By IBISWorld Analyst Kevin Boyland and Research Editor Lindsay Holloway
In 2001, Apple Inc. unveiled the first iPod to the world, and the iPhone and iPad were just figments of Steve Jobs’ imagination. A decade ago, internet users didn’t have Facebook or Twitter, the concept of Web 2.0 was just entering the technophile’s lexicon and cloud computing hadn’t been dreamed up yet. In those short 10 years, the American consumer has been introduced to 3-D TVs and cameras, a variety of hybrid vehicles to pick from (the Toyota Prius took the lead in 2000) and the ability to video chat with someone on the other side of the world – for free – with Skype. Once named “new technologies to watch,” these technologies and companies have become household names.
If the past decade is any indication of how fast technology advances and evolves, the future has a lot in store. And along the way, various industries will feel the effects, proving beneficial, detrimental or both. In particular, computing software, manufacturing and medical industries are experiencing some of the greatest changes and advancements. IBISWorld has identified 10 tech industries that have experienced significant change or growth over the past five years. While they vary from emerging to mainstream, they’re all ones to watch in the years ahead.
Technology: 3-D printing
Industries affected: manufacturing, automotives, aerospace, architecture, medical devices, software
Notable players: 3D Systems Corp., Stratasys Inc., Z Corporation
Originally debuting as a technology used only by a few manufacturers and designers to build prototypes, 3-D printing is transforming into a technology that the New York Times says is “spurring a manufacturing revolution.” Big claims aside, 3-D printers and their impressive abilities are making waves in the tech scene.
In fact, over the past five years, 3D Printer Manufacturing industry (IBISWorld report OD4428) revenue grew at an average annual rate of 7.1%, which actually masks 13.0% and 20.8% growth in 2010 and 2011, respectively, due to a recessionary decline in 2009. The industry leaped ahead in recent years, driven by rapid technology developments and new applications for 3-D printing. More specifically, 3-D printers are being used in the Medical Device Manufacturing industry (33451b), a market where demand is high and stable. Aerospace manufacturers make up another market with strong potential for 3-D printing technology because of its ability to convert designs to 3-D models almost instantly. Although the Aircraft, Engine and Parts Manufacturing Industry (33641a) is only forecast to grow slowly over the next five years, the industry’s continued desire to reduce the cost of developing models and prototypes will drive future demand for 3-D printed products.
Similarly, companies that provide 3-D printing and rapid prototyping services (OD4581) have expanded significantly. After a recessionary lull, industry revenue jumped 11.6% in 2010 and 18.3% in 2011. Although this particular industry’s consumer market is still in its infancy, it has a tremendous amount of growth potential as 3-D printing and rapid prototyping gain popularity and customers from a wider array of industries learn of their uses and potential. Through 2017, IBISWorld projects that industry revenue will grow at an average annualized rate of 14.0% to $1.3 billion.
Technology: Enterprise software
Industries affected: business analytics and enterprise software publishing
Major players: IBM, Microsoft, SAP AG, Oracle
Until recently, innovation and investment in enterprise software was flat because consumer internet start-ups garnered the largest share of private investment. This trend is changing quickly: According to a quarterly survey by Dow Jones VentureSource, in the first quarter of 2012, venture capitalists invested $2.0 billion in 257 deals with young IT companies. Businesses today have unprecedented amounts of data to manage and need to connect with globally dispersed workforces and customers. The robust internet connections that have made cloud computing possible allow firms to offer scalable, cost-effective software packages that can address businesses’ data and global needs. IBISWorld expects the Business Analytics and Enterprise Software Publishing industry (IBISWorld report 51121c) to grow at an annualized rate of 3.8% to $31.5 billion over the five years to 2017.
New, innovative start-up companies have emerged to address modern-day problems that didn’t exist five years ago, such as search-engine optimization, social media and mobile marketing, and facilitating internal collaboration across borders and throughout supply chains. In contrast to an expensive software license, consumption and subscription-based software offered through the internet is more scalable and economical to customers. Furthermore, with software distributed over the internet, traditional marketing and distribution barriers don’t exist; start-up companies have an amazing opportunity to take away market share from some of the industry’s major players.
