Last week was the end to an eventful year for technology companies, in which technologies continued to evolve as did the environment in which they operated.
Computing is hitting new frontiers, far away from the traditional computer table where it started out. Today it is hitting mobile devices, sitting on the kitchen counter, working itself into hand-worn or head-mounted wearables, jumping into vehicles and even taking to the skies. All of this isn’t happening at the corporate level either. In fact there’s a new personal touch to everything as companies scramble to get us information and entertainment at our fingertips.
The downside is the loss of privacy because of the premium on individual data that can be used to train machines. People increasingly are losing their choice not to share data as their choices are known to technology companies offering smart phones, wearables and various digital services. This could advance behavioral sciences but also lead to job losses as many jobs can be taken over by machines when they are commercially viable. It could therefore also lead to the concentration of wealth in a few hands.
As we start out into 2017, it’s apparent that these trends have been realized to varying degrees with the promise of further development this year:
AR-VR: Head mounted wearables have moved to specific use cases ever since Alphabet GOOGL-owned Google’s Glass was severely criticized for its invasion of privacy. In 2016, there was headway with Facebook’s FB Oculus Rift coming to market as the first major virtual reality device and Microsoft Hololens exploring interesting possibilities in augmented reality. Google hasn’t exited the market by any means, and this year is likely to see it making a comeback with some AR device of its own. Apple AAPL could also enter the fray for the first time. IDC expects the AR and VR headset shipments to grow at a CAGR of 108.3% from 2015 to 2020, reaching 76 million units.
Wrist-Worn Wearables: 2016 was a bad year for this market with major players like Apple stumbling. Cheaper wearables like those from Fitbit and specific-use devices from Garmin did relatively better. IDC has been optimistic about smart watches and attributed the 2016 softness to a lack of innovation. Apple’s focus on the health tracking aspect could see it regain some share this year. But competition is also strengthening with Garmin building its own client base and Fitbit buying out smart watch vendor Pebble thus pooling their resources. 2017 could see increased decoupling from smartphones, increased voice activation and even more intrusive applications. Juniper Research expects units to move from 80 million units in 2015 to 420 million units in 2020.
Digital Home: The growth in this segment is largely related to Amazon’s AMZN Echo sales, as the e-commerce vendor made the most of its first mover advantage. Google Home may be a good product but it still has some way to go in terms of customer reach. Amazon has created synergies between its existing user base, which is about half the U.S. population by allowing people to access their digital entertainment purchases through voice commands to Alexa, which powers the Echo. Alexa is also being but into other connected home devices, thus further increasing its usefulness. Amazon should make further strides in 2017, but Google and Apple will make progress.
Self Driving Cars: The technology is still under development, but there was notable progress last year. Technology companies by and large have decided to stick to automating the driving process leaving the car manufacturing to automakers. Despite the race to develop technology and test driving under different conditions, adoption is expected to be slow up to 2020 and pick up strongly over the next five years.
Drones: 2016 was a year of testing and talking as far as drones are concerned. Facebook’s drone for beaming Internet signals crashed a number of times, Amazon tested goods delivery in the UK while Google tested delivering Chipotle burritos. Regulators continue to drag their feet because of privacy and security concerns, so broad-based adoption didn’t happen last year. There are chances of actual drone-based deliveries happening this year.
Artificial Intelligence: AI will drive a lot of technology in 2017 and draw on ever growing data volumes. The last year saw a huge increase in AI-based chatbots as different brands deployed the technology for routine customer interaction and advertising. Facebook Messenger has emerged as a major platform for bot development with several thousand bots. Microsoft’s MSFT Skype and Slack are other important platforms developing the technology. Expect acceleration in bot technology and other AI applications (such as Watson for healthcare) this year.
Cloud: This story continues to unravel from the last few years with Amazon remaining the largest player, Microsoft growing at accelerated rates and other players like IBM and Google continuing to build capabilities. Amazon is essentially building off its first mover advantage while Microsoft’s cloud business is a huge growth story and this year could see it closing the gap with Amazon based on its enterprise clout, existing software stacks, collaborative approach, machine learning progress and growing hardware range.
