Tech's globalist dream is dying
The tech world order that came together in the '90s at the Cold War's end is falling apart today as a new rift between Russia and the West opens and a great retrenchment begins.
Why it matters: The breakup of the USSR in the early '90s opened an era in which internet use rapidly spread around the globe and U.S. tech companies viewed the entire planet as both factory floor and market.
- Working from that assumption helped a handful of companies grow to previously inconceivable size, wealth and power.
- But the triple whammy of a "decoupling" between the U.S. and China, a global pandemic, and Russia's Ukraine invasion is rapidly shifting the landscape — and raising questions about how long those firms can maintain their colossal scale.
Driving the news: A new COVID outbreak that's spread from Hong Kong to nearby Shenzhen, China, has led Foxconn — the gigantic Taiwan-based tech supplier — to temporarily close production complexes there that manufacture, among other things, Apple's iPhone.
- The supply chain disruptions that could flow from further lockdowns in China cap two COVID years in which tech's products and services have grown even more essential for people around the world — even as companies' ability to provide them have faced new blockages and bottlenecks.
At the same time, Ukraine's plight has pushed many U.S.-based tech giants toward taking sides in a major international conflict, turning the power of their platforms toward blocking Russian state propaganda.
- That's cheering to supporters of the Ukraine cause, but it also reminds governments around the world that they may not be able to count on those companies' products in a crisis.
The big picture: Beginning in the '90s and accelerating after China joined the World Trade Organization in 2001, China became the tech industry's foundry. The relationship brought benefits to both sides.
- But more recently, it began to unravel, as U.S. distrust of China's government mounted, American awareness of China's human rights abuses grew, and China began to flex its muscles on the world stage.
Now all that, plus the pandemic, has left the U.S. in a "bring production home from overseas" mood.
- At the same time, the Ukraine war is causing many countries, particularly those with authoritarian leaders, to think twice about welcoming U.S. tech giants.
- Putin's war is also driving Russia deeper into an alliance with China, and any effort by China to supply Russia with arms will further deepen the gulf between Washington and Beijing.
The result is the start of a vast withdrawal from a single global tech market.
- This grand decoupling goes beyond the "splinternet" phenomenon — the breaking up of the global internet into several different jurisdictional zones with different regulations and dominant powers.
- More broadly, the changes cast a long shadow over the tech industry's internationalist vision, suggesting that the past three decades of up-and-to-the-right growth may have peaked.
Yes, but: A restructured international tech order, with native companies providing more software, services and even devices, could be more diverse, resilient, and vibrant than today's world, in which a handful of companies serve billions of customers in largely the same ways.
Our thought bubble: Decentralization is a watchword for industry visionaries, and that's exactly what's happening right now in the tech economy around the globe.
What's next: A modest retrenchment could see some tech manufacturing return to the U.S. while software services become less global in ambition.
- A more cataclysmic scenario has China deciding to follow Putin's revanchist lead and attack Taiwan, the center of the global semiconductor industry — likely leaving the industry, and the world, deeply broken.