Finnish Technology Industry Situation and Outlook, September 2014

Technology Industry /Finnish Economic Situation and Outlook

September 2014

13.04.2023 2

The Technology Industry Is Comprised of Five Sub-sectors

Metals IndustryBoliden, Componenta, Kuusakoski, Luvata, Norilsk Nickel, Outokumpu, Outotec, Ovako, Rautaruukki, Sacotec…

Mechanical EngineeringAbloy, Cargotec, Fiskars, Glaston, Kone, Konecranes, Metso, Normet, Oras, Patria, Pemamek, Ponsse, Prima Power, Stala, STX Finland, Valtra, Wärtsilä...

Electronics and Electrotechnical IndustryABB, Ensto, Microsoft Mobile, Murata Electronics, Nokia, Planmeca, Polar Electro, Suunto, Vacon, Vaisala…

Information TechnologyAffecto Finland, Basware, CGI, Codebakers, Codenomicon, Comptel, Digia, Efecte, Enfo, F-Secure, Fujitsu Finland, IBM, Knowit, Microsoft, Nixu, Tieto…

Consulting EngineeringA-insinöörit, Citec, Elomatic, Etteplan, FCG, Finnmap, Granlund, Neste Jacobs, Pöyry, Ramboll, Sito, SWECO, Vahanen, WSP…

13.04.2023 3

The Technology Industry in Finland

Mechanical Engineering• Machinery, metal products, vehicles• Turnover (2013): 27.2 billion euros• Personnel (2013): 125 500

Electronics and Electrotechnical Industry• Data communications equipment,electrical machinery, medical technology products• Turnover (2013): 15.8 billion euros• Personnel (2013): 43 200

Information Technology• IT services, applications and programming• Turnover (2013): 8.3 billion euros• Personnel (2013): 54 500

Metals Industry• Steel products, non-ferrous metals, castings• Turnover (2013): 8.8 billion euros• Personnel (2013): 15 800

Consulting Engineering• Expertise for construction industry and infrastructure• Turnover (2013): 5.0 billion euros• Personnel (2013): 46 300

• 50 % of total Finnish exports.

• 75 % of private-sector R&D investment.

• Some 280,000 employed directly in the sector, 700,000 employed in total, equalling about 30% of the entire Finnish labour force.

• The Federation of Finnish Technology Industries has over 1,600 member companies.

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The Technology Industry – the Most Important Sector in Finland

13.04.2023 5

2005 2006 2007 2008 2009 2010 2011 2012 201302468

1012141618202224262830323436

Mechanical engineering

Electronics and elec-trotechnical industry

Metals industry

Information technology

Consulting engineering

Turnover of the Technology Industry in Finland

Source: Statistics Finland

Billion euros, at current prices

13.04.2023 6

Export of Technology Industry Goods from Finland by Area in 2013Total goods exports 24.8 billion euros*

*) In addition to goods exports the sector exports services worth about 11 billion euros.Source: National Board of Customs, Statistics Finland

North America2.2 billion €8.8 %

North America2.2 billion €8.8 %

Western Europe11.4 billion €46.1 %

Western Europe11.4 billion €46.1 %

Middle and Central East0.7 billion € 2.8 %

Middle and Central East0.7 billion € 2.8 %

Asia4.1 billion €16.5 %

Asia4.1 billion €16.5 %

Africa0.5 billion €2.1 %

Africa0.5 billion €2.1 %

South and Middle America1.0 billion €4.1 %

South and Middle America1.0 billion €4.1 %

Central and Eastern Europe4.9 billion €19.6 %

Central and Eastern Europe4.9 billion €19.6 %

13.04.2023 7

Turnover of the Industry and Technology Industry in Finland

80

90

100

110

120

130

140

150

Industry

Technology indus-try

2005 = 100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: 1-5,2014 / 1-5,2013, %

Seasonally adjusted turnover index, latest information 5/2014.