But software isn’t all there is to the cloud and hardware that actually houses the data and transports it is just as important. There are many changes going on in the area and 2017 is likely to see major contributions from players like NVIDIA NVDA , Intel INTC, IBM and also, possibly AMD. ARM-based architecture should be expected to make inroads into Intel’s stronghold this year although Intel of course will not be sitting idle. Networking companies, especially software-focused ones will grow no doubt, but we don’t foresee a major overhaul in Cisco’s market-leading position.
IoT: The top IoT trends are already mentioned above except retail, smart cities, lighting and such other infrastructure related areas. These markets will also grow strongly. Government personnel are growing increasingly positive about IoT solutions for water management, energy conservation, transportation, public safety and environment protection, which should translate to increased spending in these areas.
Payments: This is an ongoing revolution no less with both Apple and Android Pay being now widely available. Retailers are also adding capabilities to speed up both online and in-store checkout. Blockchain technology for processing not just payments but also other transactions made significant progress last year with banks contributing through collaborations with technology companies such as Microsoft and IBM.
Digital Advertising: The market is dominated by Google and Facebook despite complaints and allegations attacking Google’s business model and Facebook’s refusal to offer adequate ad measurement data. The situation is unlikely to change immediately although there is always the consideration that Netflix or Amazon could start an ad-supported business. This would however pull in TV ad dollars thus expanding the market while limiting Google and Facebook’s growth.
With President-elect Trump turning more protectionist following in the footsteps of other large economies, some skirmishes with governments such as China may be expected. Whether this benefits the U.S. is as yet an open question.
Fall Of The Apple: The biggest tech disappointment of 2016 is easily Apple as the company started seeing declining unit volumes and revenues with innovation more or less coming to a standstill. But 2017 should see a resurgent company with developments in all areas including phones, wearables, home, AI and the host of services it currently provides.
|
Company |
Last Week |
Last 6 Months |
|
AAPL |
-0.13% |
+20.78% |
|
FB |
-2.00% |
+5.58% |
|
GOOGL |
-2.12% |
+16.33% |
|
MSFT |
-2.22% |
+28.30% |
|
INTC |
-1.79% |
+18.07% |
|
CSCO |
-0.79% |
+10.66% |
|
AMZN |
-2.14% |
+8.46% |
What happened in the last week –
Corporate
Facebook Talks To Media Rating Council: The marketing industry’s watchdog for media measurement research and methodology has held talks with Facebook. The social networking company earlier admitted to incorrect measurement of viewership metrics and the meeting was likely with respect to these mistakes. Facebook doesn’t define viewership metrics the way other industry players do, nor does it allow a lot of independent measurement companies access to data on privacy considerations. Nor does it present its own numbers in a way that they may be compared with others. This makes it hard for advertisers to determine the ROI on advertisements. Facebook maintains that it provides adequate tools.
Citron Expects Downside In NVIDIA: The research firm, known better for its contrarian views, has tweeted that NVIDIA shares are headed to $90 this year citing the following risks: first, the current growth is attributable to gaming share gains at AMD’s expense rather than new addressable markets; two, growing competition at the data center from Intel, AMD, Xilinx; three, Intel already has access to its IP through a licensing deal; four, Intel’s annual payments end this quarter so there will be a hit to EBITDA; five, NVIDIA’s gross margin could come under pressure as it has to share profits with TSM which manufactures its chips so Intel, being vertically integrated, is better positioned to charge less for its chips and still generate a stronger gross margin; and six, Google’s TPU and other GPU workarounds. Shares plunged following the tweet although there was no mention of the fact that NVIDIA too has a few new products in the pipeline, that gaming PCs and VR systems continue to offer opportunities, that the machine learning market is just getting started, so there may be room for multiple players and that Intel’s contribution coming to a close is old news. NVIDIA shares plunged following the tweet.
Legal/Regulatory
Amazon Won’t Turn Over Data: Important conversation related to James Bates' alleged murder of Victor Collins in November 2015 may have been recorded by his Echo device, but Amazon is unwilling to release the data in the absence of a “valid and binding legal demand properly served on us”. This isn’t of course an outright denial, but technology companies will make it as difficult as possible for law enforcement to extract private data from devices. Their lives (and/or the lives of the devices) depend on it. Public opinion also varies hugely on the issue as terror threats, government surveillance and privacy remain concerns.
