Consumer Electronics & Digitalization
Consumer Electronics & Digitalization
Consumer Electronics & Digitalization
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<strong>Consumer</strong> <strong>Electronics</strong><br />
&<br />
Digitalisation<br />
Adri Baan<br />
Executive Vice President & Member of the Board of<br />
Management<br />
Chairman and CEO Philips <strong>Consumer</strong> <strong>Electronics</strong>
• Market<br />
• Next steps<br />
• Digital Migration<br />
Content<br />
• Interconnectivity<br />
• Conclusions
Market Value in Bln Euro by Main<br />
Product Category<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
38.1<br />
22.0<br />
39.7<br />
26.3<br />
41.0<br />
30.3<br />
23.1 22.8 22.5<br />
8.9<br />
9.1<br />
9.8<br />
41.6<br />
32.6<br />
22.1<br />
41.7<br />
34.8<br />
21.4<br />
32.9 34.2 36.1 39.3 42.7<br />
1999 2000 2001 2002 2003<br />
9.7<br />
9.6<br />
PCC<br />
PC Peripherals *<br />
Audio<br />
Videq<br />
TV
Market Value in Bln Euro by Region<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
21.5<br />
17.2<br />
6.2<br />
36.4<br />
23.8<br />
17.3<br />
38.6<br />
25.5<br />
17.7<br />
27.4<br />
17.6<br />
29.1<br />
17.8<br />
41.1 42.8 44.2<br />
3.5 3.6 3.8 3.9 4.0<br />
5.2<br />
7.0<br />
5.6<br />
7.7<br />
6.3<br />
34.5 35.8 37.2 37.7 37.7<br />
1999 2000 2001 2002 2003<br />
8.4<br />
6.9<br />
8.8<br />
7.7<br />
Asia Pacific excl. Japan<br />
Japan<br />
Latin America<br />
NAFTA<br />
Middle East & Africa<br />
Central & Eastern Europe<br />
Western Europe
Volume Growth Philips<br />
1998 vs 1997<br />
0% 25% 50% 300%<br />
Colour TV<br />
Video Recording<br />
Audio CD-R<br />
DVD-Video<br />
Monitors<br />
Mobile phones<br />
10%<br />
10%<br />
20%<br />
* Audio CD-R 1999 vs 1998 400% estimate<br />
* DVD - Video 1999 vs 1998 300% estimate<br />
75%<br />
*300%<br />
*1300%
Price “Erosion”:<br />
Learning curve effect<br />
- over / under capacity<br />
1. . - Learning curve effect<br />
2. How to cope:<br />
- product concept (modular)<br />
- technology progress (IC shrink)<br />
- efficiency / productivity<br />
3. Value proposition:<br />
- feature build up
1998 market share per region in value<br />
1997 1998 97-'98<br />
Western Europe 14,7% 16,2% 1,5%<br />
Eastern Europe 9,0% 11,1% 2,1%<br />
North America (Nafta) 9,5% 10,6% 1,1%<br />
Asia Pacific 5,4% 5,6% 0,2%<br />
Latam 13,8% 12,6% -1,2%<br />
World 8,6% 9,6% 1,0%<br />
Excluding OEM Excl. PCC/PCP
June 1997<br />
• Reduce number of manufacturing sites<br />
• Shrink supplier base<br />
• Reduce number of chassis<br />
• Concentrate regional marketing<br />
• RONA mainstream 24%<br />
June 1999<br />
DONE!<br />
Next steps… ...
