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Reduce. Re-Use. Recycle. Retreat.

The electronics industry we grew up with is going away...

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Reduce. Re-Use. Recycle. Retreat.

Don't look now, but...

Big changes are happening across the consumer electronics landscape.  Companies you've always known are leaving their traditional businesses.  Companies you hadn't heard of the proverbial five minutes ago of are taking their place, while other who-are-these-guys are licensing other company's names.

The bread and butter products that used to drive the consumer electronics industry  (not to mention a good part of the Japanese economy) are in free fall.  Televisions, for example, are now largely profitless commodities with little brand value or loyalty, as the remaining manufacturers consolidate, give up their technologies to faceless OEM manufacturers, or with the benefit of good advice, leave the business altogether.

Audio equipment is doing better than TV, and in fact audio factory shipments for mid 2012 have hit a six year high.  But that's all relative of course; most of the sales are in low-cost portables and headphones, and the salad days of big receivers, amplifiers and speakers have long become a niche business. But hey, turntables are doing well!

How many people want to buy a new camera for snapshots when their smartphone does a perfectly respectable job for free?  For that matter, how many people want to buy a new camcorder when their digital camera -- and their smartphone -- shoots video too?

The demand for the benefits are still there.  Everyone likes and wants a great TV picture, exciting sound and crisp photos and videos to exchange with friends and family.  It's just that the demand for key products is not longer what it used to be, and what products are out there have to sell for less and less.  Few companies have been able to buck the trend on a mass scale.  Apple and Samsung are two of them and they just now happen to be embroiled in a huge patent infringement battle

The retail landscape for electronics, if anything, has continued to get worse.  In the last several years we've seen the demise of numerous national and regional electronics chains.  Now we're seeing many of the remaining small players downsize or go bankrupt, with the lone remaining big player -- the one with the yellow logo -- besieged by internal scandal, executives that can't jump ship fast enough, and now an attempt to buy the company back and take it private by it's original architect.  Which may or may not be a good idea, but the lawyers are already looking into certain legal questions.

On a global scale, this shift is moving the balance of power in multiple directions. Manufacturing has predominantly moved to China of course, and sales leadership in key categories like TVs and appliances has shifted to South Korea. The large American electronics companies (with the exception of white goods) abandoned manufacturing long ago in a tacit deal with Japan that had little to do with electronics.  And now the major Japanese companies are faced with a similar conclusion, only not so much by choice.

For these former market leaders who gave the world most of the snazzy gadgets we grew up with and now take for granted (even if they didn't necessarily invent them), the storm clouds are directly overhead.  Some will move their technologies into hot new areas like clean energy, while others will focus more on health care, one of the few industries in these coming days that's going to get bigger, not smaller.  Others will get absorbed by other companies that are 'synergistic' but not necessarily competing, such as Gibson Guitar's recent purchase of a majority interest in Onkyo USA, which used to be a leading seller of audio-video receivers, back when a lot more people used to buy those things.

Then there are the big software players, who so far have made only tenuous moves into hardware and flopped each time, with the Google TV box and Microsoft Zune being just two memorable examples.  As hardware becomes even more commoditized and software increasingly becomes the differentiator for the consumer (think of the iPod, then think of the Zune) might the masters of the cloud end up ruling the gadget roost? 

What about service providers like Verizon and AT&T, who'll be happy to set you up hardware for home control and security today -- why not a TV and audio system tomorrow?  Or book sellers like Barnes and Noble, who want to sell you e-readers, or even entertainment stars like Dr. Dre, who've already sold more headphones than makers that have been working at it for half a century?

The innovation never stops in the consumer electronics industry.  But innovation isn't the problem here - economics are.  There will be a lot of cool new tech coming down the road in the coming months and years.  But the names on the front of the box and the technology inside it will be increasingly up for grabs.  As will be the retail channels through which we'll be buying them.

It will be an exciting time for some, a depressing time for others.  But as the Chinese expression goes, "may you live in interesting times..."

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