CES 2024 – Day 2– Less Peaceful Progress

CES comes to life.

• After a quiet start on Tuesday, CES 2024 came back to life on Wednesday with a substantial increase in footfall, crowds and queues.
• This is an abnormal pattern for CES but not unusual for the Mobile World Congress which always begins at the beginning of the week with traffic peaking on its second day.
• Consequently, I think that today is a better representation of where the industry is, but that being said, this does not change the fact that there is not a lot of new technology on display.
• The TVs are a bit better, bigger and brighter than last year and a lot of slideware is now at the prototype stage meaning that the main theme of the show is one of progress rather than change.
• This is exacerbated by the biggest technology trend of 2024, generative AI, still being in its development phase with not much outside of chatbots actually available in the market for people to buy.
• This reinforces the view that 2024 is the year that generative AI needs to deliver something in terms of tangible products and revenue.
• This I think it can do but the ever-increasing number of products and services is going to mean that there is substantial price erosion.
• This could cause a reset in valuations even though there are plenty of real-world use cases that the likes of Walmart and L’Oreal are already capitalising on.
• This is not necessarily a bad thing as it would mean a more efficient deployment of capital meaning that only the best ideas are funded and a more rapid maturation of the technology but it will require a painful correction.
• Generative AI remains the trend to follow in 2024 but a reset is likely to temper enthusiasm considerably just as it did in autonomous driving.
• Autonomous driving is now widely hated and reviled meaning that the time to buy the sector is probably getting closer.
• Generative AI could easily follow a similar path but not nearly as severe as it is ready for market and does generate revenue, unlike autonomous driving which has yet to deliver a working product.

No trains, no planes, only automobiles.

• Automotive is once again dominating CES where a lot has changed in 12 months both in terms of vehicle software and semiconductors.
• This makes sense as the smartphone is now very mature meaning that very little is changing while the digitisation of vehicles is just getting started.
• Furthermore, 2024 has always been the year when vehicles, where most of the functionality is defined by software, were supposed to begin appearing.
• Consequently, the demonstrations that are on display are looking better than ever as they are now close to production and expectations for autonomy have been reset to rock bottom.
• These expectations are that level 3 is pretty much as far as anyone has any expectations of reaching with Level 4 and Level 5 now being icing on the cake that may appear at some point in time.
• The realities of software are also hitting home as more and more suppliers are talking about mid-cycle hardware upgrades as well as after-market sales.
• RFM has long concluded the product cycle of the digital cockpit and ADAS domains need to be decoupled from the product cycle of the vehicle.
• Smartphones typically have a product cycle of one or two years meaning that consumer-facing electronics in a vehicle are often 2 to 3 years out of date by the time the user gets his or her hands on them.
• The OEMs are finally waking up to this issue and the show this year has many more products which are upgradeable during the vehicle’s life and where the specification is set much closer to the vehicle’s launch date.
• This is a good sign as the OEMs need to ensure that the smartphone stays in consumers’ pockets when they get into the vehicle and decoupling infotainment from the vehicle is a key step in achieving that goal.
• The OEMs still have a very long way to go to compete effectively against the user experience of the smartphone and the digital ecosystems but there are some signs of progress.
• Whether it is enough to wrest the initiative from Apple and Google remains to be seen.