After playing Pokemon Go with my nephew this weekend I have another solid data point to support my hypothesis that we are in yet another tech boom. Let’s call it fad based investors jousting with unicorns. Think dotcom bubble of 2000. What drove the dotcom bubble? Cheap money, magical valuations, market overconfidence, and a good old fashioned speculative boom reminiscent of Black Tuesday (10/24/1929). Sound familiar?
Let’s start with the chart below which shows the Pokemon Go Android app topping Snapchat, the millennial favorite, by a huge margin, proving once again that today’s consumers have a serious case of APP ADD (mobile application attention deficit disorder). So you really have to ask yourself; Self, how are app based unicorns like Uber, SnapChat, Aribnb, etc… going to thrive 5 years from now? The answer is of course, they won’t.
Uber is the easiest one to see through. Autonomous car companies like Tesla, Google, and maybe Apple will attack from the system level leaving technology void unicorns without food or shelter. And of course there are dozens of other car sharing App companies nipping at their hooves. Do you remember when Priceline.com was all the rage? Not so much anymore. The same could be said about eBay and the other bidding sites. I wonder, does Webvan.com qualify as the first tech unicorn death?
The latest example is the LinkedIn acquisition by Microsoft. Do you remember when LinkedIn was all the rage? The same goes for Skype (which was also acquired by Microsoft) and Craigslist. The difference of course being the magical valuations of today’s App Unicorns which leads me to believe that someone is going to get caught holding the bag and that someone is investors who will flee the tech industry like rats on the Titanic. Let’s call it “Dotcom Bubble Part II” or “Revenge of the Nerds”.
Now let’s talk about the semiconductor industry. So again, money is cheap, the semiconductor industry forecast is optimistically flat, valuations don’t really matter since money is cheap, and if you want to grow you have to buy revenue, the result being a handful of dominant companies and hundreds of emerging ones, right?
The next big shift amongst the ranks is what I call “Systems: The Transformation of the Semiconductor Industry”. Systems companies (Apple, Amazon, Tesla, Huawei, etc…) are designing their own chips and changing the way the fabless semiconductor ecosystem does business. Now that it is much easier to design and manufacture a semiconductor, who better than to design a chip than the company that uses them? By the way, we have come full circle here because computer “systems” companies started out building fabs so they could design and manufacture their own chips. Intel put them all out of business by producing the first mass market computer chip. The rest of the story is in the Computer History Museum in Mountain View California.
So what is a chip company to do? Pretend you are a systems company like Qualcomm? Buy systems companies to feed your chip business like Intel? Or build systems to make APPs ADD resistant? The answer of course is all of the above.Share this post via: