Trending in 2025: Forecasting Strengths and Challenges in Our Key Economic Sectors
As we look to the new year ahead with the usual mixture of eagerness and trepidation, we recognize how interconnected we are. Business does not exist in silos, so we value insights from fields that touch our own, even if only peripherally.
In Business Magazine reached out to leaders of businesses in our community for their thought leadership in areas at the very foundation of our economy.
Technology & Innovation
Trending in 2025: A Look Ahead at Arizona’s Technology Industry
from Steven G. Zylstra of Arizona Technology Council and SciTech Institute
As we approach 2025, the global economy stands at a critical juncture. Factors ranging from geopolitical tensions to domestic policy changes shape an unpredictable landscape. Looking to next year, let me share a few of my predictions and insights into this uncertain future, focusing on the technology sector’s growth trends and the broader economic implications.
Weathering Economic Challenges
Economic headwinds dominate the horizon, with challenges such as geopolitical tensions, interest rate pressures and shifting trade policies. The continuation of three significant conflicts overseas has particularly buoyed the aerospace and defense sectors, driving demand for advanced military technologies. Yet, the high cost of borrowing complicates matters for major corporations, including those within technology, as they seek to fund innovation amidst financial constraints.
The recent U.S. presidential election adds another layer of complexity. Policies introduced by the incoming administration, particularly those surrounding corporate taxation and trade tariffs, will likely ripple through the technology sector. On the one hand, proposed extensions to corporate tax cuts and potential improvements to the treatment of R&D expenses could provide a much-needed boost. That’s especially true for semiconductor and electronics manufacturing, with both industries slated for continued growth in Arizona. On the other hand, proposed heightened tariffs — 25% on goods from Canada and Mexico and 10% on Chinese imports — could pose challenges.
Sector-Specific Growth and Turnarounds
Despite these challenges, the technology sector remains poised for recovery and transformation. After being heavily impacted by recent layoffs and facility closures, the semiconductor industry is expected to rebound by mid-2025. Companies like Microchip and Intel, currently scaling back operations, may find themselves reenergized by renewed demand and evolving market conditions. Meanwhile, Taiwan Semiconductor Manufacturing Company continues to push forward with three new facilities, one of which will come online in 2025.
Key areas of growth include aerospace and defense, bolstered by continued global conflicts and advancements in technology. Companies such as Raytheon and Boeing are capitalizing on demand for smart munitions and advanced military hardware. Furthermore, the United States’ potential shift toward a more hawkish defense stance could amplify these opportunities.
In the renewable energy and electric vehicle sectors, innovation remains a driving force. However, reliance on international supply chains for critical components like batteries and solar panels underscores the sector’s vulnerability to trade policies. For instance, tariffs on steel and raw materials used for solar infrastructure and materials for EV batteries could create a challenge by increasing costs, potentially slowing the adoption of clean energy technologies.
Broader Economic Impacts
The ripple effects of the technology sector are set to influence the broader economy in profound ways. Workforce development initiatives, particularly in semiconductor manufacturing, are a bright spot. Arizona’s apprenticeship programs, for example, have demonstrated significant success, equipping workers with the skills needed to meet industry demands.
Additionally, infrastructure development will be critical to supporting this growth. As a growing hub for technology and innovation, Arizona anticipates a 35% increase in utility capacity demand by 2031. Investments in energy, water and housing infrastructure are paramount to accommodating the influx of businesses and residents drawn by the state’s favorable business environment.
A Balanced Outlook
While uncertainties abound, I remain optimistic about the role of Arizona’s technology sector in shaping economic growth for 2025. The sector’s resilience, coupled with strategic policy changes and investments in workforce and infrastructure, can mitigate some of the challenges on the horizon.
However, vigilance is necessary. Geopolitical developments, trade negotiations and domestic policy shifts will require companies to remain agile, adapting quickly to new realities. Collaboration between industry leaders, policymakers and local governments will be key to navigating this uncertain terrain.
We’re heading into a season of unknowns, but our technology sector has always thrived on its ability to adapt and innovate. With the right strategies in place, it can continue to be a major driver of economic growth in Arizona in 2025 and beyond.
Steven G. Zylstra is president and CEO of Arizona Technology Council and SciTech Institute. A renowned leader in the technology and innovation sectors, leading the Council since 2007, he was named to the Arizona Space Commission Board of Directors this past September.
