Technologies such as smartphones are not reflected in "outdated" IT qualifications being taught in schools and colleges, says a watchdog.
A review by Qualifications Wales found students are ahead of the curve and already know the technology before they are taught about it.
It added many schools are using old computers and are struggling to afford the latest equipment.
One teacher said that IT was once seen as "almost a second-rate subject".
This is the latest review by the watchdog assessing whether qualifications within key areas of the economy are fit for purpose.
It said the subject needed "fundamental reform" and had not kept pace with the "fast-moving digital sector".
It wants GCSEs and A-levels in information and communication technology (ICT) scrapped in favour of new digital technology exams.
One of the authors of the report, Gareth Downey, said digital skills such as using software packages, sending emails and searching for information on the internet are "part of everyday life" but that is not reflected in the qualifications.
"Most young people already have these skills long before they start studying the current qualifications, so these topics aren't engaging or challenging for young people," he said.
"Most of the qualifications we looked at don't reflect the digital world that young people have grown up with".
The review found that:
- Current qualifications are outdated, with some a decade behind the latest digital developments such as smart phones, iPads and smart watches.
- IT assessments are often written or via screen-shots
- Many schools and colleges say they do not have the money to update equipment
- The subject is not prioritised in some schools and is often taught by non-specialists
The report recommends addressing problems with current qualifications before moving on to develop new digital technology qualifications.
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Digital competency, along with literacy and numeracy, will be central elements of the new curriculum for schools being rolled out from 2022.
But the most recent annual report from the inspectorate Estyn said planning for making sure ICT is embedded across the curriculum is "underdeveloped in most schools".
It said tasks were often limited to basic word processing or "producing slideshows where pupils cut and paste from websites".
Victoria Price, who teaches ICT and computer science at Thomas Picton School in Haverfordwest, has been working with the Technocamps project at Swansea University which helps pupils and teachers boost their IT skills.
She said IT in the past had been seen "kind of almost as a second-rate subject".
"But I think now there's been such an impact in Wales particularly in terms of our digital competence and digital literacy and so on and I think it's starting to change", she said.
She believes that a new Digital Technology GCSE and A-level would be a positive step.
"People do realise now, wherever our students are going to go whether it's college, university or the world of work, that we need to be developing those skills in our pupils".
The Welsh Government said it was "determined" all children and young people receive the most up-to-date education possible.
A spokesman added: "We've invested significantly in IT infrastructure in recent years, with additional funding recently being made available to support schools in preparation for delivering the digital requirements in the new curriculum."