By Stu Woo, John D. McKinnon, Sebastian Herrera and Ben Foldy
After a year of startling growth, the tech industry faces a more
vexing 2021.
The pandemic helped bring the world's tech giants such as
Amazon.com Inc. and Microsoft Corp. to new heights in 2020. The
shift to online shopping and remote working accelerated at a pace
that would have been inconceivable without the coronavirus.
But there are signs the good times may end soon. Late last year,
governments in the U.S., China and Europe separately began
investigating whether Big Tech is too big. The scrutiny in
Washington is expected to continue under a Biden administration,
which also appears inclined to continue the Trump administration's
export restrictions against Chinese companies that are reshuffling
global supply chains.
While Big Tech faces perhaps its biggest challenge in years,
some sectors can look forward to 2021. The world of electric
vehicles may finally arrive. President-elect Joe Biden promises to
make cybersecurity a priority. And Washington will start doling out
financial incentives to help U.S. companies stay ahead of Chinese
rivals.
Here are some of the tech industry's most important themes this
year.
--Stu Woo
Email: stu.woo@wsj.com
Regulation
The main regulatory worry hanging over Big Tech will continue to
be the threat of antitrust lawsuits. But newly empowered Democrats
in Congress are likely to press for more legislative restrictions,
as well.
For Alphabet Inc.'s Google and Facebook Inc., the antitrust
threat is already very real. The Justice Department, Federal Trade
Commission and state attorneys general filed five lawsuits against
them in quick succession late last year.
The big question for those companies is whether the incoming
Biden administration will choose to expand the federal actions,
continue to litigate them or perhaps choose to settle. Both
companies appear interested in putting the cases behind them. Each
has denied any wrongdoing.
Copycat lawsuits by private parties also are piling up, adding
to the headaches.
For Amazon and Apple Inc., the big worry is whether preliminary
probes by federal regulators will lead to new lawsuits against
them.
Beyond the current crop of investigations and lawsuits, tech
companies also must worry that Congress will pass legislation to
strengthen existing antitrust laws. As interpreted by courts,
current antitrust rules mostly focus on the impacts of business
practices on consumer prices. That can make enforcement against
largely free search and social-media services tricky.
After the tumultuous final days of the Trump administration,
newly empowered congressional Democrats might push social-media
companies such as Facebook and Twitter Inc. to get tougher on
disinformation and hate speech. Some Democrats suggested as much
following the Capitol attack, but no one has yet offered a clear
policy proposal.
New privacy rules and tighter liability standards also could get
consideration.
--John D. McKinnon
Email: john.mckinnon@wsj.com
Will Big Tech get bigger?
Dependency on Big Tech soared in 2020 as homebound Americans and
businesses turned to online shopping, software and cloud-computing
services and to their smart devices and video streaming. Some
smaller companies built for a pandemic world also saw skyrocketing
growth, with videoconferencing firm Zoom Video Communications Inc.
headlining the crowd.
The entrenchment of technology services in everyday life has set
the industry up for continued success this year, analysts predict.
Segments such as e-commerce, which by some estimates grew by
roughly 50% in 2020, will continue to benefit from the change in
consumer habits spurred by the pandemic. And even as offices and
public spaces become more accessible with the rollout of
coronavirus vaccines, the corporate embrace of remote work is
expected to provide sustained demand for the platforms that have
helped people stay connected.
"We knew tech was important to us, but there was a level of
denying just how important it was," says Gene Munster, managing
partner at investment and research firm Loup Ventures. "The
pandemic has gotten us to a point where we are fully embracing
it."
Still, Big Tech will face the law of large numbers in 2021.
Record-setting earnings last year mean a threat of a slowdown,
particularly for firms that saw several years' worth of growth in
several months because of the pandemic. As growth in some business
segments slows, analysts expect leading tech firms to double down
on video streaming and other services that are expected to have a
bright future.
"They will need to feed the beasts of growth," Mr. Munster says
of Amazon, Apple and others that have entered streaming and other
new markets in recent years.
--Sebastian Herrera
Email: sebastian.herrera@wsj.com
Electric vehicles
This year will be a pivotal one for the electric-car market.
Tesla Inc., now the world's most valuable auto company, plans to
open two new assembly plants, in the U.S. and Germany, and enter
the lucrative pickup-truck market with the all-electric Cybertruck,
due out in late 2021 or early 2022. Traditional auto makers such as
Volkswagen AG, General Motors Co. and Hyundai Motor Co. also plan
to introduce new electric models aimed at mass appeal.