This threat to major players hasn’t gone unnoticed either. Oracle recently acquired cloud-based social marketing company Virtue ($300 million), recruitment software platform Taleo ($1.9 billion) and customer-relationship software developer RightNow ($1.5 billion). Salesforce acquired Buddy Media ($689 million) and Radian6 ($340 million), which are both enterprise social software platforms. Then there’s Microsoft’s recent $1.2-billion purchase of enterprise social network Yammer. In just four years, Yammer has added more than 4 million users (including 85.0% of the Fortune 500) and has garnered $142.0 million in private investment. Its revenue is doubling every quarter.
Technology: Virtualization software
Industries affected: collocation facilities, computer manufacturing, semiconductor and circuit manufacturing, security software publishing, IT consulting
Major players: VMware, Citrix, Oracle, Microsoft, Red Hat
Virtualization software acts as layer between a computer’s hardware and the software that runs on it. Multiple operating systems can be run over this layer, with each operating system representing an independent, virtual machine (VM). In particular, server virtualization is revolutionizing the IT industry. Businesses today need to manage and maintain complex information infrastructures, and virtualized servers are simultaneously lowering costs and giving firms more flexibility in managing and expanding this infrastructure. While virtualization has been around for the better part of 10 years, growing awareness of its advantages is increasing competition.
By running multiple (typically about four) virtual servers on one physical server, firms need fewer servers and, thus, have lower associated power and cooling costs. Having fewer servers also means that less data center floor space is required. As collocation facilities become more prominent, this factor will reduce the cost of rented floor space. Hardware efficiency increases dramatically with virtualized machines: a typical server uses about 15.0% of its hardware, whereas a server running multiple VMs can increase its hardware utilization to as much as 80.0%. Furthermore, virtualization provides organizations with the flexibility to expand on demand: By cloning an existing virtual machine, a new virtual server can be up and running in minutes. Finally, because virtualization takes underlying hardware away from computer operations, firms gain flexibility in negotiating with hardware vendors. Indeed, virtualization has been a major contributor to the commoditization of computer hardware and continues to put pressure on the Computer Manufacturing and Semiconductor and Circuit Manufacturing industries (IBISWorld reports 33411a and 33441a).
Security concerns, such as unsecured VM-to-VM communications, poor visibility into server traffic and VM configuration and patch management, are creating plenty of opportunities for the Security Software Publishing industry (51121f). Security software firms may move toward offering specialty services on an infrastructure-by-infrastructure basis, providing customized applications to manage firms’ intertwined virtual and cloud environments. Opportunities abound in the small-business realm as well. According to a recent survey from disaster recovery and data protection firm Acronis, 29.0% of small to medium-size businesses predicted that their servers would be virtualized by the end of the year. In contrast, only 14.0% of large enterprises predicted that they would adopt virtualized servers over the same period (according to a survey by research firm Gartner). As smaller organizations look to manage and implement complex virtual environments, the IT Consulting industry (54151) will benefit.
Industries affected: manufacturing, automotive, hospitals, specialist doctors
Notable players: iRobot, Intuitive Surgical, Accuray Inc.
Although many Americans’ perception of robots may be informed by The Jetsons, R2D2 or a Roomba vacuum, robotics as a technology is penetrating a greater number of industries every year. Automakers were one of the earliest adopters of industrial robots, which are now ubiquitous within automotive manufacturing (IBISWorld report 33611a). Industrial robots are regularly used to weld joints, assemble components and handle heavy items. Continued advances, particularly in vision and navigation, are allowing them to complete tasks with greater accuracy. According to The Robot Report, vision and navigation systems are the next level in the evolution of industrial robotics as they branch out of the automotive industry and into many other areas.
One industry that is increasingly relying on robotics is hospitals (62211). Originally approved for general abdominal procedures, like gallbladder removal, robotic surgery (where the surgeon manipulates computer controls rather than a scalpel) is now used for heart and prostate cancer surgery, gynecological procedures and bariatric surgery, among others. Proponents of robotics in the operating room note that a robot is steadier and has a wider range of motion than human hands.
This greater use of robotics in hospitals and by specialist doctors (62111b) is driving astronomical demand for the Robotic Surgery Equipment Manufacturing industry (OD4074). Industry revenue increased at a whopping 30.7% annualized rate over the past five years. Buoyed by strong demand and sales, profit margins have also increased considerably, which has boosted the number of new entrants into the industry over recent years. Product innovation, continued acceptance of robotics in hospitals – and in general – and an aging American population will keep robotics on its upward trend into the future. Although growth will slow in the coming years due to higher regulation and taxes, revenue is still expected to increase at a strong average annual rate of 14.9% to $4.2 billion in the five years to 2017.
