Recession scare: Global tech industry, supply chain disruptions

NEW DELHI: The war in Ukraine and the sanctions against Russia will continue to disrupt the global tech industry and supply chain in the near future.

According to market research firm GlobalData, technological sanctions against Russia will continue to increase. The UK has so far issued 1,123 new sanctions against Russia since the outbreak of the war, adding to the 215 already imposed.

The war has also contributed to market uncertainties, leading to high interest rates, a deepening funding winter, and mass layoffs, especially in the tech sector.

In 2022, over 1,000 companies laid off 154,336 workers, as per the data by layoffs tracking site Layoffs.fyi.

Nearly 1 lakh of them lost jobs in the month of January globally, dominated by companies like Amazon, Microsoft, Google, Salesforce and others.

Then, Russia and Ukraine hold significant reserves of metals such as cobalt, nickel, platinum, and palladium.

Russia is the third-largest producer of nickel, with 10 per cent of the market, which is used in lithium-ion and electric vehicle batteries.

Ukraine has been the supplier of about 50 per cent neon gas and 40 per cent krypton gas to the world -- the two indispensable by-products in the production of electronic chips.

"Supply disruptions due to the current war are preventing this item from reaching manufacturers, making it very difficult to deal with component shortages, late deliveries and higher raw material costs," according to a study in the International Journal of Mechanical Engineering.

"This means that companies that depend on chips, such as automakers, also face production delays. According to some companies in Japan and Korea, they can tap into the reserves, but the rush to find suppliers outside Eastern Europe is causing shortages and increasing prices, not just neon gas but also other industrial gases such as xenon, according to The Nikkei," the study elaborated.

Finding a supplier of neon gas other than Ukraine is currently difficult, as the gas must be purified to 99.99 per cent purity, a complex process that only a few companies in the world can do.

Already strained global semiconductor supply chains were heavily impacted by the war.

Prices were hit and are likely to impact electric vehicle batteries and accelerate the narrowing of the cost gap between ICE vehicles and EVs in the near future, according to reports.

"A prolonged conflict between Russia and Ukraine will continue to impact global growth in terms of production, trade, and employment. Major economies will continue to adopt tighter monetary policies to tame inflationary pressures," says GlobalData.

In the 'Global Risk and Resilience Trends Report and the Predictions Report', DRI International surveyed nearly 500 resilience professionals across all industries and sectors.

The ongoing supply chain crisis and the effects of the Russia-Ukraine war emerged as top concerns among them, including increased geopolitical risks, reports Forbes.

Among the issues identified were the disruption of key supplies, supplier failures, low inventories, the use of single or sole source suppliers, the global shortage of commodities and raw material, the transportation problems at docks and depots and of course, labor shortages.

According to the US Federal Reserve, the Ukraine war is expected to further impact not only the supply chain, but the entire global economy, as inflation and high interest rates fuel a possible recession.

According to KPMG US, the ongoing Russia-Ukraine war is likely to exacerbate and elongate global supply chain disruptions.

"The sanctions in response to the Russia-Ukraine war are having a compound effect on already beleaguered supply chains. Amid the ongoing initiatives to future proof operations, companies now face yet another test of supply chain resilience brought on by the risks of globalisation," said the global advisory firm.

Targeted actions that leverage digital capabilities can have a near-term impact on supply chain costs.

However, that shouldn't delay initiating or accelerating longer-term strategies designed to eliminate the risk.