Home users may save the PC industry

System builders worried about falling PC margins need to move into consumer electronics, and hardware manufacturers are already gearing up for the shift.

Margins in the PC market have been falling in Europe since 2001, according to Gartner, and companies are being advised to move into the consumer electronics field.

Not only is this a more profitable area than PCs, but it allows for the sale of add-ons such as wireless networks and flat-screen displays, the analyst explained.

"System builders consider the digital home to be a significant business opportunity," said Shari Marion-Hoff, chief executive at research analysts Hawkeye Cohesion.

"The Digital Home initiative by Intel and others offers some prospects for growth but, until someone can make it easy to use, vendors will stick with what they know: set-top boxes and personal video recorders."

Meanwhile manufacturers of components are recognising the shift and adapting their offerings accordingly. This requires making systems quieter, more robust and easier to use.

Jos Hageman, marketing manager at Samsung's European optical division, said: "We are damping the noise levels of disc readers so that they can go in the living room, and have introduced an auto-balancing system that will allow a wide variety of discs to be played on a single machine."

Samsung has already licensed HP's Light Scribe technology, which burns labels directly onto CDs.

Such technologies are vital to system builders, since they are valuable selling points for consumer electronic devices.