Now you've got the basics of how the Technology sector works, and an understanding of its history and some of its drivers. But a high-level understanding is just the beginning. Just like our overall economy, each sector is made of many distinct parts—some relatively similar to others and some quite unique. To better understand the whole, you must understand the parts.
Chapter 1 covered the major Technology products and services: semiconductors, computer hardware, communications equipment, consumer electronics, software, and services. These offerings come from a variety of firms with very different end markets and drivers. While an understanding of every company isn't necessary, a firm grasp on the major industries is vital before making any sector-related portfolio decisions. This chapter explores the sector's industries and how an investor can begin forming opinions on each.
Before beginning, some definitions: The Global Industry Classification Standard (GICS) is a widely accepted framework for classifying companies into groups based on similarities. The GICS structure consists of 10 sectors, 24 industry groups, 68 industries, and 154 sub-industries. This structure offers four levels of hierarchy, ranging from the most general sector to the most specialized sub-industry:
Let's start by breaking down Technology into its different components. According to GICS, ...