After Slow Start, Internet Appliance Sales Expected To Soar.

Amid downturns in virtually every corner of the Internet-connected universe, forecasts for the fledgling Internet Appliance (IA) market indicate a sharp rise in sales of both IA devices and microprocessors for such appliances.

A recent research study by Cahners In-Stat Group has found that the market will have sales growing more than 40 percent per year between 2000 and 2005. Cahners views the IA market in two distinct product categories: Internet terminals and TV-based IAs. The Internet terminal category includes cordless Web tablets and corded terminals, while TV-based IAs consist of set-top box products, including Microsoft WebTV and AOLTV. "While the introduction of the AOLTV box will invigorate that sector, sales of Internet terminals are expected to surpass those of TV-based LAs in 2001," says Brian O'Rourke, Senior analyst with In-Stat's Multimedia Service.

Cahners has also predicted that total IA sales will jump from a paltry $219 million in 2000 to $1.3 billion in 2005. (Interestingly, Cahners forecasts that much of the growth will occur outside the traditional PC-centric markets in North America and Western Europe.) Semiconductor manufacturers, bloodied in recent months, will benefit from the expanding IA market: Sales of Internet Appliance-based microprocessors will jump from $18 million in 2000 to $91 million in 2005.

Interestingly, Cahners sees a big change in the flash memory market. For the past two years, flash memory demand has outstripped supply, creating high prices. But prices are expected to plunge over 40 percent annually between 2000 and 2005. As next generation IAs come online, they will contain double the flash memory capacity of today's units.