Tech Giants Spend $80 Billion To Make Sure No One Else Can Compete (bloomberg.com)

An anonymous reader quotes a report from Bloomberg: Google parent Alphabet and the other four dominant U.S. technology companies -- Apple, Amazon, Microsoft, and Facebook -- are fast becoming industrial giants. They spent a combined $80 billion in the last year on big-ticket physical assets, including manufacturing equipment and specialized tools for assembling iPhones and the powerful computers and undersea internet cables Facebook needs to fire up Instagram videos in a flash. Thanks to this surge in spending -- up from $40 billion in 2015 -- they've joined the ranks of automakers, telephone companies, and oil drillers as the country's biggest spenders on capital goods, items including factories, heavy equipment, and real estate that are considered long-term investments. Their combined outlay is about 10 times what GM spends annually on its plants, vehicle-assembly robots, and other materials. The splurge by tech companies is behind an upswing in capital-goods spending among big U.S. companies, which is seeing its fastest growth in years, according to a Credit Suisse analysis. The $80 billion tab also is a snapshot of why it's tough to unseat the tech giants. How can a company hope to compete with Google's driverless cars when it spends $20 billion a year to ensure it has the best laser-guided sensors and computer chips? There are a lot of physical assets behind all those internet clouds.

Comments

That's small potatoes

[rsilvergun]

compared to what they're spending on Mergers & Acquisitions. That's where the real non-compete comes from. I don't remember the last big tech company that didn't just get bought out. That's the trouble with letting these companies hold onto so much cash. They don't have anything to spend it on except buying out competitors. Not since Bell Labs have they felt the need to put real money into basic research...

Re:That's small potatoes

[youngone]

Exactly. The company I work for is not a tech company, and you have definitely heard of it.
Last year our CEO used exactly that pitch to the shareholders of our biggest competitor.
"If we buy you out, just think how much we will be able to jack our prices up!"
That's not exactly what he said, but that's what he meant, and everybody knew it.

Re:That's small potatoes

[monkeyxpress]

trouble with letting these companies hold onto so much cash

Why do you think other people's resources somehow belong to you and you should have a say in what they do with it?

Well, in principle I agree with you, until enough of those people come for your stuff with pitch-forks, and don't seem to be particularly interested in your protestations that they are breaking a sacred moral code.

I find myself wondering...

[CrimsonAvenger]

...just what spending on capital equipment has to do with "making sure noone else can compete".

Have we actually reached the point of thinking buying machine tools is anti-competition? And if so, does that mean that when a small company buys machine tools, they are also "making sure no one else can compete"?

When I saw the headline, I assumed that "make sure no one else can compete" meant they'd spent the $80B in Washington buying legislation. Because it never occurred to me that buying the machinery required to make your product could be seen as anti-competitive. By anyone

Re:Stop trying to invent AI drivers and build cars

[viperidaenz]

I have an idea to remove the need to complex AI for long haul.
You build a network of rails, and put the trucks on the rails, no steering required!
You could connect a hundred of the trucks together and then you'd only need one driver for the whole lot!
You could also power the rail-trucks through a wire above them and the steel rails they ride on, no more diesel!

Re:Stop trying to invent AI drivers and build cars

[novakyu]

That's so stupid. You would never get enough resources together to get such a network to cross a state, let alone the entire continent!

This is one of those stupid ideas that sound good on paper when implemented in small scale, like in New York City, but it will never work on a trans-continental scale in practice.

OR: "Tech giants spend $80B to reduce their costs"

[whoever57]

That's what I was thinking. It appears to be money invested in reducing costs, increasing capacity.

It may have the effect of making it difficult for younger companies to compete, but, if you are a small company trying to compete with a large company, you have already failed if you plan to offer a small cost reduction to your potential customers.