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How Smartphone Advances Improve Other Products

As the CES 2013 event in Las Vegas approaches, let's consider the overall market impact from technology innovations and new product launches. Meaning, that for every positive advancement in a new product category there is often a negative result in another category.

As an example, prior product enhancements made to smartphones -- and now media tablets -- continue to take market share away from other portable consumer electronic (CE) devices.

According to the latest market study by ABI Research, annual shipments of handheld game players are expected to decline by at least 4 percent year-over-year (YoY) -- with the North American market experiencing a fall of nearly 13 percent.

In the digital camera market, shipments are expected to decline by over 11 percent YoY worldwide and nearly 20 percent in the North American market.

New devices like Sony’s 3G Vita and Samsung’s Galaxy Camera are trying to bridge the divide between portable CE devices and cellular-enabled mobile devices, but these new crossover devices will have many challenges.

"Early sales of Sony’s 3G Vita were quite strong, likely attributable to pre-launch bundles which favored the cellular version -- more recent holiday bundles have since favored the Wi-Fi only model," said Michael Inouye, senior analyst at ABI Research.

The incremental monthly fees that people must pay when adding these devices to their cellular data plans -- combined with metered data restrictions -- often outweigh the benefits of these mobile devices (excluding smartphones and media tablets).

Opportunity, however, still remains for portable game consoles, as they have adequate differentiators versus smartphones, most notably exclusive game franchises and better user interfaces.

Nintendo’s 3DS has sold well and Sony’s Vita is looking like a late bloomer -- perhaps a price cut would help spur new demand. For digital cameras, picture quality and lens attributes are one way to differentiate dedicated point-and-shoot cameras.

While the inherent content auditory and visual quality capabilities that's within a device is less important today than in the past, some people still look for these distinctive features.

Case in point: a subset of the population still want high-end single-purpose digital cameras for their superior image quality and portable game players for better game-play quality -- when compared to what's available from typical smartphone feature sets.

Also, enhancements to smartphones and media tablets help to raise the bar of expectations for these other related product categories -- and that's a good byproduct of continued mobile device technology innovation.

Moreover, ABI believes that when CE manufacturers and mobile network operators work together to develop win-win data plan attributes, and reduce the cost burden of the additional hardware, then these categories may gain new momentum in the marketplace.

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