This has been a challenging year for the multi-trillion-dollar information communications technology (ICT) industry. Now, however, it looks like the downturn is behind us, and growth is predicted in the near term.

In fact, the ICT segment of the industry is likely to become one of the world’s fastest-growing manufacturing sectors in the next few years. But still clouding the horizon are inflation and recession concerns, as well as geopolitical tensions and the 2024 election. 

Semiconductors, one of the industry’s biggest subsectors, continued to weight it down throughout most of 2023, hitting rock bottom in February. But semiconductors now appear to be moving in the right direction. Analysts see a rebound in growth of nearly 4% for the industry in 2024. And while that number is small, we’ll likely see more stability and a return to pre-pandemic level rates in 2025. Additionally, talk of a full-blown recession appears to have lessened, and as of the end of 2024 the supply of semiconductors is expected slowly to continue to improve.

The ICT sector will continue to evolve more rapidly than ever, to keep pace with the latest innovations by businesses worldwide. We can’t go anywhere these days without hearing about “big data,” which is certain to impact the cloud memory market. Consumers and businesses alike are using cloud storage tools to back up their photos, reports and everything in between.

With the surge in data comes a demand for more automated data processing. That’s why the 5G market, with its faster data speeds, will continue to increase over the next couple of years. Business owners are looking to the ICT industry to speed up operations, analyze more data, and develop targeted statistics for streamlining business decisions.

Cybersecurity is another hot industry subsector. As the world grows more digital, the need for more secure data protection will increase. This is especially true given the geopolitical outlook for ongoing tensions in Russia, Ukraine, China and the Middle East. It’s going to be a busy year for this subsector – businesses will demand innovations to cybersecurity tech that will protect their intellectual property against global hacking threats.

While these subsectors of the ICT sector have a positive outlook, it’s always wise to monitor inflation and interest rates. As 2024 is an election year, a big drop in interest rates isn’t anticipated, although it’s possible we’ll see a slight decline. Individual household spending tends to drive demand for consumer electronics. 

As the pandemic slowly fades from consumers’ minds, they’re looking to replace electronic products purchased online during the lockdown with new models that have subsequently come to market. 

Hopefully, the Fed has stopped ticking interest rates higher and higher to allow consumers to increase their purchasing power and rev up the economy once again. With a more stable economic environment next year, and inflation predicted to level out, consumer spending should increase in the second half of 2024.

Nevertheless, the global macroeconomic environment will remain at risk in 2024. Tensions between Taiwan and China, as well as between China and the U.S., are ever-present. Ukraine is still at war with Russia, and on top of that, the Israel-Hamas war is a concern in the Middle East. While these hostilities aren’t being fought on U.S. soil, they do impact U.S.-based supply chains.

Semiconductor production is a strategic priority for the U.S., Asia and Europe. Recent government actions include the Made in China 2025 policy, Japanese subsidies for semiconductor joint ventures, the U.S. CHIPS and Science Act and similar measures in the EU, South Korea and Taiwan.

It will be interesting to see how efforts to shift chip production “in-house” impact various costs and supply. We’re seeing more investments in semiconductor fabrication in the U.S. to prevent future supply chain constraints, but it will take several years to complete these facilities and ramp up production. An autonomous approach to chip production could cause higher prices for consumers, limiting expected growth in the ICT sector. 

As we look ahead into 2024, we predict that the electronics and ICT industry will continue to improve but growth will be modest, as there are many subsectors that have yet to rebound from the recession and inflation that hit many of them in 2023. Businesses should be wary of cybersecurity concerns, and should also take care to monitor ongoing conflicts across the globe that could place their production and demand at risk.

Chad Clarke is manager of U.S. buyer underwriting and risk services with Atradius.