Technology – what it means for investors

Digitalization is advancing

• 2017 was the first year in which global smartphone sales stagnated. Furthermore, growth in the number of internet users was only 7% as against 12% in the previous year. After all, more than half of the world is now online. 
• People are spending more and more time online. Adults in the US spent almost 5.9 hours per day on digital media in 2017; this compares with 5.6 hours in the previous year. Around 3.3 hours of this was spent on mobile devices. 
• The principle of acceleration endures. While it took around 80 years for dishwashers to become an everyday item, e-commerce went mainstream within a decade and millennials can no longer imagine life without their smartphone.

Technological advances are shaping new trends

• Despite iPhone 8 and Samsung Galaxy Note, the average global selling price of smartphones continues to fall. Falling costs are encouraging their rapid spread to less developed markets. 
• Mobile payments are becoming more popular. With more than 500 million active mobile payment users, China continues to lead the rest of the world. 
• Voice-controlled products like Amazon Echo are taking off. The installed base of Echo in the US rose from 20 million in the third quarter of 2017 to more than 30 million in the fourth quarter.

Digital disruption is changing markets

• The healthcare markets are in the embryonic stages of digital disruption: From online pharmacies, through telemedicine, to the digitalization of medical processes. Big data and big tech will change these markets, along with most service sectors too, over the coming years. 
• Internet leaders such as Google, Microsoft, IBM, and Amazon will offer more platforms for artificial intelligence, reflecting the fact that the share of corporate spending on artificial intelligence is set to grow.

Tech companies today

• Tech companies are driving the economy. In the US and China, they already account for about 25% of corporate earnings and market capitalization, as well as an even greater share of earnings growth and a growing proportion of research and development investment. 
• Technology companies face a "data protection paradox." On the one hand, customers expect better consumer experiences thanks to "big data"; on the other, the rules on protecting consumer privacy are being tightened. 
• Immigration remains important for tech firms. More than half of the highest valued technology companies in the US were founded by first or second-generation immigrants. In fact, Uber, Tesla, WeWork, and Wish were all created by first-generation founders.

Digitalization is a gradual process

• Digital commerce continues to grow disproportionately fast. In the US it increased by 16% in 2017 versus 14% in 2016, with Amazon accounting for the biggest share at 28%. "Bricks-and-mortar" retail sales, on the other hand, are continuing to fall. 
• Big tech is competing on multiple fronts. Via Google Home ordering, Google is expanding from display platform to trading platform. Amazon, on the other hand, is also growing in advertising. 
• China is catching up fast in its role as a hub for the world's biggest internet businesses. Today, nine of the twenty largest internet businesses in terms of market capitalization are based in the People's Republic as against eleven in the US. Five years ago China had just two and the US nine.