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Blog

Understanding COVID's Impact on the Tech Sector

COVID, Technology, IT ...

Everything in the tech industry, from raw materials supply to the electronics value chain to product cost inflation, has been affected by COVID-19. However, there are upsides: the rise of remote working, the swift focus on evaluating and cutting risks in the end-to-end value chain, and the fall in emissions, bringing a greater focus on sustainability.

Possible long-term impacts by sub-sector

Hardware/software

• New smartphone launches may be delayed thanks to supply chain constraints – and with consumer confidence taking a hit, fewer contract phone users will be replacing their devices anyway.
• Factories in Asia are struggling to get production back on track as they reopen, which could have significant short- and long-term impacts.
• As a counterpoint to the chaos in supply chains, the software is turning out to be a growth catalyst.
• Businesses offering tech for remote working are seeing a boom in demand.
• The growing remote workforce will also bring third-order benefits for security software as IT departments rush to secure endpoints, especially cloud-based tools, VPNs and log management.
• Hardware companies are also looking at a surge in demand as employers bulk-buy laptops and ergonomic chairs for home workers.

IT services

• Demand for cloud infrastructure services is likely to continue, and spending on specialised software, telecoms and communications equipment could rise thanks to both home working and online schooling.
• Most organisations have no tech stack in place for a workable business continuity plan (BCP). The rise of remote working means IT departments will become more involved in BCPs and will
seek the help of IT service providers to procure devices and set up networks, systems, and security.

Semiconductors

• COVID has delayed deliveries of raw materials like chemicals, aluminium and copper by up to a quarter, and re-inventorying will be difficult.
• Disruptions all over the value chain could cause component shortages, leading to choke points at systems and board manufacturing.
• New product launches may need to be delayed and launch strategies changed to take into account the current state of the value chain. Delays could lead to lower participation in customer and internal meetings, as well as external events.
• In the longer term, semiconductor companies may have to address the risks of low resiliency and high geographical concentration to avoid future disruptions caused by single points of failure.

Network equipment

• The boom in teleconferencing software as tech companies encourage workers to work from home will be good news for the companies that provide it.
• As users demand faster and faster access to automation and data, network communications and equipment will be in the spotlight, accelerating the deployment and adoption of 5G networks and equipment.

Key questions for tech companies

• How can we protect our people’s safety first?
• How can we support our key suppliers and customers?
• How can we minimise disruption in the electronics value chain?
• How does COVID impact our ability to produce market-ready products?
• How can we meet sudden peaks in demand?
• How can we acquire or create technologies that are needed for the new normal?
• How can we plan for economic uncertainty and potentially falling demand?

Practical next steps

• Look at how to minimise disruptions in your value chain in future crises.
• Look at predictions for your sub-sector, and drive innovation and new tech adoption to support those scenarios.
• Think about mergers and acquisitions to enhance your tech capabilities.
• Develop strategies to handle sudden peaks and troughs in demand and supply.
• Implement digital tools for remote work, including for back-office functions and business processes.