The global supply chains organised to optimise profit and speed – which shaped international trade and delivered benefits to both producers and consumers for two decades under globalisation – have now been twisted out of shape, with the global economy facing significant geopolitical disruptions.
A world with slower growth and heightened geopolitical tensions is making the operating environment for tech, media, and telecom (TMT) companies riskier, more complex, and costlier. Against this backdrop, the TMT industry has become the most (geo)politised sector in the world, according to leading data and analytics company GlobalData.
The research organisation’s latest thematic report – Geopolitics in Tech, Media, and Telecoms – delves into five key geopolitical flashpoints: US-China; Europe; India; the Middle East; and Latin America to understand how technologies like artificial intelligence (AI), semiconductors, batteries, and 5G have become exceptionally (geo)politicised and liable to be weaponised.
“US-China competition should not be confused with Cold War dynamics,” says Carolina Pinto, thematic analyst at GlobalData. “We now live in a multipolar world, with multiple players – including India, South Korea, Japan, and the Middle East – having significant pull and individual drive factors.”
Mike Orme, consultant at GlobalData, adds: “It speaks volumes about the scene that now confronts business leaders – which has formed so suddenly and alarmingly since 2020 – that the global insurance industry itself is struggling hard to get to grips with the new and exploding world of geopolitical risk.”
The era of hyperglobalisation is over and there is now a movement towards a period of decoupling supply chains. Optimising production costs remains important, but the new order places a higher weight on security and resilience. The fragmentation of US-China relations has bifurcated supply chains and incentivised companies to reshore closer to home markets.
The struggle for global mastery between the US and China is actively shaping regulation across geographies and industries – with the tech sector at the forefront of this disruption. Competition has stimulated technological developments, but the frictions created by intensifying trade and investment barriers arising from geopolitical rivalry may hinder additional advances across various tech-linked sectors including automotive, energy, and defence.
“Decoupling completely from China is virtually impossible and many Western companies are finding it extremely difficult and expensive to do so,” says Pinto. “The reality is that there are no alternative manufacturing destinations that provide the same organised infrastructure and cheap labour that China has offered for the last 50 years.
“Nevertheless, companies must build supply chain resilience by diversifying and shortening supply chains closer to their customer and product bases. Doing so will minimise the impact of future supply chain disruptions.”
Amid rising technology nationalism and given the dependence of progress in artificial intelligence (AI) on advanced semiconductors, the semiconductor industry is being increasingly (geo)politicised.
The US gave birth to the semiconductor industry and owns most of the critical intellectual property (IP) associated with chip design and manufacturing.
Since 2020, the US has weaponised its chip IP to deprive China of key technologies – from chip design software and chip manufacturing equipment to the chips themselves. By doing so, the US aims to stall China’s access to advanced AI chips and progress in building itself a self-sufficient domestic semiconductor industry.
“The world resides on wafers of silicon, but with the global semiconductor industry supply chain blown apart by geopolitically inspired and hugely expensive reshoring projects leading-edge chips will cost a lot more – and the demand side concentration of power among the customer elite will compound,” says Orme.
“AI is not only a target of US-China competition, but it can also be used as a weapon – whether it be in military operations or to spread disinformation during election cycles,” adds Pinto.