In nature, evolution’s hand is slow moving and rarely provides evidence of progress over one person’s lifetime. Definitive conclusions are drawn over centuries rather than in days. The opposite is true with technology. Engineering retirees can speak of tales of computing systems the size of shipping containers that resided in academic and scientific institutions. The computing power of those architectures are now dwarfed by the capabilities of the devices we carry in our pockets, ones that also just happen to make voice phone calls. This speaks to the blazing speed at which technological evolution operates, and some argue that the biggest impact to computing architectures over the next decade will come from taking devices that traditionally lived analog lives off-line and bringing them online. Enabling their on-ramps to connectivity has the potential to increase these devices’ utility in our increasingly digital lives, a phenomenon commonly referred to as the “Internet of Things” (IoT).
Cisco Systems estimates that the number of connected devices will increase from roughly 28 billion today to over 50 billion by 2020. This 21% CAGR will be driven by everything from the intelligent thermostats, smoke detectors, security cameras, and lighting systems that increasingly populate our homes. It also pertains to an increasingly connected transportation grid of connected vehicles, planes, and trains, and to robots that proliferate our manufacturing plants and distribution center floors.
Companies that position themselves as arms dealers to this connectivity proliferation stand to be large beneficiaries of IoT-based disruptions. There is also a host of tangential impacts, such as a massive overhaul of our wireless tower infrastructures that enable these devices to communicate efficiently. The electromagnetic spectrum over which all our devices communicate is a finite resource that is prone to the same congestion dynamics of a multi-lane highway, and the data being exchanged among these devices are analogous to the vehicles on that highway. Thanks to our increasing need to stream hi-definition video, alongside the growth trajectory of IoT devices, the vehicles clogging our wireless spectrum highways are increasing in size and quantity.
This is where tipping points occur in technology, and in the world of wireless tech, the white knight to increasingly congested data pipes is the 5G standard. This new generation of wireless connectivity will have to accommodate dynamics such as an increasing number of 5G-enabled automobiles that will be generating 25 gigabytes of data, roughly the equivalent of four high definition movies, every hour. When you compare this to traditional mobile phone plans that bundle single-digit gigabyte pricing packages per month, you quickly gain a sense how much of our existing infrastructure needs to be overhauled. This is a good problem for the companies enabling this shift and a more difficult problem for those responsible for the capital outlays required for implementation.
Studying disruptive evolutions can reveal opportunities and challenges for companies whose operations that will be impacted by them. It becomes critical for investors to assess the trajectory of these changes and calibrate those assumptions as new information becomes available.