Profit from technology that gets under your skin

The future of tech is not the stuff you will wear, but the chips and sensors you’ll be carrying around in your body, says Sam Volkering.

The hottest trend in technology right now is also one of the biggest tech-trends of the past decade. You may have heard it described as ‘the internet of things’, or ‘wearable tech’ – both those terms are rubbish.

They aptly describe today’s situation, but they tell us very little about what it means for the future – and they’re not very helpful for investors. When you hear these phrases bandied about by fund managers and broadsheets, it’s easy to think, this is the next big thing! But by the time you read about it in the Sunday papers, it’s already old news.

Tech dinosaurs

Take ‘wearable tech’: smartwatches, lifestyle trackers, connected wristbands, virtual reality and, of course, smart glasses, are all over the technology supplements. But these have been in the works for years; this stuff is not new – it’s practically outdated.

The same applies to the ‘internet of things’ – which is all about everyday things and places becoming ever more networked and connected to digital devices. But the term covers such a broad range of different things that it’s become virtually meaningless.

So everything from adjusting your home thermostat from your phone while you’re at work to using your phone to pay for your bus fare could be described as the ‘internet of things’. But there’s more interesting things going on in the technology world than this.

As an investor, you need to look beyond the gadgets and the tales of talking fridges, and understand the underlying technology that drives these devices and makes our increasingly connected existence possible.

Smartwatches and the like are a mere pit stop to the coming future, one that, for many people, is too weird to think about. There will be elements of today’s technology, yes, but embedded far more deeply in our everyday lives.

The bigger trend – the one that will shape what the world looks like in five, ten and 20 years from now – is ‘immersive technology’.

The world of ‘immersive tech’

In an immersive tech world your digital and physical worlds seamlessly intertwine, to help you be healthier and happier, and generally make life more convenient. And it’s happening right now.

The gadgets and gizmos make for good headlines, but it’s the technology that you can’t see or feel that will be truly life changing. This technology will exist in you, not on you. That may sound a bit worrying. But when you look at what’s happened to technology over the years, it makes perfect sense.

Technology at its best is discreet – we use it without noticing. Great technology simply works. Not only that, but it advances at an exponential rate. I call it ‘technological compounding’. It’s like money earning interest in a bank account – the money grows at an ever-faster rate as interest piles up upon interest. The same goes for technology.

It took humanity thousands of years to discover how to harness electricity. Then, in the space of just over 100 years, we invented the telephone, car, powered flight, radio, television, the personal computer, mobile phones, smartphones – and discovered and mapped the entire human genome.

Where can we possibly go next, you might wonder. Well, here’s another way to think about it. Kodak released the DCS 100 camera in 1991. It was the world’s first digital single lens reflex (DSLR) camera. It had a then-huge 1.3 megapixel resolution.

In 1992, meanwhile, for £2,500 I could buy a Sony CCD-VX1 shoulder-mount Handycam. This could record video with a resolution of 530×480 pixels. If I wanted to listen to music, I’d have a Sony Walkman (cassette player), Discman (CD), or if I was a trendsetter, a MiniDisc player.

I told the time on my watch. I’d go to the cinema to watch a film, or maybe to this place called Blockbuster to rent one on VHS. If I was really into technology (and well-off), I might have had a portable computer. The Apple PowerBook 100 was quite a machine for $2,300. It came with 2MB of RAM (a measure of computing power) and weighed 2.31kg.

Fast-forward just 20 years. Now, I use my Sony Xperia Z1 smartphone to take 20.7 megapixel photos. It records video with a resolution of 1,920×1,080 pixels. I can store and listen to an entire music catalogue of 4,873 songs.

I’ll watch a film or live TV on the way to work that’s being streamed to me from a giant data centre. If I want to find out something on the go, I use my smartphone to check online.

I do all this on a device that weighs 170 grammes and has 1,024 times more RAM than the PowerBook 100. This is how we can be sure that today’s wearable technology, and the ‘internet of things’, will be positively prehistoric in just five, let alone 20 years’ time.

A vision of the future

Let’s try to imagine the world in 2033. There is no technology. Well, it feels like there’s no technology. In reality, we all carry several sensors, processors and microchips on our person and immersed in our biology.

Now, when you start to talk about a melding of biology and technology, it tends – to put it bluntly – to freak people out. But we’re not talking scary tech-implants that you might see in a science-fiction film, or anything that involves surgical intervention. Instead, this is nano-sized technology that might sit behind your ear or on the back of your thumb.

It’s invisible to the naked eye, although occasionally in the right light you’ll catch a shimmer of reflection.

These biosensors are unnoticeable. They connect your physical wellbeing to systems and programs that are used to help you live a longer and healthier life. The sensors detect everything from your oxygen levels, complete blood count and electrocardiography (ECG – essentially, how your heart’s ticking along), to your temperature and bacteria levels.

How might such biosensors be used? Say you wake up one morning and all of your biosensors indicate you’ve got the flu. You feel fine right there and then, but the technology is highly accurate – you’re sick, and potentially contagious. Your office is automatically sent an update that says you’re sick with the flu.

You are away from work for two days to recover, or until your biosensors say otherwise. There’s no disputing the readings and no guilt in staying at home. You get back to work faster, and it stops other staff catching your bugs.

There’s more to it than just health.

You might also have a proximity sensor on your body, encoded with your DNA, ECG and voice patterns. This device provides ‘three-factor authentication’ – ie, it’s an ultra-secure way to prove that you are you. It talks to your front door to say you’re home. It allows you through security at the office.

It even allows you to transact within the global digital economy. Say you’re at the shops. To make a purchase, you just walk out with your goods, say ‘I’m leaving’, and you’re done. As you leave the shop your sensors connect to your digital wallet, and payment is taken automatically.

