How geopolitical developments are shaping the TMT sector

Introduction

Global power shifts and regulatory changes are forcing the Technology, Media, and Telecommunications (TMT) sector to adapt quickly. Companies face three key challenges: building diverse supply chains, working within new tech regulations, and protecting their digital assets. These real-world pressures require companies to think differently about how they operate and grow.

• De-risking global interdependencies
• Geopolitics of AI
• Cyber resilience

Read on to learn more about the opportunities evolving from geopolitical shifts.

De-risking global interdependencies

“TMT is one of the most regulated sectors, but also the most rapidly developing. TMT businesses have immense opportunities but must anticipate geopolitical challenges.”

What is it?

After decades of rapid expansion in global trade, economic de-risking is on the agenda of global governments. For example, the European Union plans economic de-risking across several pillars. Making our own economy and industry more competitive and resilient is one of these, meaning investment to foster innovation and remain the leading global market. More independence and diversity are required to de-risk global interdependencies.³

Why are companies heading this way?

Governments view the technology, media, and telecommunications (TMT) sector as highly strategic; therefore, the economic security policies are affecting the businesses. Export controls for dual-use technologies in the EU, the upcoming outbound investment screening in the US, and export controls on China are just a few to mention that effect this sector. ¹

How does this affect the industry?

The stringent export controls and cross-border investment restrictions will primarily impact semiconductor manufacturers.

Semiconductor manufacturing is fundamental for any industry, while its distribution is in the hands of a limited number of suppliers. In 2021, the US brought legislation to build out semiconductor manufacturing in the country. With this initiative, the government hopes to build out the US technology sector and decrease the reliance on foreign suppliers and intends to diversify leading-edge capacity in order to reduce risk. As a result, geopolitical concerns have had major implications on the ability to enact M&A transactions and scrutinize semiconductor deals like Nvidia`s unsuccessful intention to buy Arm Limited.⁴

On the other hand, the sector also has subsidies and incentives for local capability advancement. The European Chips Act aims to reinforce the EU´s semiconductor technology and innovation capabilities and ensure European chip technology leadership in the mid- to long-term.⁵

What can you do to prepare?

Optimize supply chain dynamics with the help of desk and heuristic research approaches, where each potential disruption is analysed separately. Identify local suppliers and potential alternatives by utilizing a thorough desk research approach. For a tactical outcome, it is highly recommended to investigate your supply chain by studying various scenarios in a workshop that will help your organization identify where potential disruptions might occur and create viewpoints from your organization`s perspective.

Identify investment opportunities through customized ad hoc studies. While local governments incentivize local development and manufacturing, businesses will have an opportunity enabled by these policies. Understand these opportunities through a market or segment attractiveness assessment framework.
Track regulatory changes. A dynamic market intelligence platform with a customized insights monitoring scope and alerting system will help your organization stay ahead of the fast-paced geopolitical climate and regulatory changes.

Geopolitics of AI

“84% of TMT CEOs said investing in generative AI was a top priority. (KPMG)”

What is it?

AI development is at high speed, where nations are racing towards getting the leadership positions. There is the European AI Act that came in force in August 2024, being the first regulation in this field. In 2023, President Biden issued a wide-reaching executive order on safe, secure, and trustworthy AI. The implementation of the regulations is nevertheless extremely challenging. ⁷

How does this affect the industry?

The delayed government`s efforts around AI regulations pose an opportunity and risk for TMT companies worldwide. According to KPMG, 84% of TMT CEOs said investing in generative AI was a top priority. 71% said a lack of regulation in the space would be a barrier to success.⁶

The existing regulation, the European AI Act, is both seen as a driver and an inhibitor of the sector. On the one hand, the new policy`s objective is to promote trustworthy AI across Europe, and businesses may benefit from the competitive advantage of solid AI solutions built in line with standardized regulations. On the other hand, companies in Europe face high initial cost challenges and long time to market due to administrative burdens.

What can you do to prepare?

It is crucial to understand how to improve the transparency and security areas when using AI technologies. Organisations should implement AI development, news, and debate monitoring systems in order to explore and adapt the AI use opportunities.
AI brings immense opportunities to innovate on products, services, and operational efficiencies. A customized study based on the primary research methodology will help your organization explore the opportunities for internal and external/customer use cases. Interviews with experts and peer organizations will support building best practices around the AI use cases and avoid early adopter pitfalls.

Cyber resilience

“In 2023, cybersecurity budgets increased 125% compared to 2019, and 58% of TMT companies conduct penetration testing at least twice a year.”

What is it?

In a world full of geopolitical tensions, the role of cybersecurity is evolving. Companies, especially those in strategic sectors like TMT, become increasingly the target of state-sponsored cyberattacks. There is a need for TMT companies to become cyber resilient. This is the signal of the growing importance of cybersecurity measures to be on the agenda of every executive.

Why are companies heading this way?

In Europe, there is the strictest data protection law—GDPR 10. The EU also provided an update on the NIS2 Directive on measures for a high common level of cybersecurity across the Union.⁹ The directive will oblige many companies to meet higher cybersecurity standards. Only a few companies are prepared for the NIS2 requirements so far.

Any regulatory implications mean higher costs for companies, and even higher costs in the case of actual cybercrime and effective penalties from the government. A successful cyberattack can be costly and can damage reputation. According to IBM, the average cost of a data breach in 2023 was US$4.45 million, with 50% of costs being higher than a year after the breach due to fines.⁸ The GDPR penalties, for example, can go up to € 20 million or 4% of global annual turnover.

How does this affect the industry?

In 2023, cybersecurity budgets increased 125% compared to 2019. Reportedly, cyber managers and the board levels need to demonstrate cyber expertise. Larger players even report CEO compensations to depend on cybersecurity performance objectives.⁸

58% of TMT companies reportedly conduct penetration testing at least twice a year, compared to 41% for non-TMT companies.⁸ This demonstrates how important this topic is for TMT sector and this means that the TMT sector is leading in the measures undertaken to become cyber-resilient

What can you do to prepare?

Investigative research will help global organizations identify opportunities in the use of advanced technologies with the goal of enhancing cyber resilience. While “cybercrime-as-a-service” is evolving and the crime gets professionalized, there are constantly developing technologies that can help in combating it. Scheduled desk research analysis enables keeping track of innovations. Primary research with experts and peers will shed light on best practices and how to achieve cyber resilience goals.

Conclusion

TMT companies must take clear steps to thrive in today’s complex environment. Those who build stronger supply networks, follow smart tech development practices, and invest in security will gain an edge. The numbers tell the story—cybersecurity spending has jumped 125% since 2019, showing that companies are taking action.

Success now depends on finding practical ways to grow while managing new rules and risks.

By the way, if you found this article

Sources:

1. EY, Geostrategic Outlook Report
2. S&P Global, Market Insights on Geopolitical Risks
3. European Commission
4. Mizuho Group, TMT Whitepaper
5. European Commission
6. KPMG, Top Risks Forecast
7. European Commission, Regulation Data
8. Cyber magazine, Why have cybersecurity budgets soared for TMT companies?
9. European Commission, NIS2 Directive
10. GDPR