Now that the third quarter has closed, it's time for investors to start guessing what the earnings season might hold.
In tech, the hottest topic is still smartphones, what with exploding batteries at Samsung and a mixed-response to Apple's iPhone 7.
But rather than think short term, a smarter approach is to consider where the industry and its supply chain may go in coming years. Falling prices are an oft-discussed topic. Less talked about is the fact that improvements in the underlying hardware of smartphones have been slowing.
Similar to PCs, processing power was once a key differentiator, but the chatter over chip speed has died down. Qualcomm rode the processor wave with Snapdragon, which helped the U.S. firm's stock more than double in the five years through March 2014. The period since hasn't been so kind.
Another smartphone driver was screen resolution, yet display technologies have improved to the point most consumers can't discern the difference.
More than any other facet, cameras have been the surprising standout. I say surprising because while screens and processors charted the same path as PCs, integrated cameras are unique to smartphones and have been both the enablers and drivers of the selfie revolution.
Taiwanese phone-camera maker Largan Precision has been one of the biggest beneficiaries, with its shares rising sevenfold since 2012. Apple spent more time on camera quality in marketing its latest iPhone, going so far as taking the groundbreaking approach -- for Apple -- of offering different cameras for its standard and plus devices.
However, smartphone cameras have become so good, that the upgrade cycle will soon run its course, leaving device makers hunting for the next sales spiel.
Software and services will remain key, but if you look purely at hardware, I'd argue battery life and recharging technologies are the next frontier. If Samsung's exploding phones inadvertently put that aspect of the industry front and center, well, a focus was overdue anyway.
There are three ways to deal with battery life: Build bigger batteries, build better batteries (more power per volume of battery), or make the devices that use them more efficient.
With phones getting slimmer, the first option is a non-starter while the second is incredibly tricky. The fundamentals of battery technology haven't changed in decades. Right now, lithium is the drug of choice for consumer electronics, but as Samsung well knows, drugs can be dangerous.
There's no doubt the chemical makeup of batteries will change, with developers considering magnesium, sodium and sulfur. But until something really whiz-bang comes along, manufacturers will be stuck with option three.
Tackling device efficiency requires changes to either the hardware or the software.
While much has been made of a phone's battery capacity, that metric is misleading, and Apple is a prime example. Its unique ability to develop both the software and hardware for the iPhone allows it to make the two parts of the puzzle work together more efficiently, squeezing extra hours from a battery-recharge cycle. While this is possible in the Android ecosystem, the fact that none of the handset makers write the underlying operating system limits how much they can do.
In hardware, the race is on to find less power-hungry displays, considering that's the biggest battery drain. Various forms of light-emitting diode technology are attracting the most interest. Thanks to its existing business, Samsung has an early leg up in this field, and Apple knows it. That's why Cupertino is keen to develop its own technology to cut reliance on outside vendors. To that end, Apple established a lab in Taiwan dedicated to developing display technologies and has recently begun preparations to manufacture LED screens.
With the speed of innovation in other parts of the smartphone business decelerating, battery life will become an ever-greater focus for developers, and their marketing teams.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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