This is all feasible using existing real-world technology. I’m not pulling this stuff out of the sky. These gadgets are already in development. Google has just announced the development of a smart contact lens designed to help monitor diabetes, for example. As the company’s official blog states, it is working with chips and sensors so small “they look like bits of glitter” and with antennae thinner than a human hair.

Electronic payments processor PayPal is also developing new technology, such as its PayPal Beacon. This proximity-based device connects to your smartphone. It allows cashless, seamless payments for goods in store. Auction website eBay has changed its stance on allowing trading of the crypto-currency bitcoin.

The political issues

Of course, as soon as we start talking about immersive tech, various social and political issues arise – the most significant of which is the desire for government to have a say in it all.

Governments will inevitably seek to intervene, regulate and control these technologies. The problem is regulators can’t keep pace with the rate of advancement – it’s just the nature of bureaucracies. So what will happen is that people will consensually adopt these technologies well before any law or regulation is in place to say otherwise. This in its own right is a huge topic of discussion.

But it suggests that in a future of immersive tech, people will rely on technology-driven networks, rather than the state, for guidance or support. ‘The crowd’ will provide the support and democracy needed for these technologies to advance. And this future is approaching much faster than most people realise.

Before you know it, there will be trillions of sensors, processors and semiconductors dotted around the world. You will find them everywhere you look – even when you look in the mirror.

• Sam Volkering is a technology analyst for the Revolutionary Tech Investor, an Australian technology newsletter.

The ‘picks and shovels’ plays to buy now

There are many companies involved in immersive tech that investors can buy into. Many of the smaller ones involved in individual products are basically gambles – their fate rests on whether their particular gadget captures the imagination or not.

A smarter way to invest in these themes is to look for the ‘picks and shovels’ plays – the companies that provide the tools that make the whole thing possible. In this case, that’s the firms in the business of making the sensors, processors and semiconductors needed for an immersive tech world to exist.

The two that stand to profit the most are pioneers in this field. They’re vitally important for a future of advanced technologies because they both make the parts that hold it all together. The first is Qualcomm (Nasdaq: QCOM).

Qualcomm is one of the biggest companies in the US Nasdaq index, with a market capitalisation of $126bn. But don’t let that put you off. It’s at the forefront of the technology that will drive immersive tech for years to come.

Qualcomm pioneered machine-to-machine (M2M) communication – which, as the name suggests, allows machines to ‘talk’ to one another – back in 1988. At the time, the OmniTRACS system was merely a way to track and monitor trucks in a fleet – but this was the very early beginning of immersive tech.

Now Qualcomm makes some of the world’s most advanced microprocessors. Nearly every high-end smartphone has a Qualcomm Snapdragon mobile processor.

And judging by the company’s recent announcements at this year’s Consumer Electronics Show in Las Vegas, these tiny processors are getting faster and more capable. Now the company has made its first consumer device.

The Qualcomm Toq is a smartwatch that does everything you’d expect (it lets you read emails and text messages, change your music and tell the time). But what’s really exciting about Qualcomm is its ‘Gimbal’ and ‘Vuforia’ platforms.

Gimbal is a context-aware and proximity-based system. In other words, this is technology that knows where you are and sends you personalised, relevant information to your  smartphone when and where you need it. It does this all intuitively and automatically. It’s an example of immersive technology that already exists.

Vuforia, meanwhile, complements this as a platform for an ‘augmented reality’ world. Augmented reality integrates the things that you see and experience in the real world with your digital life (so you might hold your smartphone’s camera up to a row of shops and see a digital overlay indicating where you can get the best deal on a particular product you’re looking for).

As a result, your physical environment becomes an extension of your digital world. With over 85,000 developers and 7,000 software applications (apps) on the Vuforia platform, it’s a growing part of Qualcomm’s business.

The second company that will play a crucial role in the future of immersive tech is ARM Holdings (LSE: ARM). ARM is the world’s leading supplier of semiconductor intellectual property. It’s a global name with immersive technology at the very core of its business model.

Consider this excerpt from Shared Purpose: A Thousand Business Ecosystems, A Worldwide Connected Community, And The Future a paper written by James F Moore in May 2013 for ARM: “A story from ARM Holdings begins many years ago when a major partner wanted chips for mobile phones. This company suggested ARM limit its processor to a 250-milliwatt budget for electrical power — tiny by computer standards — and asked that ARM learn how to double the processing capability of chips every 18 months while keeping power constant. Of course, ARM could have rejected this technology strategy but, by embracing it, ARM learned how to do sophisticated power saving in advance of its competitors.”

It’s this approach to innovation that sets ARM apart from others. With the need for technology to become even smaller, faster, more powerful and yet ‘invisible’, ARM stands as the company to make it happen. Regardless of whether a fully immersive digital world is five, ten or 20 years away, both Qualcomm and ARM will be two of the companies to benefit most.

But if you’re looking for something more adventurous, then you could check out Toumaz Group (LSE: TMZ), a small semiconductor company. It’s based around two subsidiaries: Frontier Silicon and Sensium Healthcare.

Frontier produces advanced semiconductors for digital radios, and high-quality audio speakers. Sensium, meanwhile, makes medical wireless devices, which allow doctors to monitor patients’ vital signs remotely.

This will become increasingly important as the population ages, and will also enable healthcare and social care to be integrated more efficiently.

For now, the company is loss-making. However, Frontier is seeing strong growth in Germany, and has recently agreed a strategic deal with music-streaming group Spotify.

Sensium is in discussions with several hospitals on both sides of the Atlantic, after concluding a successful trial of its monitoring technology.

Trading at only a 6% premium to the value of its net assets, and expecting a surge in revenue in the next two years, Toumaz looks a promising if risky play on immersive tech.


Category: Technology

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