"This is the tip of the spear," says Scott Keogh, CEO of
Volkswagen's U.S. division, whose ID.4 electric crossover hits U.S.
dealerships in March.
Additionally, a wave of hotly anticipated 2021 launches from
electric-vehicle startups like Rivian Automotive LLC and Lucid
Motors Inc. will give drivers more plug-in options.
Auto executives say greater variety and new competition will
help supercharge electric-vehicle sales, as they have in China and
Europe. Sales of battery-powered models grew 9.8% in China last
year, and 89% in Europe through November of last year, industry
figures show.
But in the U.S., where analysts estimate Tesla sold roughly four
out of every five electric cars purchased in 2020, full-year sales
of battery-powered vehicles fell roughly 11%, according to data
from LMC Automotive.
One challenge: charging. The U.S. currently has around 96,000
public chargers for electric vehicles, according to government
data, a fraction of what analysts say is needed to support major
growth.
But 2021 could bring new impetus to solving that issue. During
the campaign, President-elect Joe Biden pledged to build 500,000
new public chargers in the U.S. through 2030.
--Ben Foldy
Email: ben.foldy@wsj.com
Cybersecurity
The massive hack of federal agencies discovered last month
revealed the holes in the government's cyber defenses. After the
breach, which officials accuse Russia of orchestrating,
President-elect Joe Biden said cybersecurity would be a priority at
every level of government.
Diane Rinaldo, who served from 2018 to 2019 as a top
administrator of one of the hacked agencies, the National
Telecommunications and Information Administration, says Congress
can start with a simple step: allocating funding. While the name of
the agency she ran suggests technological pre-eminence, its
staffers struggled with decades-old computer infrastructure dubbed
"sneakernet" -- which required them to insert flash drives and
physically walk data from computer to computer to back up emails,
among other things, she says.
Sneakernet was symbolic of Washington's outdated computer
infrastructure. "It's so simplistic: We need money," says Ms.
Rinaldo, a Republican. "The systems need to be updated."
Beyond government, the top cybersecurity challenge of 2021 is
the same as it was last year: ransomware attacks, says Eric Chien,
technical director of Broadcom Inc.'s Symantec cybersecurity unit.
Nothing about that landscape has changed, and it's up to
organizations to continue practicing basic cybersecurity hygiene to
prevent such attacks.
What's unique to 2021 is how organizations adapt to the
permanence of work-at-home employees. Before the pandemic, it was
feasible to require a few remote workers to access corporate
networks via virtual private networks. It's less so if the whole
workforce works from home.
"What if someone forgets they're on the company network and is
watching Netflix?" Mr. Chien says. "That's a lot of data." He says
organizations can set up simpler security gates, letting employees
log into systems if they, for example, are in the correct time zone
and don't trigger security or malware alerts.
--Stu Woo
Tech nationalism
Last year was the year the U.S. government crippled some of
China's tech-industry champions, notably telecom-hardware giant
Huawei Technologies Co. and Chinese chip makers. This year will be
the year it tries to ensure companies in the U.S. and allied
countries don't squander this edge.
Don't expect a Biden administration to roll back the major
actions against Chinese tech companies, Democratic advisers and
China analysts say.
"It's not reverse engines," say James Mulvenon, who leads a team
of China analysts at defense contractor SOS International. "The
Biden administration wants to keep some aspects of Trump policies
that are useful, and they want to de-emphasize ones that seem
emotional and punitive."
That could mean maintaining export restrictions on Chinese
telecom and chip giants, while leaving courts to figure out the
legality of the Trump administration's ban on TikTok and
WeChat.
Maintaining the status quo would let U.S. officials figure out
how to spur America's tech industry. Congress recently passed
national-security legislation to give chip companies grants and
financial incentives, which lawmakers indicated could be as much as
$3 billion per project. Biden advisers have signaled they intend to
continue a Trump administration effort to spur U.S. companies to
develop open-source 5G equipment technology that could compete
against Huawei. And the president-elect himself made encouraging
U.S. manufacturing of electric vehicles -- a supply chain that
China currently dominates -- a central plank of his platform.
"The U.S. priority is to increase domestic semiconductor
manufacturing so that it's less reliant on potentially volatile
sites in Asia," says Dan Wang, a Beijing-based tech analyst at
Gavekal Dragonomics. "Meanwhile, China has to rebuild substantial
portions of the semiconductor software and equipment supply
chain."
--Stu Woo
(END) Dow Jones Newswires
January 16, 2021 12:14 ET (17:14 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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