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CES 2014: Hardware start-ups are big at Consumer Electronics Show

At CES, consumer electronics start-ups are seeing a golden age as many costly barriers to entry have come down.

January 08, 2014|By Chris O'Brien

LAS VEGAS — Tucked into the tiniest of corners of the gargantuan Consumer Electronics Show one night this week was Sonny Vu, the founder of Misfit.

The Redwood City, Calif., company did not have an elaborately constructed trade booth with flashing lights or blaring dance music. It just had Vu, undeterred by his lack of props, standing next to a table displaying a few samples of Shine, the company's new activity monitor that's about the size and shape of a Nilla Wafer.

Though the company and product are small, they are emblematic of the biggest trend on display this week at CES: This has become a golden age for consumer electronics start-ups.

Like many new hardware companies, Misfit is taking advantage of the falling cost of components, crowd-funding, inexpensive manufacturing, and the ability to piggyback off mobile platforms such as smartphones to create a low-cost device. The combination of these and other forces is creating a hardware start-up frenzy that is transforming the influential trade show, long dominated by tech titans.

It is also providing some badly needed adrenaline and hope to a troubled consumer electronics industry that has seen growth stall and finds itself facing a projected drop in sales this year.

"It's definitely easier to build these types of things," Vu said. "Crowd-funding has really changed things. And now, people are wide open to buying things that don't come with a big brand name. It's a great time to be in this space."

Of course, this week at CES attendees saw the usual parade of jaw-dropping gadgets being introduced in lavish keynotes by executives of giant tech companies: The 120-inch ultra high-definition TV from Vizio, a bendable TV from Samsung, a refrigerator from LG that will respond to text messages.

Although big TVs grab headlines, they're drawing shrugs from consumers. Consumer spending on technology has been mostly flat in recent years. And this week, the Consumer Electronics Assn., which hosts CES, released a report projecting that global consumer spending on technology will drop 1% in 2014.

For the most part, consumers are only buying smartphones and tablets, now 66% of all such spending, with sales in almost every other product category shrinking. And even within mobile products, consumers are shifting to cheaper and smaller versions that produce smaller profits.

"We've really taken the cream off the top in terms of selling to the premium, high-end markets," said Steve Koenig, director of industry analysis for the CEA, adding that the industry needs a new catalyst to ignite growth.

As if on cue, the start-up cavalry came charging into CES this week.

By the numbers, the effect of these smaller companies on the world's largest technology trade show has been profound. Just a couple of years ago, when Microsoft announced it was pulling out of CES, and other large companies reduced their presence, many started writing the show's obituary.

Instead, this year CES set a new record with 3,200 exhibitors across more than 2 million square feet of exhibit space — or enough to fit about 35 football fields. That's up from 3,000 exhibitors and 1.92 million square feet last year.

A healthy part of that growth came from the swarm of hardware start-ups, according to Laura Hubbard, a CEA spokeswoman. Though these upstarts are small on their own, there were several areas at CES that brought them together to help draw attention to them.

TechCrunch, the influential Silicon Valley tech blog, held its first ever "Hardware Battlefield" at CES. Throughout the week, hardware start-ups got on a stage to pitch their wares to a panel of judges, including craft maven Martha Stewart, who will help select a winner of the $50,000 prize.

Eureka Park, which is the traditional start-up corner of CES, hosted 200 companies this year, up 40% from last year. And it added a new area called Eureka Park: NEXT for companies that had outgrown the start-up confines but were not yet ready to graduate to the main trade show floor.

Wandering the aisles of Eureka Park, attendees stumbled past a wide range of hardware start-up hopefuls. There were gadget accessories, like bendable stands or tablet cases. But then there were more ambitious products, like holographic displays, new 3-D printing materials, a pet webcam that allows owners to talk to their pets when not at home, and a panoramic camera ball that could be thrown in the air to take 360-degree photos.

After years of focusing on Web-based start-ups, which seemed cheap and easy to launch, there is a long list of factors that are making it easier for entrepreneurs to shift to making physical electronic things.

The cost of many components such as sensors has fallen dramatically. Because so many people own smartphones and tablets, entrepreneurs can build small gadgets, like the Misfit Shine, that have no screen and are controlled through an app.

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