We don’t have to cast our minds back too far in history to conjure up memories of a world in crisis; 9/11, the GFC, bushfires and floods. We’ve learned to live with volatility, uncertainty, complexity, and ambiguity in just a few decades.

The IT industry has been incredibly fortunate so far. Since 2005, tech sector jobs have grown 66% compared to an average growth rate of 35% across the economy¹. And since 2016, our industry has grown four times faster than others, partly due to the accelerated digital adoption during the pandemic. 

But, we’re not immune to what is happening externally. Let’s look at the factors affecting IT businesses across the globe.

We’re all competing for semiconductors

The semiconductor industry is still desperately trying to play catch-up. Pre-pandemic, it had experienced a  surge in demand due to digital transformation, which was then compounded by COVID-19. According to Deloitte², chip demand for devices and data centres shot up in 2020 and 2021. PC sales rose over 50%, and cloud computer centre chip purchases increased 30%. 

It’s not just the IT industry that wants more chips. In 2022, the average car is predicted to contain almost double the dollar amount of microchips it did in 2010. Healthcare needs them for wearables and smart patches. While artificial intelligence and Machine Learning demand is predicted to grow 50% annually, requiring the latest and best manufacturing techniques.

Taiwan-China conflict increasing shortage risk

In 2020, 81% of semiconductor contract manufacturing was based in Taiwan or South Korea. The ongoing conflict between Taiwan and China and the US-China trade war has destabilised this vital global technology supply chain. 

To try and avoid shortages and enhance national security, the US and the EU have committed to growing their country or region’s capacity to manufacture semiconductors locally. However, this is a long-term and expensive play. Bloomberg describes cutting-edge chips as the most complex devices ever made, and it takes the most expert chipmakers in the world billions of dollars, years, and all of their expertise to get a new plant up and running³. 

Despite Scott Morrison listing semiconductors as one of seven industries Australia needs to gain national sovereignty over⁴, it looks unlikely to be achieved. This is due to complexity and cost and the lack of Australian suppliers who provide components lower down the chain. It will be almost impossible not to rely on China or Taiwan at all.

Global supply chains are a discombobulated mess

The severe global supply chain delays we’re experiencing have been caused by several factors⁵. Firstly, the pandemic, lockdowns and restrictions resulted in significant geographical shifts in supply and demand. The acceleration of pre-pandemic trends such as skills shortages and increased online shopping is now causing major issues. 

Secondly, the economic and global business environment became more challenging. Brexit and other geopolitical tensions have caused backlogs with ships and containers stuck in ports for months on end. 

Thirdly, we are likely to see further disruption as businesses focus on sustainability and their supply-chain footprint. What was once a finely calibrated network of world trade may not ‘get back to normal’ until 2024 or beyond.

War against Ukraine

Ukraine is one of the top locations for offshore and near-shore third-party services for engineering and IT skills. According to Forbes, the war is expected to disrupt services from 70,000 to 100,000 highly qualified workers—especially with digital engineering and IT skills.

Ukraine also accounts for 70% of the world’s neon gas capacity – an essential element in semiconductor production. This means the current chip supply constraints may get even worse and at best, will drag on until at least 2023.

Finally, there is the sharp increase in fuel prices as a result of the invasion. This will translate into the increased price of goods and services as costs are passed onto the consumer.

Navigating the era of predictable unpredictability⁶

It’s not pretty out there, but experienced business partners, suppliers and vendors should know by now how to navigate a forever changing landscape. Solving problems creatively, adapting to moving priorities and behaving ethically during scarcity and shortages will help ensure, as a customer, you can mitigate risk, have options, and keep doing business as usual when the world is anything but.

DEC – 20yrs of supporting our customers through volatile times. Let us help you today.

1. https://www.consultancy.com.au/news/3869/10-charts-on-australias-fast-growing-technology-sector
2. https://www2.deloitte.com/xe/en/insights/industry/technology/technology-media-and-telecom-predictions/2022/semiconductor-chip-shortage.html
3. www.bloomberg.com/graphics/2021-chip-production-why-hard-to-make-semiconductors/
4. https://www.afr.com/technology/pm-s-chip-supply-plan-a-mammoth-task-20220311-p5a3ru
5. https://theconversation.com/the-big-challenges-for-supply-chains-in-2022-174420
6. https://www.economist.com/leaders/2021/12/18/the-new-normal-is-already-here-get-used-to-it?frsc=dg%7Ce