virtual assistants from the likes of Microsoft, Amazon and Google to their products, while others will claim they have added “artificial intelligence” to everything from cars to toothbrushes.

We are just not seeing huge swings of growth anywhere

“Artificial intelligence could well be the story of the show,” says John Curran, managing director at consultancy Accenture’s TMT division. AI can “help jump-start some of the other categories that have met resistance in consumer adoption because the devices have been seen as hard to connect and hard to understand”.

Many manufacturers will be hoping to replicate the growing popularity of Amazon’s Echo, a voice-controlled speaker that can play music, turn on lights or hail a taxi.

“We expect an avalanche of smart speakers at CES,” says Ben Wood, analyst at CCS Insight, a tech researcher.

Yet even this promising new category is today far smaller than the hype surrounding it may suggest. In November, Consumer Intelligence Research Partners estimated Amazon had sold just 5m Echo units in the US since its 2014 launch.

Last year, virtual reality was hailed as the breakout hit of CES. Yet this year, VR’s best-known pioneer, Facebook-owned Oculus, will have no stand on the show floor, after what is widely seen as a slow start for the category in 2016.

Analysts at IHS Markit expect consumers spent $1.6bn on VR last year, rising to $7.9bn by 2020. Senior executives at Silicon Valley companies warn that VR may not begin to offer the right consumer experience at an affordable price until 2018.

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Yet already, the CES hype machine is alighting on an even more ambitious and expensive kind of headset that can make “holograms” seem to appear in the real world. Augmented-reality goggles such as Microsoft’s Hololens are likely to draw crowds at many of the big chip companies’ booths this week.

Ten years ago, days before Mr Jobs unveiled the iPhone, Microsoft’s Bill Gates showed off a “home of the future” with kitchens, bedrooms and cars all outfitted with ever-larger Windows displays. “Hey, this is pretty neat,” Mr Gates said, as he changed the wall-sized screen of his mocked-up bedroom into a giant aquarium.

The demonstrations of AR and VR at this year’s show may also be neat, but there is little evidence yet to suggest these visions of the future are any more likely to tear consumers’ gaze away from smartphones than the digital aquarium in Mr Gates’ bedroom a decade ago.

“Many people in the industry have learnt the wrong lessons” from the last decade,” says Mr Bajarin. “The bottom line is, these markets just might never be as good as something like the iPhone.”

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