Vision - July/August 2008 - (Page 7)

36-Country Trade-Weighted Exchange Rate (January 1997=100) 140 ogy products. Plus what measures taken by China in preparation for the Summer Olympics will have any spillover effects on the CE supply chain and how long might these spillovers echo through the industry? Moore’s Law Is Helping Out In a 1965 article, Gordon Moore, the cofounder of Intel and then director of research at Fairchild Semiconductor, stated that the number of transistors on an integrated circuit would double every two years. This translates into computer performance per unit cost doubling every 18 to 24 months, or in other words, the cost of constant computing performance declining by 50 percent every 18 to 24 months. While the raw materials, the falling U.S. dollar, labor laws and the Olympics might impact prices to the upside, Moore’s Law should help maintain prices to the downside. Since CE products are increasingly digital, they use more semiconductorbased material. Therefore, they are more subject to Moore’s Law than ever before. This factor appears to be accelerating the rate at which prices for consumer technologies are declining. For example, after controlling for quality, the price of televisions declined roughly two percent a year from 1967 until 2000. But from 2000 to 2008, the rate of price decline accelerated significantly—averaging nearly 14 percent per year. Today, television prices are declining 18 percent per year, and a similar trend holds for many other consumer technologies. Today, there are diverse dynamics influencing pricing for consumer technologies, but the eventual outcome of these influences currently remains uncertain. Will the pressures of higher input costs lead to higher prices at retail—something quite uncommon for consumer technologies? Or will Moore’s Law and the increasing move to digital continue to trump other factors— at least at the point of retail? Will players throughout the supply chain, from manufacturers to retailers, find new ways to adapt to changing environments? At least for now, the rate of price decline for consumer 120 100 80 60 40 20 0 4 6 8 0 2 2 4 6 6 200 0 4 198 198 198 8 200 199 199 200 200 199 199 U.S. Dollar to Chinese RMB Exchange Rate ¥ 8.50 ¥ 8.00 ¥ 7.50 ¥ 7.00 ¥ 6.50 ¥ 6.00 2003 2004 2005 199 2006 2007 Source: CEA Market Research technologies does not appear to be slipping while input costs have risen, thus suggesting something else has given. Only time will tell if this remains the case. • 200 2008 8 http://www.audiompeg.com http://www.sisvel.com

Table of Contents Feed for the Digital Edition of Vision - July/August 2008

Vision - July/August 2008 Contents Shapiro's Spectrum In This Issue The Economist C4 Trends Visionary Embracing Disrupting Technology Vaulting Ahead with Your Brand International Risk Stop Boomerang Products CEA Newsline Tech Speak Tech Policy Going Global Eye on Business Market Insider Just the Stats

Vision - July/August 2008

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