Industries affected: design editing and rendering software, smartphone app developers, internet publishing and broadcasting
Major players: Adobe, Apple Inc., Google, Wix, StackMob
Hypertext markup language (HTML) is the standard protocol for formatting and displaying information and documents through web browsers. Internet users experience HTML every day, yet few notice it or know what it is. Thus, it should come as no surprise that the introduction of HTML5, the latest revision of the HTML standard, was met with very little pomp and circumstance. Still, HTML5 is truly a game changer.
Since the advent of web video, there has been no way to naturally integrate video with HTML. But not anymore: HTML5 integrates video and many more features, such as audio, browser storage, drag-and-drop capabilities and vector graphics. The advancements are great news for innovative developers, but bad news for the companies in the Design Editing and Rendering Software industry (IBISWorld report 51121d) that produce plug-ins.
HTML5 creates a standard, consistent experience across all web-enabled devices. In other words, it works on any device. Because the most-used mobile app is the web browser, the adoption of HTML5 will make life a lot easier for mobile application developers. By programming once in HTML5, developers can now reach consumers through every mobile device. More importantly, by programming in HTML5, mobile apps may cease to become, well, apps. Instead, apps would exist on the internet and would be accessed through web browsers, fundamentally changing the nature of the smartphone app industry. Furthermore, HTML5 can provide consumers with media-rich mobile content that is lighter on a phone’s hardware, which would increase battery life. Publishers and advertisers now have an array of media-rich tools for delivering content, without the need to program differently for separate devices (i.e. mobile website vs. tablet website). These streamlined operations will benefit the Internet Publishing and Broadcasting industry (51913b) and the Social Network Game Development industry (OD4564), as well as creators of targeted ad software.
Technology: Next-gen batteries and fuel cells
Industries affected: automotive, utilities, batteries, power generation
Notable players: UTC Power, Duracell, US Department of Energy
Although US battery technology lags behind that of Japan and other Asian countries, technological change in the industry is still high. In the coming years, innovation will help the Battery Manufacturing industry (IBISWorld report 33591) charge forward as companies focus on developing batteries that have longer life spans, produce a higher voltage, reduce emissions and improve recharge frequency and time. Duracell is already making strides in battery innovation. In June, the company announced its patented Duralock technology, which allows batteries to last up to 10 years after the purchase date. Other battery advancements are occurring in the Car and Automobile Manufacturing industry (33611a), particularly lithium-ion batteries, which are more lightweight and have greater life spans and energy densities. With the gaining popularity of electric vehicles, there has been an increasing scope for high-power lithium-ion batteries. Over the next five years, there will be significant growth in demand for lithium and other batteries for electric vehicles. For example, the Taxi and Limousine Services industry (48533) is already investing in fuel-efficient vehicles or those powered by alternative fuels to reduce its dependence on rising gas prices.
Hydrogen fuel cells have also been growing in popularity in the auto industry. According to Hydrogen Fuel News (HFN), major automakers have opted to make use of hydrogen fuel cells due to their high energy production and zero greenhouse gas emissions. So far, the only companies moving forward with hydrogen fuel cells are foreign automakers, which means there’s lots of room for opportunity for US automakers. Japan’s Mazda, for example, has its sights set on the technology and “believes it’s a sign of the future for the auto industry and the future of transportation,” says HFN. As advances in fuel cell technology play out and make it more affordable and efficient, more companies will begin pursuing and adopting the technology.
Growth in these areas is only expected to pick up in the next five years, especially with the US Department of Energy (DOE) recently launching a new Energy Innovation Hub for advanced research and development (R&D) on batteries and energy storage. The R&D efforts through the new hub, which will be funded up to $20 million in 2012 and $120 million over five years, will help advance cutting-edge battery and energy storage technologies. Says US Secretary of Energy Steven Chu, “With the advances from this R&D effort, we will be able to design and produce batteries in America that last longer, go farther and cost less than today’s technologies.”