-1 %

-2 %

13.04.2023 8

Turnover of the Technology Industry in Finland

50

60

70

80

90

100

110

120

130

140

150

160

170

180

190

200

210

Information technology

Consulting engineering

Mechanical engineering

Metals industry

Electronics and electrotechnical industry

2005 = 100

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: 1-5,2014 / 1-5,2013, %


Seasonally adjusted turnover index, latest information 5/2014. Share of total turnover in 2013: mechanical engineering 42 %, electronics and electrotechnical industry 24 %, metals industry 13 %, information technology 13 %, consulting engineering 8 %

-1 %

+15 %

-2 %

-5 %

-4 %

13.04.2023 9

Value of New Orders in the Technology Industry* in Finland

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

Combined

Export

Domestic

Million euros, at current prices

Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information April-June 2014

*) Excluding metals industry and game industry companies.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Change: II,2014 / II,2013 II,2014 / I,2014

Export: -1 % +1 %

Domestic: +3 % -9 %

Combined: 0 % -1 %

1013.04.2023

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

Series3 Export

Value of Order Books in the Technology Industry* in Finland


Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information 30.6.2014

*) Excluding metals industry and game industry companies.

Combined

Change: 30.6.2014 / 30.6.2013 30.6.2014 / 31.3.2014

Export: -10 % -4 %

Domestic: +2 % 0 %

Combined: -7 % -3 %

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

13.04.2023

Tender Requests* Received by Technology Industry Companies in Finland

Source: The Federation of Finnish Technology Industries’ order book survey, latest information: July 2014.

“Have you experienced a notable increase or decrease in the number of requests for tenders in recent weeks in comparison to the situation three months ago?”. Balance figure = the number of companies receiving more requests - the number of companies receiving less requests.

-60

-50

-40

-30

-20

-10

0

10

20

30

40

Balance figure

11

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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Value of New Orders in the Electronics and Electrotechnical Industry in Finland

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,000

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Muutos / Change: II,2014 / II,2013 II,2014 / I,2014

Vientiin / Export: -23 % -10 %

Kotimaahan / Domestic: +7 % +3 %

Yhteensä / Combined: -19 % -8 %

Lähde/Source: Teknologiateollisuus ry:n tilauskantatiedustelun vastaajayritykset, viimeisin tieto huhti-kesäkuu 2014 / The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information April-June 2014

1313.04.2023

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,000

Export

Domestic

Value of Order Books in the Electronics and Electrotechnical Industry in Finland

Combined


Change: 30.6.2014 / 30.6.2013 30.6.2014 / 31.3.2014

Export: -23 % -9 %

Domestic: +8 % +8 %

Combined: -20 % -7 %


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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Value of New Orders in the Mechanical Engineering in Finland

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: II,2014 / II,2013 II,2014 / I,2014

Export: +29 % +14 %

Domestic: +16 % -3 %

Combined: +26 % +10 %


1513.04.2023

01,0002,0003,0004,0005,0006,0007,0008,0009,000

10,00011,00012,00013,00014,00015,000

Series3

Export

Value of Order Books in the Mechanical Engineering in Finland

Combined


Change: 30.6.2014 / 30.6.2013 30.6.2014 / 31.3.2014

Export: -3 % -2 %

Domestic: -1 % -3 %

Combined: -3 % -2 %

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


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Value of New Orders in the Consulting Engineering in Finland

0

40

80

120

160

200

240

280

320

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: II,2014 / II,2013 II,2014 / I,2014

Export: -12 % -10 %

Domestic: +20 % -4 %

Combined: +16 % -5 %


1713.04.2023

0

50

100

150

200

250

300

350

400

450

500

550

Export

Domestic

Value of Order Books in the Consulting Engineering in Finland

Combined



2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: 30.6.2014 / 30.6.2013 30.6.2014 / 31.3.2014

Export: -3 % +5 %

Domestic: +14 % +6 %

Combined: +11 % +6 %

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Value of New Orders in the Information Technology in Finland

050

100150200250300350400450500550600650700750800


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: II,2014 / II,2013 II,2014 / I,2014

Combined: -15 % -25 %


*) Excl. game industry companies.

1913.04.2023

Value of Order Books in the Information Technology in Finland

0100200300400500600700800900

1,0001,1001,2001,3001,4001,5001,600


2007 2008 2009 2010 2011 2012 2013 2014

Change: 30.6.2014 / 30.6.2013 30.6.2014 / 31.3.2014

Combined: 0 % -1 %


*) Excl. game industry companies.

