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Can New Zealand’s Tech Sector Ride Adjustment Out?

Written By: - Date published: 7:48 am, November 24th, 2022 - 20 comments
Categories: Economy, tech industry - Tags:

Remember when New Zealand farming was a sunset industry and tech would rise in its place?

Just about every major US tech company from Amazon, Meta, Snap, Stripe, Coinbase, Twitter, Robinhood and Intel, are having massive layoffs and sharemarket falls of more than 50% in the past year. We are not immune here from that ‘adjustment’.

New Zealand’s own tech giant Xero, though not listed here, has also had a profit crash and a quick change in leadership at the top. Fisher & Paykel Healthcare, our high tech darling of many Kiwisaver portfolios, is valued well down on 2 years ago.

The technology sector is critical to New Zealand’s economy. In 2021 our top 200 tech exporters earned $13.9 billion and total global digital exports grew by 23%.

It is perhaps the export sector that has both welcomed and relied upon government assistance more than any other, and it is paying off. You can see how New Zealand’s Labour government has driven the messaging in ‘We See Tomorrow First’. This has already received the seal of approval from industry names like RocketLabs, Xero and Fisher&Paykel Healthcare.

As should be expected, you can see in that site our tech offering is specifically values-driven as a competitive advantage.

Of course, one of the longest-lasting and most effective tech innovations is this very own site which has led left-leaning digital political discourse here for over a decade.

The impact of the sector can be found in summary facts: we have 23,200 tech companies, employing over 111,000 people making it our second largest employer, and is our second largest export sector and growing fast.

Trade Minister Damien O’Connor –one of our best performing Ministers – has noted the changes in our increasing exports to the United States:

Digital services are a major contributor, with NZ$682 million worth of exports to the US spread across computer services and software license exports. US trade investment has also played a key role in the development of the New Zealand space industry.”

This export sector is particularly important to Auckland, where most of the lead companies are based.

A particular mention must also be made of Wellington-based listed investor Infratil for its huge and profitable investment in datacentres. They more than anyone have shown how to make tech investment profitable by concentrating less on growth and more on cashflow and profit.

All that makes New Zealand vulnerable to a big US tech shakedown.

So the question is this: as the US-based supermajors lay off people including here, will it damage our vital tech industry or push new personnel, investment and opportunity our way?

20 comments on “Can New Zealand’s Tech Sector Ride Adjustment Out? ”

  1. DB Brown 1

    The internet and it's commerce is immense. These players crashing now were not fit for purpose. People don't want to prop up a billionaire class they want better communication. They don't want to be led down rabbit holes they want to learn.

    The tech sector has barely begun. We just watched the wheels fall off a few stagecoaches but there's more than enough future to soon forget about those fossils.

    As organic chemistry comes into its own, and nano tech catches up practically with theory… we will build ever better and cheaper and cleaner. Carbon structures with metalloid properties overtaking the need for metals will be there somewhere in the future.

    A hybrid of science and commerce that takes into account environment and social factors, that is where we shall evolve to. The ridiculous fearful nature of science-phobic and small minded greed will all be exposed for what it is – these fatuous so called leaders in the industry have been exposed as frauds and thieves many times over, I laugh at every cent they lose. As for the lost jobs, get over it. Losing a job is all part of learning to do something new, starting a new chapter, and importantly, assessing the problems of what was.

    We decry the loss of twitter for its activism? Make a platform specifically for activism that's not full of trumpettes. We've barely begun yet people have been acting like it's exclusively the domain of Zuck and company. It's wide open and waiting for innovators.

    The remnants of twitter will build applications that bury twitter. Evolution baby!

    https://www.understandingnano.com/nanotubes-carbon-properties.html

  2. bwaghorn 2

    Just maybe we shouldn't kill the golden farming goose just yet, might need those ill gotten gains to keep the lights on.

    • Ad 2.1

      Indeed one can start to draw the rational political line between:

      social services we all enjoy, to:

      tax receipts the state spends, to:

      out agribusiness exports, to:

      actual farmers making export ingredients, to:

      wondering why they protest and very successfully at massive new regulations on their business from multiple directions.

  3. When the shipping industry changed in Britain, we gained an influx of engineers.

    Perhaps we may gain some tech innovators here?

    Farming has taken up quite a deal of tech to help with tasks both on and off farm. The two are not incompatible.

  4. Poission 4

    Digital services are a major contributor, with NZ$682 million worth of exports to the US spread across computer services and software license exports

    NZ makes more from entrails alone (such as casings and tripe),it provides high paid employment for unqualified workers.