Technology: 4G LTE networks
Industries affected: Wireless telecommunications carriers, telecommunications and wireless infrastructure, internet publishing and broadcasting
Major players: Verizon, T-Mobile, Sprint, AT&T
The term “fourth generation, long-term evolution” (4G LTE) is thrown around quite a bit by wireless telecommunications carriers (IBISWorld report 51332) – but it’s not just a buzzword. Rather, 4G refers to a specific set of international wireless standards, which state that a 4G network must offer speeds of 100 megabits per second (Mbps) for mobile use, or 1 gigabit per second (Gbps) for low mobility situations (i.e. sitting down). In contrast, 3G networks must offer paltry speeds of about 2 Mbps. In reality, most firms touting their 4G networks don’t yet meet the appropriate standards and should instead fall somewhere between 3.5G and 3.9G. Technicalities aside, 4G LTE networks will significantly change the mobile world.
IBISWorld expects the number of mobile internet connections to increase at an annualized rate of 12.1% to about 275 million from 2012 to 2017. Traffic over mobile networks now consists almost entirely of data. In fact, Mobile Future, a coalition of vendors and consumers, estimates that by 2014, voice traffic will only comprise 2.0% of total wireless traffic in the United States. All of this data traffic is putting a severe strain on networks. A 2011 survey conducted by Credit Suisse found that mobile networks in North America are running at 80.0% capacity. Add to this the fact that, in late 2011, the wireless association CTIA reported that the number of mobile devices in the United States had surpassed the number of people, and it is clear that 4G network expansions can’t wait any longer. As such, the Telecommunication Network Equipment Manufacturing industry (33421) is expected to benefit as network developments and upgrades hasten the need for related equipment. After years of strong decline, the industry is forecast to post 2.3% annualized growth to $11.7 billion in the five years to 2017.
According to a report by consulting firm Deloitte, wireless telecommunications firms in the United States are expected to invest as much as $53.0 billion in 4G network build outs over the next five years. This move could contribute as much as $151.0 billion in GDP growth and create as many as 771,000 new jobs from 2012 to 2016. And, just as 3G technology led to the mobile web and its endless associated applications, 4G technologies will facilitate new opportunities that people haven’t even thought up yet. 4G LTE networks are 10 times faster, on average, than their 3G counterparts, presenting the opportunity to deliver more data-rich content to consumers, particularly video. A recent Cisco report found that, although 4G connections represent only 0.2% of mobile connections, they already account for 6.0% of mobile data traffic. The computing power of mobile devices will also increase: With storage and computing power stored in the cloud and accessed through robust 4G connections, smartphones and tablets will be able to far exceed their own hardware’s computing capabilities.
Technology: Near field communication
Industries affected: mobile phone manufacturing, wireless carriers, banking, credit card companies, e-commerce, advertising
Notable players: Nokia, Philips, Sony, Google, Apple
Although near field communication (NFC) isn’t a new concept, the low murmur it was once creating is now a loud buzz thanks to support from big companies like Nokia and Sony, and from new developments and compatible products. NFC is short-range wireless connectivity that allows transmission of data from one device to another (or an NFC tag); it’s the technology behind “tap and go” credit cards that are popular today.
While contactless credit card payments (IBISWorld reports 52221 and 52232) will remain a key market for NFC, the variety of potential uses made possible by smartphones is much wider. According to Forbes magazine, More than 550 million smartphones are estimated to implement the technology by 2016, and mobile commerce transactions are expected to total $670 billion by 2013. As such, cell phone industries stand to feel the biggest impact. Although most cell phone manufacturers (33422) operate abroad, more NFC-enabled phones mean greater opportunity for related apps, advertising campaigns and more. Last year, Google Wallet launched in limited markets, allowing users to pay for, say, a Coke, a taxi or a prescription by simply passing their phones over an NFC-enable terminal. This year, Sony introduced “Smart Tags”, which use NFC technology in the new Sony Xperia P smartphone to change modes and social network profiles at close range.
In 2012 and the years ahead, as the shares of people using smartphones and consuming media on the go increase, NFC apps, tools and advertising will become more pervasive in daily lives. In June 2012, for example, Google reported that it shipped 1 million NFC-enable Android devices every week. Furthermore, all major phone, credit card and carrier vendors, and a good number of governments plan to trial the technology in 2012.
