ICT Spending Will Suffer from U.S. - China Trade War and Slowing Economy

Business spending on ICT will be caught in the crossfire of headwinds and tailwinds over the next five years as a softening global economy puts pressure on the ability of organizations to increase technology budgets while at the same time their growth and competitiveness is increasingly dependent on digital transformation, AI, and data analytics.

A new forecast from IDC predicts worldwide ICT spending on hardware, software, services and telecommunications will reach $4.6 trillion by 2022, representing average growth of 4% per year. Commercial customers will represent around 63.5% of total spending by 2022 ($2.9 trillion), while consumers will still account for 36.5% ($1.7 trillion).

Consumer spending growth will lag behind business and government spending due to increasing saturation in smartphones and tablets. The fastest growth over the forecast period will come from the professional services segment (7%), including cloud and digital service providers, which will account for a rapidly increasing share of overall tech spending thanks largely to the explosive growth of cloud infrastructure providers. The slowest growth in commercial technology budgets will come from federal government, followed by wholesale and construction firms.

In Asia/Pacific, the U.S.-China trade war is a double-edged sword, which presents both challenges and opportunities. Many businesses are increasingly dependent on China for revenue and might be expected to continue their pivot away from the U.S. in trading relationships. On the other hand, the conflict opens up opportunities to increase exports to the U.S. market.

Countering negative sentiment around the economy in China is increasing demand for ICT solutions related to digital transformation. This is driving major investments by large enterprise and state-owned customers in industries such as retail, manufacturing, healthcare, and financial services, especially around cloud and AI. Digital transformation is also driving technology budgets in Europe.

Overall growth in Western Europe will slightly lag emerging markets in Asia/Pacific over the forecast period, but the U.S. market is set to post some of the strongest growth rates in spite of its relative maturity. Business investments in digital transformation, cloud, and AI will help drive overall U.S. growth of 4.5% over the forecast, equaling Latin America as the second fastest growing region for total ICT spending after China.