ICT

Long-term growth sustained by digitalization

Sector
Value

USD9700bn

M

MEDIUM RISK for entreprises

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

  • High capacity to innovate
  • Widespread adoption of new technologies
  • Driver of growth and productivity of the global economy
  • Increasingly interconnected systems and objects (“Internet of Things”)
  • Low value-added for a few standard products
  • Consolidation in IT services comes on the heels of growth boosted by digitalization
  • Shortening life cycles of products impairs the investment cycle
  • Default of security could compromise the success story of the sector

What to Watch?

  • 5G is becoming a reality, implying a new wave of disruptive impacts on ICT
  • Rising protectionism will above all impact ICT over the medium-term
  • Tech bubbles are still a reality in the capital market, with potential ripple effects on investment in the case of a burst 

The Information and Communication Technology sector (ICT), comprising a wide range of activities from electronic components to telecommunication services, is expected to register decelerating growth in 2019 in line with global trade. We expect activity for ICT products to be below the 2013-17 average in 2019, close to 3% y/y, and recover a bit in 2020 to 4% y/y (still below average).

2018 was definitely a year of excess capacity in the semi-conductor industry as the synchronization of demand in 2016 and 2017 boosted the investment cycle globally. The industry has to now rein in this excess capacity following a shock of uncertainty related to the trade war between the US and China. This reduction of excess capacity will imply downward impacts on prices and the profitability of the sector in 2019, followed by a small recovery in 2020. The Chinese stimulus will bring some support in 2019, in particular for the end-use sector (smartphones and others) as it aims at supporting Chinese consumers. However global demand is expected to suffer from 2020 onwards alongside a deceleration of the US economy.

End-use sectors are also facing lower demand with longer life cycles of products and higher precautionary savings from households in a context of high uncertainty. But over the long term, the automation and digitalization of supply chains should continue to support demand.

Network equipment: Highly competitive market with sustained expected growth. Network equipment is required to support widespread adoption of technological advancements related to big data, cloud computing.

Services: Huge demand spurred by the digitalization of the economy, yet suffering from price pressures.

Key players

Country Role Sector risk
United States

#1 exporter

#1 producer

#3 importer

B

Medium Risk

China

#1 exporter

#2 producer

#2 importer

B

Medium Risk

Japan

#3 producer

#8 exporter

#4 importer

B

Medium Risk

Taïwan

#4 producer

#3 exporter

B

Medium risk

Contact

Contact Euler Hermes

Economic Research Team

research@eulerhermes.com

Sector Risk Analyst

Alexis Garatti

Alexis.Garatti@eulerhermes.com

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