Technology: Ad serving platforms
Industries affected: search engines, internet publishing and broadcasting, ad targeting software, advertising agencies
Major players: Google, Microsoft, Facebook
The internet has revolutionized marketing and underpinned the transition from mass media to targeted, individual marketing. IBISWorld expects that the internet will account for about 9.5% of all advertising expenditures in the United States in 2012. Rightfully so: Marketing firm MDG Advertising estimates that online marketing costs 62.0% less than traditional marketing. Add to this the fact that 40.0% of smartphone users compare prices online while in a store and 78.0% of consumers do product research online. Additionally, the internet is not only cheaper but also potentially more effective at connecting the right advertisement to the right consumer. Ad serving platforms provide the means for advertising agencies (IBISWorld report 54181) to reach their targeted audiences and are only becoming more essential as internet advertising expenditures increase.
Ad serving platforms are fueled by data. Firms like Google, Microsoft and Facebook sort through the vast amount of data to deliver targeted ads to consumers, generating huge profit margins through processes that, at this point, are almost entirely automated. And these platforms are getting more effective every day. Search engines (51913a) are moving away from keyword searches and are developing and expanding their semantic search capabilities, delving deeper to ascertain a searcher’s intentions. HTML5 provides a more consistent way of analyzing data, and its geolocation features will provide location-based targeting capabilities to advertisers. More robust mobile internet connections are allowing advertisers to deliver more media-rich ads to consumers and are expanding the reach of ad serving platforms. As advertisers increasingly look to search engine marketing as a more valuable and cost-effective solution, industry revenue is projected to rise 6.8% per year on average to $24.1 billion over the five years to 2017.
Data traffic over the internet is increasing exponentially, and the internet’s share of advertising revenue is expected to continue to increase over the next five years. As ad serving platforms become more adept at analyzing data, the firms that operate them will be able to charge a premium for their services. Advertisers will be more than happy to pay because internet advertising (mobile advertising in particular) presents significant opportunities to influence consumer purchases. Within the next five years, geolocation services will enable advertisers to target consumers with ads and coupons at the most opportune moment, as they pass by a store or walk down a certain aisle.
Technology: AMOLED displays
Industries affected: cell phone manufacturing, consumer electronics, lighting and bulb manufacturing, wireless carriers
Notable players: Samsung
Following in the footsteps of positive trends in the light-emitting diode (LED) industry and the organic LED (OLED) industry, the high-quality and energy-efficient characteristics of active-matrix OLED (AMOLED) technology are being welcomed with open arms. Mainly used in mobile phones, media players and digital cameras, AMOLED is a thin-film display technology that has higher refresh rates, quicker response times and lower power consumption. Increasingly, AMOLED displays are also being pursued for larger electronics.
Current demand for AMOLED screens is high – high enough that leading producer Samsung Display can’t keep up. In response to supply shortages, the company constructed a new production facility last summer. In 2010, The Wall Street Journal reported that the new plant (then doing business as Samsung Mobile Display) would help push capacity from 3 million screens per month to 30 million. With many cell manufacturers using AMOLED screens, Samsung’s shortage has actually limited production of many high-profile smartphones, from its own flagship Galaxy S to the competing Droid Incredible and Evo 4G, both made by HTC. Samsung representatives expect the number of devices using AMOLED screens to grow 35 times to 700 million units by 2015.
Because most cell phones are manufactured abroad, the United States doesn’t have a substantial stake in AMOLED technology. But if Samsung’s inability to keep up with booming demand is any indication of AMOLED’s future, it’s a technology that will remain on display in years to come, especially if it continues following the paths of its predecessors. In the five years to 2017, revenue for the LED Manufacturing industry (IBISWorld report OD4456) is projected to increase at an annualized rate of 3.4% to $975.8 million. And as companies look to AMOLED technology for other devices and electronics, demand will just continue growing, opening up opportunity for the companies who want to take it.
To download full research reports for the industries discussed in this article, click on the report titles below.
3D Printer Manufacturing, Medical Device Manufacturing, Aircraft, Engine and Parts Manufacturing, 3-D Printing and Rapid Prototyping Services, Business Analytics and Enterprise Software Publishing, Computer Manufacturing, Semiconductor and Circuit Manufacturing, Security Software Publishing, IT Consulting, Hospitals, Specialist Doctors, Robotic Surgery Equipment Manufacturing, Design Editing and Rendering Software, Internet Publishing and Broadcasting, Social Network Game Development, Battery Manufacturing, Car and Automobile Manufacturing, Taxi and Limousine Services, Wireless Telecommunications Carriers, Telecommunication Network Equipment Manufacturing, Credit Card Issuing, Credit Card Processing & Money Transferring, Communication Equipment Manufacturing, Advertising Agencies, Search Engines, LED Manufacturing