Technology Sector
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Industry Overview
The technology sector in the US includes more than 140,000 companies with combined annual revenue of about $900 billion. Major companies include AT&T, IBM, Intel, and Microsoft. Industry concentration is high in many segments: the largest 50 participants often generate more than 60 percent of segment revenue.
The technology sector includes telecommunications, IT services, semiconductor manufacturing, software, Internet services, biotechnology, and scientific research, including aerospace research. Related manufacturing industries covered in separate profiles include aerospace products and parts, computer hardware, pharmaceuticals, and telecommunications equipment.
Competitive Landscape
Demand often depends on the income of consumers or the profitability of business customers, because many technology products and services are expensive. The profitability of individual companies is driven by their ability to develop and market new products. Large companies often have advantages in access to capital and marketing. Small companies can compete successfully if they have expertise in a particular field of knowledge. The industry is capital-intensive: average annual revenue per worker is nearly $300,000.
Products, Operations & Technology
Companies in the technology sector take advantage of scientific discoveries and turn them into marketable products. Of the several distinct fields within the technology sector, most are based on computer technology. Even biotech and aerospace rely heavily on computers.
The key scientific discoveries and developments that underlie many of today's technology companies were made more than 50 years ago: the transistor, the laser, the computer, the integrated circuit, and the structure of DNA. The technology sector of the US economy was built through large financial investments committed to developing these discoveries once they were sufficiently well understood to promise practical products. Newer scientific discoveries like nanotechnology, superconductivity, and carbon nano-tubes have yet to receive similar levels of investment, because the pathways to practical applications are not yet clear.
Tech companies are driven by continuing advances in knowledge, which produce a stream of improved products. The product cycle at technology companies is often short; a new version of their products is often being developed. In addition to developing their own technology, many companies acquire it from other companies, either through licenses or by buying entire companies. A strong link between industry and academic research institutions exists, including a flow of personnel between them. Technology companies employ large numbers of engineers and scientists, invest heavily in expensive research equipment, and have R&D expenses that often exceed 10 percent of revenues. Companies hold patents that protect their products and are frequently embroiled in patent disputes.
Companies depend on the increasing power and decreasing cost of computing capabilities resulting from the miniaturization of computing elements. New technologies first applied to telecommunications, like fiber optics and wireless communication, have migrated into the broader computer area. Increases in computing power have made advances in aerospace and biotech research possible.