  5. Thinker 5

    We should look back and remember how farming got to be the backbone of NZ. Not by weak, individual farmers trying to both manage their farms and go overseas to flog their wares.

    It was things like marketing boards, collectivising small farmers' and growers' efforts and promoting New Zealand as a sizeable 'business' to deal with.

    At about the time we (NZ) realised we had to find more than farming to keep us in the first world (and, to be fair, that may have been due to the Lange government) we were told about level playing fields and it wasn't the government's role to pick winners (by Roger, then Ruth).

    I've always believed that the copying of ideologies from much bigger countries is one of the biggest mistakes NZ has made in the last 40 years. We're not the size of the USA. That country has umpteen corporates bigger than NZ itself.

    To thrive, our government needs to develop the cahones to pick winners and then give those sectors a leg up. Other countries do and we don't have much going for us.

    I dealt with Japan in the 80s, just as their car industry was beginning to beat the rest of the world. If you turned your back on a Toyota, the message was to at least sell you on buying a Japanese made car. They had the Ministry of international trade & industry that wasn't just an office tower full of bureaucrats. It would do a research on global consumer preferences on behalf of all the car industry and then manufacturers did their best to build cars that met those needs. Maybe they still do.

    Were a small country. I think it's up to the government to do a MITI equivalent for us so that some of our businesses can get a leg up while the established ones are free to vote ACT and do their own thing if they want.

    • Poission 5.1

      Japan which is one of the most technically advanced countries,looks to old school technology to sustain the colder weather,with reduced energy loads.

      Freeman Dyson suggested that for mid latitude climates the two greatest technological advances were, Knitting and hay making.

    • Yes farming in NZ began to pay its way with refrigerated shipping and the addition of cobalt to our volcanic soils. One a tech advance, the other a science advance.

      Before those advances, sheep died of sleepy sickness and a carcass was 6 pence!!

  6. Incognito 6

    Good Post!

    Although this doesn’t answer your question directly it points to current developments, partly born out of necessity:

    https://www.newsroom.co.nz/health–science/technology-a-painkiller-for-embattled-health-sector

    I have no idea how much skill and knowledge overlap and transfer across various sectors but it may well be a realistic option for those people if they are laid off here in NZ.

  7. Andy 7

    I've often wondered how these US tech companies such as Twitter and Facebook can have so many employees. What the heck do they all do?

  8. RedLogix 8

    I work for a hard technology company, one that produces real world hardware and software that does real things. We are an essential component of everything that is made or delivered in the modern world. Literally everything you can see or touch in our made environment has a story that we are part of. If the handful of major companies in our space stopped – so would the world.

    Yet our turnover is a fraction of Google, Twitter and the like. We have little room for deadwood, low-contributing employees. By contrast Musk has laid off more people in the last few weeks than we employ in total and nothing has changed. That tells me they were bullshit jobs.

    These so called big techs have been grossly overvalued in my view and have been riding for a fall.

    • Poission 8.1

      There are a number of problems with the tech models in General,the distribution of funds (often at the expense of the shareholders and other taxpayers)

      The remuneration model that issues shares to upper and middle managers (often the founders) that in turn are brought back to limit the dilution of earnings per share.

      The borrowing of debt to pay for the buybacks and dividends (which in turn is tax deductable and franked to shareholders)

      The overpricing of the shares by investment funds due to their differential social costs ( higher esg rating scores) which allows some with p/e over 40 to even survive.

    • Muttonbird 8.2

      I love the self-aggrandising you do with every single comment. It is comforting.

      Apparently the ignorant world owes you much more of a living than they currently do because pre-Musk Twitter.

      Market forces etc, so cry me a river.

  9. Poission 9

    Tech layoffs continue as reality returns to value,with google to reduce headcount by 10000,as losses accrue for both private wealth funds and esg investments.

    Michael Burry (the big short) had already said that the forthcoming downturn was to be sen in the loss of white collar jobs,mostly in service industries,with demand for blue collars ( people who make and fix things) being unbated.

    https://www.computerworld.com/article/3679733/tech-layoffs-in-2022-a-timeline.html

    The deindustrilization experiment in Ireland ( to embrace high tech through low taxation) will see a country very exposed,with 10 companies,producing over 25% of their tax revenue.

    https://www.reuters.com/markets/europe/ireland-sees-risk-corporate-tax-take-tech-slowdown-2022-11-17/

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