The end of the year is approaching and it’s time to review what we have left behind. In this case it is a whimsical review, which does not necessarily aim to mention the most relevant of what happened, but rather a selection of topics where the only criterion is subjectivity. Passing from the general to the particular, reviewing 2022 can leave to go the complex global macroeconomic framework which, how could it be otherwise, has had an impact (and a strong one) in the technology sector.
The global macro has gone from heaven to hell. The 2009 global financial crisis led to a steep drop in interest rates (which even went negative at one point), sending asset prices skyrocketing, prompting bull markets in just about everything, including the tech sector. But the pandemic arrived and the global economic structure was significantly altered. A strong issue of various currencies, given to oxygenate an economy paralyzed by the confinements, has led to levels of inflation unknown in recent decades.
The subsequent rise in interest rates made capital scarcer and therefore more expensive. Both factors abruptly and painfully ended more than a decade of prosperity. In this scenario, the sharp decline in the valuation of technology companies (which in turn has led to significant cuts in their workforce and projects) has proved to be a logical, if unintended, effect. And as if the post-pandemic macro weren’t enough, the Russian invasion of Ukraine has added fuel to the fire, affecting the price of some raw materials and reorganizing the geopolitical map.
The post-pandemic scenario has also provided another glimpse into China’s role in the world economy. The prolongation of the pandemic in China, or more precisely its self-flagellant “Covid zero” policy, has favored a clearly perceptible change: the estrangement from that country. The “factory of the world” has become a concept of concern in some companies, leading them to seek out more geographically diverse supply chains.
Therefore, the concept of offshoring began to give way to that of friendshoring: a relocation of supply chains, oriented towards stable countries, ideally geopolitical allies. The priority begins to be not only having efficient but also solid supply chains.
But it’s not even just a matter of these chains running smoothly, avoiding the disturbances deriving from the policies towards Covid applied by China (and which it seems to be starting to retrace). Even the pressures of this power against Taiwan give rise to a hypothesis of conflict similar in some respects to Russia’s invasion of Ukraine.
The question then arises as to what the impact would be if things thickened and, consequently, several countries, especially on the western axis, decided not to cut, but at least to reduce their commercial dependence on the eastern power.
A case that has become more than evident with the promotion of the United States and Europe domestic chip production in the name of national security. Therefore, this new era of diversification shows signs of being the beginning of a new era of industrial policy.
Beyond this new dynamic, in terms of chips, the increase in supply combined with a weakening of demand (with declines in PC and smartphone sales, as well as overloads of industries such as the automotive) and an environment of rising prices of capital, bring back to earth the superstar industry of the pandemic which suddenly appears much less stellar. A non-stop journey from heaven to earth.
What is closing was a year in which satellite technology achieved a visibility reserved only for very specialized fields. But all this is very far from Argentina.
Source: Clarin
