Photo: Daniel Goodman / Business Insider
We were speaking to a prominent venture capitalist the other day (he asked not to be quoted), and picking his brain on the trends to watch for the coming year.One that surprised us: this investor is absolutely convinced that the consumer electronics industry is going to swing back to the U.S., reversing a 40-year trend that saw all the biggest players in the industry shift to Asia — first Japan, and more recently Korea.
Here’s his reasoning: consumer electronics devices are becoming computers. And American companies like Apple and Microsoft still have the deepest understanding (and strongest intellectual property portfolios) when it comes to making computers.
By computer, he’s not not talking about smart devices like the Nest thermostat, which are mostly a few microprocessors with a very simple embedded OS and maybe a wireless antenna so you can tap into them via the Web.
He’s talking about devices with a complete operating system and an actual user interface — fully interactive, and able to run applications from third parties.
It has already started with TV. Apple, Google, Microsoft, and a bunch of startups like Boxee are changing the way we interact with video on our television sets. Instead of a simple channel changer, we now have on-screen menus with video from all kinds of sources, voice and gesture controls from Microsoft (and soon from Apple), and — yes — apps.
He believes this kind of interactivity will soon be seen in many other kinds of devices, from things you wear on your body (watches, heart rate monitors) to the dashboard of your car.
His proof? The transition from cell phones to smart phones.
A decade ago, the value of a cell phone was entirely in the hardware, which was made mostly by companies from outside the U.S. (Qualcomm being the big exception).
Now, it’s almost entirely in the software — both platform software from Apple and Google (mostly), and application software from big companies like Facebook and Amazon and countless startups.
This is probably the same reasoning that Google is using as it makes its big hardware play. We’ve been sceptical about the company’s chances for success — and today’s report from GigaOM that Google TV has less than 1 million active users after more than a year on the market increases our scepticism further. But at least Google isn’t chasing after some random whim. Other smart people in Silicon Valley are on to the same idea.
It also explains why big old computer companies like HP aren’t quite so eager to give up their consumer hardware lines. Even if the old “personal computer” is dying, the basics of personal computing are going to be everywhere.
At any rate, this investor controls more than $1 billion in funds, so expect an influx of money into this space in the coming year.