76 Business TheEconomistOctober30th 2021
ries seem to be smaller firms, however.
Taking a panel of 50odd secondtier tech
firms today, about fourthfifths are provid
ers of cloud services. Some are now forces
to be reckoned with: Snowflake, a cloud
based data platform, is worth $104bn; Twi
lio, which provides corporatecommuni
cation services, some $61bn; and Okta,
which manages employees’ digital identi
ties, some $39bn.
Older tech firms are now also more
firmly anchored in the cloud. Salesforce, a
software giant, was one of its pioneers.
Adobe, another software titan, has suc
cessfully reinvented itself for this new
form of computing. Even the cloud’s lag
gards, Oracle and sap, the world’s largest
vendors of conventional corporate soft
ware, are at last making use of it. The big
gest hardwaremakers—Cisco, Dell and
ibm—are also increasingly selling their
wares “asaservice”, accessed remotely
through the cloud on a payperuse basis
rather than installed on office computers.
The industry’s second shift is that lowly
hardware has also made a comeback of
sorts during the pandemic, despite the mi
gration up into the computing skies. Most
surprisingly, personal computers staged a
revival as remote workers required better
gear. In 2020 pcs saw their biggest growth
in a decade, with more than 300m devices
shipped, 13% more than in 2019, according
to idc, a marketresearch firm. Growth has
since slowed, but mainly because short
ages of chips and other components are
holding back production. Dell, the world’s
thirdlargest maker of pcs after Lenovo and
hp, has done best, increasing shipments in
the third quarter by nearly 27% compared
with last year, according to idc—almost
guaranteeing good results when Dell re
ports on November 23rd.
Chipmakers give an even stronger sig
nal of the return of hardware to the indus
try’s core. Although Intel disappointed in
vestors when it released its quarterly re
sults on October 21st, sending its shareprice down, sales were up by 5% to $19.2bn
and profits by 60% to $6.8bn. Samsung
Electronics, the world’s largest memory
chipmaker, which will also reported re
sults on October 27th, saw its profits jump
to the highest level in three years. And
tsmc, the top contract manufacturer of
semiconductors, for its part said on Octo
ber 14th that sales had continued to grow at
a rapid clip, reaching $14.9bn with net in
come coming in at $5.6bn, an increase of
16.3% and 13.8% respectively.
The big question is whether the three
companies can profitably follow through
on their recordbreaking investment
plans. These are meant to satisfy growing
demand for chips not just from cloud pro
viders, but from firms making gear for
what is called the “edge”: devices connect
ing to the cloud or extending it, from
smartphones to intelligent sensors. Intel,
for instance, has said that it will invest up
to $28bn in 2022. tsmc plans to spend
$100bn over the next three years to expand
its chipfabrication capacity.
The third big change to the tech indus
try during the pandemic may be the most
consequential: increased competition. Al
though members of gafamhave yet to at
tack each other’s main franchises, such asonlinesearchinthecaseofGoogleand
ecommerce for Amazon, rivalries have
heatedup. So far,vigorouslycompeting
cloudsandchangesinApple’sprivacypoli
ciesontheiPhone—whichhurtFacebook’s
adrevenuesaccordingtoresultsreleased
onOctober25th(seeSchumpeter)—arethe
mainexamples.ButonOctober21stGoogle
announcedthatitwouldlowerthefeeit
chargesproviders ofsubscriptionsinits
appstoreto15%,puttingpressureonApple
todothesame.Andwithsomanypeople
nowworkingremotelyandprobablycon
tinuingtodoso,a platformbattlehasbro
kenoutbetweenGoogle,Microsoft,Sales
force and Zoom, a popular videoconfe
rencingservice,overwhichwilldominate
thevirtualoffice.
Other firms are also picking more fights
with gafam. Facebook’s socialmedia for
tress looks a lot less safe now that it has at
least two serious rivals: America’s Snap
chat, a social network owned by Snap, and
TikTok, the shortvideo app operated by
ByteDance, a Chinese internet giant. Ac
cording to data divulged in a recent wave of
leaks, Facebook’s teenage users in America
now spend two to three times longer on
TikTok than on Instagram, which belongs
to the American socialmedia conglomer
ate. Amazon also faces more competition,
both in the form of incumbents that have
at last embraced the digital world, includ
ing Walmart, and newcomers, such as
Shopify, which helps merchants sell on
line and fulfil orders. PayPal’s attempt to
buy Pinterest, another social network, now
seems to have been abandoned, but it
would have helped PayPal to move deeper
into ecommerce.
After nearly two years of covid19 the
tech industry is cloudier, more tied to
hardware and more turbulent. Of these
trends, the first two are unlikely to last for
ever, at least in their current form. Digital
meteorologists argue that the cloud has al
ready reached “peak centralisation”, mean
ing that it will henceforth grow not so
much through footballpitchsized data
centres, but at the “edge”, where its digital
services touch the physical world. And giv
en the economics of the semiconductor in
dustry—fabrication plants often cost over
$10bn and take years to build—the chip
shortage could eventually turn into a glut.
A more open question is how long the
new phase of competition will last. Opti
mists argue that, after a long period of ossi
fication, the pandemic has helped push the
industry into a more dynamic period, in
which the giants compete with each other
as well as with smaller firms. Pessimists
say that this phase will not last long—and
that the industry’s leaders will sooner or
later shore up their fortresses and buy out
competitors. Andthatis why, more than
ever before, trustbusters should not let
down their guard.nTech-nical knockout
United States, top 50 companies listed
by market capitalisation*, % of totalSources: Bloomberg; The Economist *October 26th 2021100806040200
1510052000 21Facebook
Te s l a
Amazon
Alphabet
Microsoft
AppleOthers