Division and prosperity

Bain & Company mapped out trends in the tech sector

Bain & Company analyzed the technology sector and made a forecast of how it will develop. The dominance of IT giants is ultimately a blessing for consumers, the chip crisis will lead to the dominance of narrow-profile processors, and the struggle between China and the United States will lead to a surge in investment in technology, the company's experts say.

Consulting firm Bain & Company has published an annual report on the state of the technology sector and the impact of technology on consumers, business, the economy and geopolitics around the world. Experts have identified several trends that determine the present and future in the world of technology.

As noted in the report, digital technologies are attracting more and more attention from both businesses and investors. The first is reflected in the digitalization of companies. The second, for example, can be traced in the behavior of venture capitalists. So, based on the Startup Investment Cruncher database from Bain, from 2010 to 2020, most of the investments fell on technology startups. The COVID-19 pandemic has only exacerbated this trend.

At the end of the first quarter of 2021, almost 70% of venture capital investments fell on technology companies, and their total volume has doubled compared to the beginning of 2020.

The significant increase in investment is also directly related to geopolitics. In particular, the tense relations between China and the United States and the trade war between these two countries have led to the fact that each of the parties is forced to speed up the development of their own technologies. Thus, China plans to spend about $ 1.4 trillion in the near future on the development of artificial intelligence, the deployment of 5G mobile networks and the production of semiconductors.

By the way, the acute shortage in the microchip market, which has been observed since the beginning of the year, has also led to serious changes in the technology sector. If until now the market was dominated by general-purpose microprocessors, now, Bain experts note, the popularity of highly specialized chips (ASICs) will grow.

Finally, Bain analyzed the activities of the IT giants that dominate the global market (Alibaba, Alphabet, Amazon, Apple, Facebook, Microsoft, Tencent) and their mergers and acquisitions over the past 15 years. These companies are regularly accused by both competitors and authorities of reducing the level of free competition and thereby harming not only business, but also end consumers. However, after analyzing the deals of the giants, the authors of the report came to the conclusion that, firstly, they constitute only a small fraction of the global volume of M&A deals, and secondly, they almost always benefit consumers in one way or another. The acquisition of competing companies by the largest corporations, the report notes, either lowers the price of a product, or makes the technology more affordable, or leads to an improvement in the purchased product.

As a result, 72% of deals made by giants in the United States worth more than $ 300 million each in the period from 2005 to 2020 turned out to be profitable for end consumers, according to Bain.

“These acquisitions have increased the fragmentation of the market, fueled increased venture capital investment, and fueled competition among the giants themselves,” summarize the president of Bluelife Inc., Blumenthal, Vivian.