South Korea Fines Qualcomm: The Korea Fair Trade Commission (KFTC) has fined Qualcomm 1.03 trillion won ($854 million) finding that the company had abused its dominant position to force handset makers to license an unnecessarily broad set of patents as part of its modem chips. The regulators also determined that the company restricted competition by refusing or limiting the licensing of its standard essential modem chip patents to rival chipmakers like Intel, Samsung and MediaTek. It has ordered the company to rework deals with handset makers when requested and get into fair negotiations with rivals.
New Technology/Products
Apple iPhone Leak: Apple will likely launch three new iPhones in second-half 2017, two of which will probably be upgrades and one a completely revamped new design. Model sizes will be 4.7-, 5.5- and 5.8-inch according to DigiTimes. The first two models will use TFT-LCD panels while the 5.8-inch model will use AMOLED. The company is currently expected to sell 60-70 million units of the AMOLED model this year. Samsung will be the sole supplier of OLED panels at up to 20 million panels a month.
Apple’s First AI Research Paper: The paper talks about techniques to improve machine learning using synthetic rather than real world images. The obvious advantage of using synthetic images is that they are already labeled, the disadvantage would be that they may not exactly reflect real world images thus hindering the system’s ability to apply the knowledge in real world situations. The Apple solution recommends Simulated+Unsupervised learning using Generative Adversarial Networks that pit two neural networks against each other resulting in synthetic image boosting to increase its realism.
Amazon Drone Patent: Amazon isn’t just thinking of drone deliveries, it also has flying warehouses up its sleeve. In April 2016, the ecommerce company was awarded a patent for an “airborne fulfillment center” (AFC) positioned high up (around 45K feet), but CNBC was the first to break the news last week. The AFC is expected to remain in the air indefinitely and serve as a launchpad for drones doing deliveries or larger aircraft transporting inventory, supplies and workers to and from the flying warehouse.
M&A and Collaborations
Facebook Acquires Eye Tribe: Facebook’s Oculus has reportedly bought Danish eye tracking technology company The Eye Tribe. Eye tracking is considered to be an important part of VR as it enables hardware to serve up things depending on the direction of the user’s gaze. The company has already sold thousands of its developer focused eye tracking systems for embedding into hardware devices. The company has raised $5.32 million in funding from Startup Bootcamp, Richard Sanquini and others, as well as grant money from The Danish National Advanced Technology Foundation.
Facebook R&D Team Partnerships: Facebook has partnered with 17 leading national universities under the Sponsored Academic Research Agreement, or SARA. The SARA is designed to speed up Facebook’s secretive hardware project called Building 8 speculated to be focused on virtual reality, artificial intelligence and connectivity innovations. It is headed by Regina Dugan, former irector of the federal Defense Advanced Research Projects Agency and leader of Google's Advanced Technology and Projects group.
Some Numbers
Apple Holiday Sales: A couple of analytics firms offered holiday sales numbers. According to Yahoo’s Flurry, the most popular smartphones and tablets activated world-wide between Dec. 19 and Dec. 25 were from Apple (44% of activated devices in the period), Samsung (21%) and Huawei (3%) with Amazon, LG Electronics, BBK Electronics’ Xiaomi Corp. and Lenovo Group’s Motorola Mobility accounting for 2% each. Google’s Pixel, which is currently limited to a few select U.S. telecoms grew nicely, but didn’t make it to the top five. Significantly, Apple’s growth rates decelerated for the second straight year while Samsung’s accelerated. Another app analytics company, Mixpanel found that from Dec. 25 to 27, the number of unique active iPhone 7s increased by nearly 13%, while Android devices grew a mere 3%. e number of unique active Google Pixels increased 8.5%. Apple Watch sales growth also decelerated.
Mobile App Downloads: Facebook topped the list of most popular apps in 2016 according to market research from Nielsen while Facebook messenger came in as number two. Google sites, including Maps, Search, Play
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