Cantor Fitzgerald Equity Research analyst Brian J. White examines trends in the technology sector for 2014, kicking off with a look at what’s on display at the International CES (Consumer Electronics Show) in Vegas. White touches on such issues as wearable technology, the merging and interconnectedness of devices in the home and car, and 3D printing. White’s report follows.
Next week, International CES kicks off in Las Vegas with over 3,200 exhibitors and over 150,000 attendees anticipated at this year’s show. In our coverage universe, we expect Apple Inc. (NASDAQ:AAPL), AU Optronics Corp. (ADR) (NYSE:AUO) (TPE:2409), Corning Incorporated (NYSE:GLW), Hewlett-Packard Company (NYSE:HPQ) and LG Display Co Ltd. (ADR) (NYSE:LPL) to be the most sensitive to data points trickling out of this year’s International CES, while Cisco Systems, Inc. (NASDAQ:CSCO)’ John Chambers (CEO) is scheduled to deliver a keynote address on Tuesday (January 7).
Wearable Technology to Gain Respect this Year but Apple to Make it “Cool“
Cantor believe the 2014 International CES will prove to be the year that “wearable technology” finally gains respect as a viable new tech product category. Based on our recent research in Asia, we believe Apple Inc. (NASDAQ:AAPL) will launch the “iWatch” before the end of 2014, and we expect this will further validate the “wearable technology” movement. Smartwatches have already been launched by companies such as Pebble, i’m Watch, Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), Sony Corporation (NYSE:SNE) (TYO:6758), Qualcomm, Inc. (NASDAQ:QCOM) and others; however, success has proved limited. We believe it will take a company such as Apple Inc. (NASDAQ:AAPL) to launch a smartwatch that is actually “cool” to wear in order to drive mass consumer adoption. In our view, Apple Inc. (NASDAQ:AAPL)’s expansive digital matrix that seamlessly connects devices, strong balance sheet with unwavering R&D commitment, loyal user base, proven ability to deliver aesthetically pleasing products, well respected brand and strong track record of serving up a unique user experience bodes well for the company’s ability to capitalize on this new market opportunity.
Further Momentum Around the Connected Home and Connected Car
With nine of the top ten automobile makers expected to be attending this year’s International CES, we anticipate the theme around the connected car to expand on last year’s momentum. Once again, we believe Apple Inc. (NASDAQ:AAPL) will be an important player in the development of this market. Recall, during last year’s Worldwide Developers Conference, Apple Inc. (NASDAQ:AAPL) discussed “iOS in the Car” and highlighted the potential to reach automobiles in 2014. Similar to the connected car, we expect more innovations around the connected home this year, and we believe Apple Inc. (NASDAQ:AAPL)’s iOS is also well positioned for this market.
Thoughts on the Usual Suspects and New Suspects Such as 3D Printing
The LCD TV has become a staple of International CES, and we expect this year will be no exception, with a focus on Ultra-HD TVs (i.e., 4K) and smart TVs; however, we believe the price points for 4K TVs still need to come down and native 4K content needs to increase for mass adoption. We believe the demand tone across the LCD TV market at the show could have implications for our LCD coverage universe that consists of Corning Incorporated (NYSE:GLW), AU Optronics Corp. (ADR) (NYSE:AUO) (TPE:2409) and LG Display Co Ltd. (ADR) (NYSE:LPL). In the smartphone world, we believe all eyes will be on Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) for the next innovation to challenge Apple Inc. (NASDAQ:AAPL), while we expect 64-bit powered smartphones to take part in this year’s show and bendable phones to be a topic of discussion. Finally, we expect 3D printing to generate more excitement this year. In our coverage universe, Hewlett-Packard Company (NYSE:HPQ) has discussed plans to play in the 3D printing market.