Gadget Makers Need a Hit as Big as the iPad to Escape Decline

The tech market will shrink this year as gadget makers struggle to attract people content with the devices they already have.

At least, that's the forecast from the Consumer Electronics Association. Unloaded this week as the the world's biggest annual gadget extravaganza, the Consumer Electronics Show (CES), gets underway in Las Vegas, the new report predicts a one percent falloff in tech device sales.

That may not seem like much - especially considering that global gadget revenues are still expected to top $1 trillion in 2014 - but it's not the dollar amount that concerns gadget companies. It's the possibility that the market is entering a long period of stagnation after a dramatic post-recession spike.

Global spending on digital devices jumped by more than $200 billion from 2009 to 2011, according to the group. The leap corresponds to the rise of smartphones and tablets, and a sharp increase in gadget sales across emerging Asian markets. Since then, however, growth has flatlined.

The association believes that 2013 will turn out to be the first year when overall gadget spending in those Asian markets tops the amount spent in North America, where device sales have stagnated since 2011. Emerging market sales are expected to keep rising in 2014, but not by enough to offset declines elsewhere, particularly because those markets are gravitating strongly toward lower-priced smartphones.

A drop in spending on gadgets may seem hard to believe. The hype cycle around the release of new devices creates a perpetual sense of growth and innovation. But that same hype cycle has created great expectations, at least in markets, like the U.S., that are already saturated with the latest, greatest hardware. Consumers have become increasingly jaded about how big the next big thing must be in order to get them truly excited. Or more charitably, they've become increasingly content with what they have. They aren't going to abandon gadgets that are already working quite well for them unless you over them something that's truly thrilling.

The last big thing to generate this kind of excitement in the hearts of the gadget-buying public was probably the iPad. Initially derided as just a giant iPhone, the Apple tablet pioneered a new category and made people buy a new device they didn't know they wanted before it existed - the perfect definition of manufactured need.

At CES this year, the best contenders for inspiring that same kind of desire are devices that bring the internet to new places in your life: mainly your home, car, wrist, and face. The question is whether wearables and the internet of things will truly enhance the kinds of information we can access - and the ways we interact with it. Will they make us feel like we're missing out on something essential if we don't buy them?

Smartphones and tablets have made the transition from novelty to necessity by opening up new dimensions of experience that have come to feel vital to our daily lives. As that market levels out, the next wave of devices must hit that high mark. Otherwise, the gadget business will stop growing and become more like the auto industry - the models may be new, but not the way we get around.