Russia-Ukraine War Impacts Global ICT Markets
A new survey found that more than half the respondents are reassessing their tech spending plans for 2022.
March 7, 2022
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The conflict has halted business operations in Ukraine while the Russian economy is feeling the early impact of Western sanctions. This will strongly affect tech spending in both countries with double-digit contraction of local market demand expected in 2022, IDC says. Meanwhile, tech spending among Western European countries may increase in part due to expanded defense and security allocations.
Tensions over the conflict in Ukraine will have wide-ranging consequences on both energy prices and security of supply, particularly for certain European countries where cascading effects on price indices are already being felt. Most countries will need to quickly reassess their near-term energy plans while accelerating efforts to reduce their dependence on carbon-based energy sources.
More than 100 global companies have established subsidiaries in Ukraine and many more have operations in Russia. The conflict has already displaced tens of thousands of developers in Ukraine and led to the relocation of some services in both countries. These relationships, along with the physical assets and personnel associated with them, as well as any future expansion plans, will need to be re-evaluated in light of the conflict.
The financial sanctions imposed to date are presenting serious challenges to foreign credit availability in Russia, while creating potential losses on loans issued by EU countries to Russia. Without access to credit, most organizations will be forced to suspend new technology investments in the near term. The country is also suffering from a severe shortage of cash, which is significantly impacting consumer spending.
Exports of finished products and technology components to Russia will be significantly affected by the sanctions, but the impact on Western companies will relatively small given the size of the market. Imports of tech materials from Russia and Ukraine will also be affected, particularly in the semiconductor sector where supplies of neon gas, palladium and C4F6 used in chip manufacturing will be greatly reduced. The conflict is also expected to further disrupt global supply chains as cargo is rerouted around the two countries and costs increase.
Russia’s currency plunged in value in response to the initial sanctions, making imports of IT equipment and services significantly more expensive. As a result, many companies are refusing to ship orders to Russia even if payment is possible. This also means that Russia’s own manufacturers of PCs, servers and communications equipment will be unable to operate. Geopolitical tensions are also impacting other currencies throughout the region, including the euro.
In addition to the immediate consequences identified, other near- and long-term impacts can be expected, including increased stock market volatility and market speculation; risk of cyberattacks and the potential for a broader cyberwar; the disruption of startup environments in both Russia and Ukraine; and the creation of new business and scientific alliances to replace those severed by the hostilities.
Russia’s currency plunged in value in response to the initial sanctions, making imports of IT equipment and services significantly more expensive. As a result, many companies are refusing to ship orders to Russia even if payment is possible. This also means that Russia’s own manufacturers of PCs, servers and communications equipment will be unable to operate. Geopolitical tensions are also impacting other currencies throughout the region, including the euro.
In addition to the immediate consequences identified, other near- and long-term impacts can be expected, including increased stock market volatility and market speculation; risk of cyberattacks and the potential for a broader cyberwar; the disruption of startup environments in both Russia and Ukraine; and the creation of new business and scientific alliances to replace those severed by the hostilities.
The Russian invasion of Ukraine and the resulting diplomatic and economic response have led to a critical turning point for Europe and the world. So says the International Data Corporation (IDC).
The information and communications technology (ICT) market has been affected by the conflict. Specifically, the economic sanctions and other measures levied upon Russia by the United States, the European Union (EU), and other countries have impacted the ICT. A new IDC report provides an initial assessment of how the crisis will affect ICT spending and technology markets worldwide.
The report is “The Impact of the Russia-Ukraine War on the Global ICT Market Landscape — IDC’s March 4, 2022, First Take.” It provides an initial assessment of the implications the crisis presents for the worldwide ICT market. The report offers recommendations to tech providers and buyers to rapidly adapt and react to fast-changing market conditions.
IDC’s Andrea Siviero
Andrea Siviero is associate research director, European Customer Insights & Analysis.
“The evolving geopolitical scenario will undoubtedly affect global ICT demand in the coming months and years,” Siviero said.
A new IDC survey found that more than half the respondents are reassessing their tech spending plans for 2022. About 10% are expecting strong adjustments to their ICT investment plans.
Regional and Worldwide ICT Market
The IDC expects a steep decline and slow recovery for ICT spending in Russia and Ukraine. The global impact of this decline will be somewhat limited. Combined, the two countries only account for 5.5% of all ICT spending in Europe and 1% worldwide. At the same time, the crisis will likely impact trade, supply chains, capital flows and energy prices. This will affect the broader economy with negative consequences for both the regional and worldwide ICT market.
Click on the slideshow above to learn more about these consequences.
Philip Carter is group vice president, Worldwide Thought Leadership Research.
Given the fluid nature of the conflict, IDC recommends that companies identify weak links in their value chain ecosystem. Carter also said the organization recommends companies develop agile supply chain strategies. Additionally, they should create action plans that enable them to anticipate and react to a range of disruptive market movements.
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