The Players

Though the market for digital consumer products is only starting to take shape, the battlelines are drawn. Expect a struggle between computer firms trying to shrink their products Into consumer gizmos and electronics companies trying to make their appliances smarter. That could mean a new showdown between Japanese and Western manufacturers

With few products out so far, the playing field is still level-and some analysts say U.S. companies could leap Into the market with systems surpassing longstanding Japanese development plans. Not everyone accepts that scenario; skeptics cite Japan's awesome manufacturing prowess. American firms have all but left the market for many components, so "U.S. firms will be dependent to a large degree on Japanese manufacturers," says one Japanese analyst. Even If U.S. and Japanese firms collaborate, there's a danger that the Japanese could learn the technologies and break away to beat American firms In manufacturing. Jeff Zavaterro, an analyst at Jardine Fleming Securities Ltd. In Tokyo, says, 'The best the U.S. can hope for would be [selling] patent rights.'

Even If Japan controls hardware, Americans stand to profit In a traditional area of strength-software 'The combination of American software and Japanese technology,' says Nobuyuki Idol, 52, a Sony director, "will lead to good development of multimedia products."That sets the stage for another bloody fight over software standards. Below, some of the big players.

APPLE

Chairman John Sculley's personal electronics push is only one part of Apple's plan; he hopes to extend the Macintosh line and build a now generation of computers for business through Taligent a much publicized partnership with IBM. Stilt the biggest changes will come In the consumer arena. Apple won't manufacture everything It sells; Sculley expects to tap the miniaturization skills of Japanese firms as he moves into gadget territory. The company also took some of Its communications technologies and spun off a new firm, General Magic, to bring them to market The most surprising now strategy. licensing Its patented software that makes computers easy to use and programs easy to develop. 'If Apple pulls it off, they will become the Dolby for digital consumer electronics,' says consultant Sheridan Tatsuno. 'There will be a little apple on every consumer product out of Japan and the rest of the world.' Apple's $6.3 billion revenues could quadruple, Tatsuno predicts, 'and It would be no work-just collecting royalties!"