Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. I'm here at the Consumer Electronics Show in Las Vegas.
One of the questions on a lot of investors' mind, and not just tech investors, is what's the state of the consumer? Consumer spending is obviously a pivotal part of the economic recovery. Until we see a robust recovery in spending, we're unlikely see a robust recovery in the rest of the economy.
I think everything we've seen at CES so far points to the fact that consumers appear to be ready to open their wallets little bit more and take some chances on new tech products.
Really all of the major manufacturers are releasing a lot of very high-end products. Instead of really trying to focus on value or trying to focus on stripping features out, so that people might be able to afford that new flat panel TV, [manufacturers] are focused on giving new features, new connectivity, and new ways for people to part from their money. And they're seeing really good uptake in this.
We saw some data that the holiday season was great for tech products; they were some of the most wished-for items for Christmas, and I think a lot of people got what they wanted. That certainly, I think, points to people willing to be a little bit more open, willing to upgrade, willing to go that extra mile. And I think we've seen this in a couple different categories.
The first category is certainly smartphones. I think that's one that everyone has seen the proliferation. We went from simple-feature phones, the flip phone with the numeric keyboard, to really your next step up, so your smart messaging phones that have keyboards, that have a little bit more features, and even into the full-fledged smartphones.
Both in the United States and abroad, people really want these full-feature devices: they want two cameras, they want an enormous screen, they want to be able to get on the fastest network, and they're willing to spend for that.
And I think if the consumer was really, really worried, this wouldn't be a super-high priority for them. I think everyone enjoys having their smartphone, but it's obviously a step up from the basic needs of housing, food, and shelter when you're starting to worry about having that kind of tech products.Read Full Transcript
So, I think that's really a good sign for consumer spending. I think TVs are another place. One of the things we've heard is that there is surprising strength in TV sales outside of the United States. It's generally a penetrated market in North America. But in Western Europe, there is a huge demand for flat-panel TVs, for all sorts of new devices.
For an area and a region that's supposedly going under all of these austerity measures that consumers are really afraid, the fact that they're willing to maybe splurge a little bit and get this new piece of technology, I think also bodes well for spending.
There is a lot of new products that are aimed towards those markets, and that doesn't even start getting into emerging markets. When you start looking at India, you start looking at China, the demand for these high-end video equipment is really substantial.
And what's happening, and what we're seeing, is that consumers in those markets really want to leap-frog current technology.
So, while American families probably started off with CRT television and some of the low-end products before they moved into the high-def TV, a lot of places in emerging markets want to skip those steps and go right to that high-end product.
Kevin Sellers: We're seeing very much an aspiration desire to participate in sort of the way the rest of the world is participating. So, for us it's a terrific growth engine, but it also isn't a growth engine that drives necessarily lower-priced products or cheaper products. It's a very good mix of product for us.
Glaser: And finally another place that we've seen a lot of consumer excitement is actually building around laptops, netbooks, tablets and other portable devices that people want, and see that they need a new PC. And when they are going to upgrade, they are looking at a lot of new kinds of products. They are willing to check out a tablet. We've seen an unbelievable number of tablets here, and I think we're going to see even more roll out over the next year. We've seen netbooks continue to be more and more important. Intel thinks that netbooks are going to be a huge category, even bigger than sales were this year.
Certainly, people are a little bit more cautious when it comes to those. I don't think we see the huge demand for new laptops, new desktops that we saw when we were on that very high end of the adoption curve.
People are going to replace their old ones, and I think that's clear and that the manufacturers are really trying to provide new features that are going to push people to do that. They can see how much better the performance has gotten, and once they get hooked on that and hooked on new operating systems, they're going to be there spending money.
So, overall, we think consumer spending from what we've seen at CES is going to look pretty robust from what the market research has shown us that people out there spending, from what the manufacturers are showing: things are high end, things are shiny, things are new, people want these products. There isn't demand for really cheap stuff. People want to get the really high-tech, and also the fact that the emerging-market consumer wants to leap-frog some of those intermediate stages when it comes to consumer technology, I think, bodes well for a lot of these firms and could bode well for the broader economy.