What is the future for the leading US tech giants? Google/Alphabet, Apple, Amazon, Microsoft and Facebook are, on the one hand, technology giants able to exert some degree of market power in their main segments and defend against new entrants and on the other, they are desperate to be insurgents and move into new markets, often in a bid to challenge one of the other tech giants, which is the incumbent in that segment. For example, Apple’s iPhone sales declined by 9% in the past quarter (to a mere $33.4bn) and Mac sales fell 5% to $7bn and so its recent growth has been driven by wearables and services. To further diversify, Apple has entered the video streaming market to challenge Netflix and Amazon. Also this week, Google has acquired Fitbit in an effort to compete with the Apple Watch and compete in the lucrative smart wearables market. Meanwhile, Microsoft was recently awarded a $10bn Pentagon cloud computing contract over Amazon and other competitors, despite a failed legal effort by Oracle to split the contract several ways on grounds of the “winner-takes-all nature of the emerging cloud computing business”.
At the same time, some major countries such as Russia, China, and Saudi Arabia have had an uneasy relationship with some of these same tech giants. As a result, many of these countries have become deeply enmeshed in the evolution of the technology sector both via regulation and in supporting its national champions, in part to ensure their ‘independence’ of the dominant American quintet and in part to exert greater control over citizens’ access to information. Rather than developing its own champions or seeking ‘independence’, the EU has been most aggressive in imposing fines on these tech giants (which we will come back to in TP6). The EU competition commissioner Margrethe Vestager recently said that breaking up the tech giants should be a ‘last resort’, while notably not taking the possibility off the table. Yet, although often lost in these debates, these ‘US’ tech companies do not necessarily reflect US interests and so there has been increasing talk by US presidential candidates and even the Trump Administration of breaking up some of these companies.
- In class, I asked for a show of hands, but pick your favourite/least favourite tech giant and consider where they will be within a decade’s time. Explain why you expect they will be stronger or weaker (or broken up or even will have vanished!)
- Should we be worried or pleased to see this healthy competition between these tech giants or should we want to see them broken up?
- To what extent can other leading countries expect to be able to influence the trajectory of the tech sector and is such intervention desirable or not?