Boom, Bust, Now Build-out: Optimism for the Tech Economy

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Ben Bajarin is the Director of Consumer Technology Analysis and Research at Creative Strategies, Inc, a technology industry analysis and market intelligence firm located in Silicon Valley.

One of the many aspects of the technology industry I have to study as an industry analyst is the macro-economic trends. With that in mind, I have been following with great interest media and financial analysts’ discussions about whether a new tech bubble is in the works. I live and work in Silicon Valley so I hear a lot of diverse viewpoints on this topic.

There are certainly things to fear if and when any type of tech bubbles happen; however I believe that what we are entering is a not a new tech bubble. Instead we are starting a massive global technology build out.

Technology Is Embedded into Our Social Fabric

There are a number of market principles at play that give me confidence that this is what is really going on at the moment. For most of the last two decades, we were quite happy when each year we sold hundreds of millions of PC’s worldwide. But now we are selling just over a billion digital devices a year now, and by the end of 2015 it is predicted that we will sell closer to 2 billion digital products each year worldwide.

The first principle is that the personal technology industry as a whole has reached maturity.

(MORE: Tech Stocks: Should You Buy the Bubble?)

A mature market is one where consumers have reached a level of familiarity with a product segment, and their personal choices and preferences are being factored into their buying decisions. Automobiles are a mature market, for example. We shop for cars knowing mostly what we are interested in; our preferences factor into our decision. Prior to a market maturing there is the unknown. Consumers have to experience and understand a product before they know exactly what they want. Tablets, for example, are a new segment and by no means a mature one yet. And smart phones are in the early stages of maturity as well.

When an industry is in the process of maturing, it is more volatile; very similar to the internet tech bubble of the late ’90s. There is more product experimentation and fragmentation as the industry learns what the market wants. The technology industry is currently in a very different and much more mature place in its lifecycle than it was 10 years ago.

Technology has also reached the point of maturity where it is now embedded into our social fabric. This means that many of the products in the market, whether PC’s, cell phones, or the internet, would be hard to live without for many people. Ten years ago most of those things had not been fully embraced by the consumer market, whereas today they are mainstream.

Another one of the stronger case studies I use to validate the point of market maturity and build-out growth is Apple. In a mature market there is more consumer choice and more educated customers. This makes it possible for a more diverse range of products to appeal to larger segments of the market.

(MORE: Apple Posts Record Q3 with $28.6 Billion in Revenue)

Apple’s turnaround, I would argue, could have only happened in a mature market. I have been quoted in the media saying, “Apple was a consumer product company waiting for the consumer market to arrive.”

Secondly their continued growth in earnings is unprecedented. What’s more is that during the recent recession they defied the industry and continued to grow even as the entire economy suffered. Those points are both signs of a mature industry as well as one where technology is essential in society.

If history is an indicator we are in for quite a ride.

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