EY: How US tech firms and Govt are tackling supply chain

Despite driving the connected platform economy, today’s technology companies must adapt to an unprecedented perfect storm of political, economic, social, environmental and legal factors. Decisions on sourcing, supply chain, product and service production, and distribution are influenced by the rapid pace of change impacting complex economic, political and regulatory changes in the broader business environment. Taken together, these actions are adding a new layer of complexity into the planning and execution within the operating model.

In terms of political and economic challenges, the survey findings indicate that technology company executives are grappling with political instability, changing political costs and new constraints that are creating both opportunities and challenges for their operating models and supply chains.

Tariffs and rising labour costs have created a situation in which many technology companies have adopted a Chinaplus-1 strategy. In Asia, countries such as Vietnam, Malaysia, Thailand and India are benefiting from new investments to diversify supply chain risk. There’s also an increased threat perception as companies globally could face heightened cyber attacks impacting their operations.

Depending on their role in the value chain, technology companies are increasingly seeing government involvement in the sector through a bifurcated lens. On the positive side, governments that are concerned about securing their access to critical technologies are creating new multi-billion dollar incentive programs such as the proposed US Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act and the European Union’s proposed Chips Act to incentivise the building of new research and development (R&D) and fabrication capacity.

Recent geopolitical challenges have also resulted in new export control measures, including new bans on the export of sensitive technology, semiconductors, telecommunication, encryption security, software and sensors, that further increase complexity to ensure compliance.

Key regulatory challenges impacting technology company operating models

• Digital services tax, trade tax, sales/use tax, value-added tax
• European Union competition policy
• The OECD Base Erosion and Profit Sharing (BEPS) 2.0 projects with Pillars One and Two
• Executive order aimed at anticompetitive practices
• Executive order to review critical supply chains for manufacturing of semiconductors and other cutting-edge technologies
• Taxation of intellectual property (IP)

SUMMARY

EY’s survey results indicate that technology executives are focused on continuously reviewing their business and operating models. Often, they are trying to respond to challenges that impact their functional issues – addressing the issue at hand versus being able to holistically address continuous change and grow their business. Technology executives must increase agility in their operating model to better optimise their supply chain.

Read the full EY report.