1 Asia Pacific (with particular focus on China,<br />
India, while Korea & Japan have low<br />
priority)<br />
2 NAFTA<br />
3 Western Europe<br />
4 Eastern Europe<br />
5 Latam<br />
Ambitions per region<br />
6 Middle East & Africa<br />
Invest<br />
Build brand<br />
Lead<br />
Increase<br />
Protect<br />
Be Present
Continued investment in the Brand<br />
in US<br />
• US $100 million branding campaign in North<br />
America in 1999<br />
• Purchase consideration of Philips brand tripled<br />
• Over one in four consumers consider Philips<br />
• Increased commitment to sponsorships and<br />
alliances:<br />
– Turner/Time-Warner : Philips Arena, broad<br />
marketing cooperation
Philips Arena<br />
•State State of the art sports and entertainment facility in<br />
Atlanta carrying Philips brand and products; At<br />
CNN Center, adjacent to convention center<br />
•10,000-square-foot 10,000-square-foot ‘Philips ‘ Philips Experience’<br />
•Estimated Estimated 12 million visitors per year
Investing in the <strong>Consumer</strong><br />
•Meeting Meeting consumer needs<br />
•Technology Technology to provide consumer<br />
applications<br />
•Less Less than 12 months innovation cycle<br />
•Extensive Extensive consumer research<br />
•Product Product concept testing<br />
•<strong>Consumer</strong> <strong>Consumer</strong> service centers
Systematic New Product Development<br />
• State of the art product concept, development,<br />
optimization and forecasting.<br />
• Vantis International, the premier concept modeling<br />
company.<br />
• Engage consumer input early in new product<br />
development process.<br />
• Market penetration and revenue predictions based<br />
multi-country consumer research.
Philips Multiple Concept Screening<br />
“Demand Scan”<br />
• 110 new product concept ideas developed.<br />
• 68 concepts were selected, with consumer input<br />
• 5500 respondents in US, Germany and Hong Kong.<br />
• Key measures:<br />
·purchase purchase intent<br />
·need need fulfillment<br />
·price price<br />
·value value<br />
·uniqueness<br />
uniqueness<br />
·likes likes and dislikes<br />
·believability<br />
believability<br />
• 10 new products ideas selected
Pia Smart Surfer Plus<br />
Time Warp<br />
Pocket Library<br />
E-Pad<br />
Early Product Concept Screening -- Examples<br />
Net Vision<br />
Clear Winners<br />
Product with strong mass<br />
consumer appeal<br />
Changes Needed<br />
Strong consumer interest,<br />
but at least one consumer<br />
acceptance problem.<br />
Serious Changes Needed<br />
Multiple <strong>Consumer</strong><br />
Acceptance Problems
Digital Migration<br />
•Philips Philips applying digital competencies in<br />
traditional analogue CE areas:<br />
–Audio Audio CD, CD-recordable<br />
CD-recordable,<br />
, SACD<br />
–TV TV satellite, cable, and terrestrial<br />
–Video Video VCD, SVCD, DVD, D-VHS, DVR<br />
•Opening Opening up new market opportunities<br />
–desktop desktop imaging (PC cameras, V-mail)<br />
–information information distribution (DTV, CleverCast)<br />
CleverCast<br />
•“Gateway” “Gateway” products (e-mail, fax)
For 60 years the TV offered you...<br />
Television
Now, by adding one box, you get...<br />
Internet Shopping Banking Games<br />
Personal TV Home Networking
Digital capability - television<br />
•Philips Philips wants to deliver the digital benefits to the<br />
consumer and to be the main player of the market<br />
where all digital equipment and services meet.<br />
•Philips Philips can/will provide the total solution<br />
–Set-top Set-top boxes and integrated TVs<br />
–Components, Components, system architectures and<br />
standardisation<br />
–Broadcast Broadcast equipment<br />
•Access Access to alternative value added services
45000<br />
40000<br />
35000<br />
30000<br />
25000<br />
20000<br />
15000<br />
10000<br />
5000<br />
0<br />
1996<br />
STB market per region<br />
(Volume, ’000s)<br />
1997<br />
1998<br />
Source: Philips<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
substitution<br />
Asia Pacific<br />
