The Tech sector is characterised by waves of innovation that tend to move independently of the general economic cycle...e.g. Mainframes in the 70s, Personal Computers in the 80s, Windows/Enterprise Software and Internet in the 90s.
We have now entered the next wave, Mobile Internet. Demand on mobile infrastructure is growing exponentially and huge investment is needed to keep up. Web traffic in general is set to grow massively over the next few years, not least driven by the demand for video.
Cisco says the increase in traffic from 2014 to 2015 alone will be 200 exabytes, more than the total IP traffic generated in 2010.http://blogs.forbes.com/ericsavitz/2011/06/01/cisco-sees-web-traffic-up-4x-by-2015-to-almost-a-zettabyte/
The company sees four drivers for the huge growth in Web activity:
An increasing number of devices.
An increasing number of Internet users – nearly 3 billion by 2015, or more than 40% of the world’s population.
Faster broadband speeds. Cisco says the average speed for fixed broadband will jump 4x from 7 megabits per second in 2010 to 28 Mbps in 2015.
More video: Cisco says by 2015, 1 million video minutes will cross the Internet every second.
Some other key findings from the Cisco report:
The company sees average global IP traffic in 2015 hitting 245 terabytes per second, “equivalent to 200 million people streaming an HD movie simultaneously every day.”
Cisco sees the Asia Pacific region generating the most IP traffic by 2015, topping current regional leader North America.
PCs, which generated 97% of consumer Internet traffic in 2010, will generate 87% of such traffic in 2015, as tablets, smart phones and connected TVs play a greater role.
Advanced video traffic, including 3D and HDTV, is expected to increase 14x in 2015 from 2010 levels.
Mobile Internet traffic will increase 26x, to 6.3 exabytes a month by 2015 from 2010.
If Cisco are saying this, one can only imagine what their R&D budget (and those of their competitors) will be over the next few years. We should also expect some serious M&A activity - many tech companies are sitting on huge cash piles.
It is also worth noting that in the mid/late 70s (the aftermath of the oil crisis) the tech sector performed well. The same was true of the recession in the early 90s.