CTA Warns of Difficult Year Ahead for Tech Sector; Supply Chain Issues Remain

“While CTA anticipates a looming recession and inflation will weigh against consumer spending in the coming year, consumer technology industry revenues will remain roughly $50 billion above pre-pandemic levels,” the report said. CTA projects “lowered expectations for sales of laptops, LCD TVs, tablets, smartphones and gaming consoles.”

Technology services lead projected growth areas with $151 billion in consumer spending, CTA said. “Consumer spending on technology services including gaming, video, audio and apps will grow for the fifth straight year,” the report said: “The video streaming market is especially competitive with major brands vying for consumer attention.” Other growth areas include factory-installed automotive technology, projected to rise 4% to $15.5 billion this year, and health and fitness technology, projected to rise 9% to $928 million.

“Not too long ago we didn’t talk a lot about supply chain,” but that has changed, Koenig said Tuesday. “The reasons are obvious,” he said: “I’m happy to say that container shipping costs are coming down, we’re seeing less friction at ports around the world. But you really have only to look at what’s happening in China to understand just how vulnerable supply chains remain.”

Demand for chips is decreasing “from pandemic highs,” Koenig said. With less demand, the lead time to get chipsets is lower, “but the bad news is we’re kind of moving from a chip shortage to potentially an oversupply in some cases,” he said. Some advances in chips may slow “as we work through some of this inventory,” he warned. Labor shortages remain, Koenig said: “The simple truth is we can’t hire enough workers, certainly if we’re talking about skilled workers.” Some tech companies have laid off staff, “but across the global economy, across every sector, businesses are struggling to find workers,” he said.

Koenig said the launch of the smartphone and 4G and mobile broadband led to “powerful new waves of technology innovation.” Smartphones were “still relatively a new thing in 2010,” with only about 30% of U.S. homes having one, he said. Today “almost 100% own a smartphone,” he said.

Most economists predict a recession this year, but businesses, through their use of new 5G technologies, will help the economy recover, Koenig said. 5G is the first wireless generation that “will be led by enterprise innovation,” he said: “5G means faster mobile broadband for consumers, but for commercial, industrial IoT applications it’s really the greater capacity and ultra-low latency that is going to unlock so much innovation, and we’re going to see that across this decade,” he said. “We’re going to see progressively more and more industrial IoT applications across the breadth of the economy,” he said.

Verizon Growth

Concurrent with CES, Verizon CEO Hans Vestberg said at a Citi financial conference Wednesday the carrier returned to net postpaid phone customers in Q4, after losing subscribers in the previous three quarters. Verizon expects to cut capital expenditure spending 23% in 2024 as the company completes its 5G network and turns its focus to sales growth and cash flow, he said. Spending in 2024 will be close to $17 billion, after current 5G spending, he said, down from $22 billion last year.

“As many of you know I wasn’t really happy with our performance at the end of the first quarter and of course then that trickled into the second quarter,” Vestberg said. “You’re going to see us being more agile … even more focused in certain segments. We have all the assets -- we have now the spectrum, we have the network, we have built the network for five years.” He also mentioned the acquisition of low-cost provider Tracfone and the divestiture of the company’s media group.

Verizon is getting “great feedback” on the performance of its C-band spectrum, said Kyle Malady, Verizon president-global networks and technology. “It’s ‘generation’ spectrum, and we’ve never been able to put this amount of spectrum in play for our customers,” he said. Verizon has deployed the band in 46 markets, he said.

For the past 30 months, the wireless industry has grown at a rate that surprised everyone, said Pascal Desroches, AT&T chief financial officer, who also spoke Wednesday. Industry had “normalization of growth” the second half of 2022, but the “environment” remains “very healthy,” he said: “I would expect the industry to continue to grow net adds, but probably at a more modest pace.”

AT&T offered fewer promotions around Black Friday last year than its main competitors, Desroches said. “That’s the way we want to run this company as we move forward,” he said: “It’s going to be important for us to grow, but we’re going to do so in a disciplined way.”