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US tech giants to "far exceed" $35 billion loss in NSA fallout

"Foreign customers are shunning US companies," says a new report.

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(Image: CNET/CBS Interactive)

Silicon Valley is expected to take a harsher beating over claims it was working with US intelligence agencies

The Information Technology and Innovation Foundation (ITIF) said in a new report Tuesday that the tech industry will likely "far exceed" the group's initial estimate of losing up to $35 billion. The group's reason is in part because little has been done to address global concerns two years after leaks revealed the PRISM surveillance program.

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ITIF, a non-profit group with a focus on tech issues, said that matters were compounded by politicians failing to adopt new laws reining in government surveillance, which "sacrifices robust competitiveness of the US tech sector for vague and unconvincing promises of improved national security," said report authors Daniel Castro and Alan McQuinn.

But in reality, the figures could be incalculable.

The report follows a slew of paltry earnings reports and lower-than-expected sales figures reports from major tech and cloud providers over the past year. It's partly because their customers, concerned about their own users' data being slurped up by the National Security Agency, are turning to local companies in Europe and elsewhere to store their data.

Foreign governments, who remain big spenders in IT and technology, are also shunning tech giants.

Many technology companies are reporting significant sales drop-offs in China, once a burgeoning economy for Silicon Valley firms. While some consumer-focused companies like Apple are seeing considerable success in the country, others -- like Cisco, HP, and Microsoft -- are taking a hit. It follows Beijing's decision to drop key brands from its list of authorized government suppliers in the wake of the NSA leaks. Although a number of reasons were cited, domestic companies were said to offer "more product guarantees" than their overseas rivals.

"The cost of inaction is not only short-term economic losses for U.S. companies," write Castro and McQuinn in their conclusion. "But a wave of protectionist policies that will systematically weaken U.S. technology competitiveness in years to come, with impacts on economic growth, jobs, trade balance, and national security through a weakened industrial base."