LATAM<br />
NAFTA<br />
Middle East & Africa<br />
Eastern Europe<br />
Western Europe<br />
*incl. Internet STB’s
1998 World Market for digital STBs<br />
Sony<br />
6%<br />
Pace<br />
7%<br />
Hughes<br />
7%<br />
Nokia<br />
4%<br />
Sagem<br />
6%<br />
Echostar<br />
15%<br />
SA 2% others 3%<br />
GI<br />
19%<br />
Philips<br />
16%<br />
Thomson/RCA<br />
15%<br />
Philips Market share 1998<br />
of Internet STB’s was 55%<br />
Source: Philips
USA<br />
Echostar<br />
DirecTV<br />
MediaOne<br />
WebTV<br />
AOL<br />
LATAM<br />
Sky Brazil<br />
Sky Mexico<br />
Sky Columbia<br />
Sky Chile<br />
Sky Argentina<br />
Key customers<br />
EUROPE<br />
Canal+<br />
ONdigital<br />
Kirch<br />
UPC<br />
EASTERN EUROPE<br />
WizjaTV<br />
ASIA PACIFIC<br />
Measat
Digital capability - CD Recorder<br />
•high-end, high-end, low-end, dual-deck, mini system<br />
•top top recording and playback performance<br />
•primary primary CD platform<br />
•replacement replacement market 700 million
Digital capability - DVD-Video<br />
•Philips Philips amongst leading developers of DVD<br />
•Fast Fast acceptance of format by software and<br />
hardware industry, the trade and consumers<br />
•DVD DVD will become the mainstream Video format<br />
•Meets Meets new consumer demands for high quality<br />
home cinema sound and picture quality
Digital capability - DVD-Video<br />
• Total market ’98:<br />
– over 2m units, 50% in USA<br />
– 0.25m in Europe (Philips has 30% market share)<br />
• ’99 market volume expected between 4 and 5m units<br />
• 25m units sales in 2002 within reach<br />
• 1999 market moving from early adopters to mass<br />
market
Near future DVD-Video<br />
•Recordability<br />
Recordability will boost DVD<br />
•Philips Philips will introduce DVD video<br />
recording for PC and CE markets<br />
•4.7 4.7 GB DVD recorder ready for<br />
consumer market in 2000
Digital capability - PC Peripherals<br />
•Easy-to-use peripherals<br />
•Peripherals constitute 50% of a PC system<br />
•Bigger than PC market<br />
•Only company active and capable across market:<br />
–display (monitors, LCD projectors)<br />
–imaging (PC cameras)<br />
–storage (CD-RW)<br />
–connectivity (USB) wired & wireless<br />
–gaming (game pads)<br />
–audio (speakers)<br />
•Innovative applications (V-mail)
Interconnectivity<br />
•Philips Philips involved in many digital solutions for<br />
the consumer<br />
AT HOME<br />
AT WORK<br />
ON THE MOVE<br />
•Goal Goal now: now:<br />
create harmony for electronic devices<br />
to be interactively linked to form part of digital<br />
home network
Products offering Interconnectivity<br />
• USB based PC Peripheral products<br />
• IEEE 1394<br />
– Bridge consumer A/V platform as well as<br />
PCs and PC Peripherals<br />
– Enables two-way ‘hot plug & play’ to<br />
process commands and high rate data<br />
transfers<br />
– Supported by industry activities such as<br />
HAVi
Content<br />
Battles for Control of the Home<br />
• TV Broadcast<br />
• Internet<br />
• E-mail<br />
• E-commerce<br />
C. Access<br />
control<br />
(DVS)<br />
Copper<br />
Satellite<br />
Cable<br />
A. Digital Video<br />
Standards<br />
Phones<br />
Encryptio<br />
n access<br />
control<br />
TV<br />
media<br />
processing<br />
Modem PC<br />
Set top<br />
box<br />
TV<br />
display<br />
Game<br />
console<br />
Monitor/<br />
Computing<br />
PC<br />
peripherals<br />
network<br />
Home<br />
network/<br />
server<br />
VCR<br />
DVD<br />
Audio<br />
EntertainEntertainment network<br />
Printers<br />
B. In-home<br />
networks<br />
Lighting<br />
Home<br />
network/<br />
server<br />
Appliances<br />
Out of<br />
scope<br />
No position<br />
Philips activity<br />
Heating
•Brand Brand equity improving<br />
Conclusions<br />
•STB, STB, we own key control point in the home<br />
•Philips Philips participate in both TV & PC world<br />
•Strong Strong IPR for Video, Audio, Encryption<br />
•HVE HVE - added value & control over technology base
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