Industry Breakout - Information & Communications Technologies
The information and communications technologies (ICT) industry, and the significant level of R&D that supports it, is driven by constant change in consumer preferences, market demand and technological evolution.
The ICT industry is the largest private-sector R&D investor in the U.S., performing nearly one-third of the total. Two firms, Intel and Microsoft, each invested more than $10 billion in R&D in 2012, and both expect to exceed $10 billion in 2013. The U.S. ICT industry is forecast to grow by 5.4% to $146 billion in 2014. U.S. ICT firms are also dominant globally and will account for more than half (57%) of the industry’s worldwide R&D expenditures of $257 billion in 2014.
Though ICT involves numerous areas of focus, cloud computing and technologies built on it will remain a major R&D thrust for the foreseeable future.
Trends and Forecast
The ICT industry provides hardware, software and services that make up the modern information age, spanning semiconductors, telecommunications, productivity or security software, computers, tablets and gaming. Across all these applications the integration of smaller, faster, mobile, and more powerful electronics with the increasingly pervasive Internet continues to drive innovation in networking and information technologies across all industries.
To keep pace with the demand for increased device performance, chip makers continue to invest in technology and manufacturing capabilities that improve functionality, size and power consumption. Other device and software manufacturers are addressing the functional size of their applications as devices get smaller, lighter, thinner, and memory to hold operating systems becomes faster and cheaper. The concept of “wireless” is no longer a feature, but a requirement in the “Internet of Things” for both distinct ICT devices and their embedded counterparts in diverse areas such as automobiles, logistics, smart grids/utilities and homes.
The U.S. continues to be the dominant R&D force in the ICT industry and will account for 57% of the global industry’s R&D in 2014. It should be noted, however, that this share reflects firms that are squarely in the ICT domain. Some firms with a strong ICT context, including many global technology giants such as Samsung (which operates a semiconductor R&D operation in the U.S.), are currently classified in other areas such as consumer electronics or appliances. As Internet functionality continues to evolve these domains, a redefinition of ICT may be needed. Such a change could alter the perception of U.S. strength.
We forecast the U.S. ICT industry to grow again this year by 5.4%, reaching $146.5 billion in 2014. The global growth of the ICT industry will reach 5.1%, tempered only slightly by projected slower growth in some of the leading European communications technology companies.
Factors Driving R&D Investment
While it might be said that Moore’s Law is driving the relentless investment in semiconductor R&D, it is consumer demand for functionality driving R&D investments in other sectors of the ICT industry. Both of these drivers are inherent and recognized as integral to the modern ICT industry, with 65% of the ICT survey respondents citing conventional technology evolution as the biggest change in their technologies over the past year. Increased competition, at 39%, was the second most cited factor in industry technology change.
The constant evolution of ICT technologies is recognized as both a market driver and as a driver for R&D, as the ICT industry’s R&D operations are built to support these demand requirements. Nearly three in four industry respondents felt technology change was a decisive factor, with 31% reporting significant technological changes just in the past year. To keep up with the constant change in the industry, 62% of the respondents cited faster time to market as a key organizational factor of their R&D operations, more than 20% higher than the other industries’ respondents.
ICT industry respondents, reflecting steady growth even in weaker economies, are optimistic regarding their 2014 R&D budget. While 47% of respondents were more optimistic about their 2014 budgets, when asked for specifics about their budget forecasts, fully 93% stated their R&D budgets will be staying the same or increasing for 2014. Part of this discrepancy in optimism versus actual budgets may reflect that 43% of the respondents also stated that their R&D budgets are not large enough to accomplish their goals. So, while budgets are not declining, they may not be growing at the rate the firms’ researchers desire.
The global nature of the ICT industry is apparent as half of the U.S. respondents currently have some level of foreign R&D operation, with 23% planning new R&D facilities outside of the U.S. These global operations are dynamic and not without some challenges, as 33% of those with foreign operations are planning expansions while another 27% are planning reductions.
Changing Technology Landscape
Technology development within the ICT industry is primarily oriented toward a combination of in-house development and industrial collaboration. The industry’s use of academic collaborations, at 14%, is the lowest among the five industries examined in detail, while its use of virtual design, at 26%, is significantly higher than the others.
Two-thirds of ICT respondents cite cloud computing as the key technology development area for 2014-2016, reflecting the ever-changing ICT technology landscape. Contrast this with results from our 2012 forecast where cloud computing was just emerging and not seen as a key development area by 2014.
Core technologies, however, are part of the constant development process of the ICT industry. Continued development of wireless technologies was cited by nearly half (49%) of the respondents, cybersecurity capabilities (46%), and embedded technologies (37%) all at levels nearly identical to the 2012 forecast.