-100 %

-80 %

-60 %

-40 %

-20 %

0 %

20 %

40 %

60 %

80 %

100 %

120 %

140 %

160 %

180 %

200 %

Change in Value of Order Books in the Technology Industry in Finland Compared with a Year Earlier


Change by companies: 30.6.2014 / 30.6.2013, %

Average: -7 %

Companies in random order

Median: 0 %

13.04.2023 20

Personnel in the Technology Industry

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (30.6)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

280,000

300,000

320,000

340,000

Personnel in Finland Personnel in subsidiaries abroad

Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey

Some 13 000 of employees affected by temporary or part-time lay-offs 30.6.2014

13.04.2023 21

Technology Industry Personnel in Finland

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (30.6)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Electronics and electrotechnical industry Mechanical engineering Metals industry

Consulting engineering Information technology

Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey

13.04.2023 22

Technology Industry Personnel in Subsidiaries Abroad

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Electronics and electrotechnical industry Mechanical engineering Metals industry

Consulting engineering Information technology

Source: The Federation of Finnish Technology Industries’ labour force survey

13.04.2023 23

13.04.2023 24

Retirement of Technology Industry Personnel

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Number of individuals retiredNumber of individuals retiring (estimation)

Source: Wage inquiry of the Federation of Finnish Technology Industries, Finnish Centre for Pensions, Statistics Finland

Individuals per year

Salaried employees

Blue collar employees

13.04.2023 25

Retirement of Technology Industry Blue Collar Employees

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

0

500

1000

1500

2000

2500

3000

3500

Mechanical engineering Metals industry

Electronics and electrotechnical industry

Source: Wage inquiry of the Federation of Finnish Technology Industries, Finnish Centre for Pensions, Statistics Finland

Individuals per year

Situational overview and outlook

• - Finland is in the grip of structural change. Development remains uneven between companies.

• - Turnover in Finland in 2013 was some EUR 65 billion. Between January and April of this year, turnover was slightly lower than twelve months earlier. Turnover in the pre-crisis year 2008 was EUR 86 billion.

• - The monetary value of new orders in April-June 2014 was remained unchanged from the corresponding period in 2013, but slightly lower than in the precending quarter.

• - At the end of June, the value of order books was 7 % lower year-on- year, and 3 % below the value reported at the end of March.

• - The turnover of technology industry companies in the autumn of 2014 is expected to be roughly equal in comparison with the corresponding period last year.

• - Since 2008, personnel numbers in Finland have shrunk by 48,000 employees, totalling 278,000 at the end of June 2014.

13.04.2023 26

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Situation in Russia and Ukraine Hindering Europe’s Revival

Industrial Production Volume

13.04.2023 28

Industrial Production Volume in EU Countries

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Euro Countries Are Developing Unevenly

Latest information August 2014. Source: Markit

Manufacturing and Services Sector Purchasing Managers’ Index Purchasing Magers’ Index

13.04.2023 30

50 = no change on previous month

World Economic Growth in 2014e

Source: IMF (July 2014)

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

-1

0

1

2

3

4

5

6

7

8

9

10

North AmericaWestern Europe Japan

China

IndiaRest ofAsia

Re

st o

f E

ast

ern

Eu

rop

e

Ru

ssia B

razi

l Me

xico

Re

st o

f L

atin

Am

eric

a

Mid

dle

Ea

st, A

fric

a

GDP growth in 2014, %

The width of the bar indicates the share (purchasing power parity adjusted) of world GDP in 2013, %

Average growth: +3,4 %

13.04.2023 31

World Economic Growth in 2014e with the Export Shares

Source: IMF (July 2014), Board of Customs

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

-1

0

1

2

3

4

5

6

7

8

9

10

North America Western Europe Japan

China

IndiaRest ofAsia

Re

st o

f E

ast

ern

Eu

rop

e

Ru

ssia

Bra

zil

Me

xico

Re

st o

f L

atin

Am

eric

a

Mid

dle

Ea

st, A

fric

a

GDP growth in 2014, %

The width of the bar indicates the export share of technology industry from Finland in 2013, %

Average growth: +2,3 %

13.04.2023 32

13.04.2023 33

Breakdown of World Industrial Production

0

5

10

15

20

25

30

35

40

45

50

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Asia

North America

Europe

Purchasing power parity adjusted shares. Source: Maddison (Historical Statistics), IMF and ETLA

%

13.04.2023 34

2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014e80

100

120

140

160

180

200

220

240

260

280

300

320

China Korea

India Russia

Finland Brazil

USA Euroarea

Japan

Source: Consensus Economics

Industrial Production Development by Year

2005=100

13.04.2023 35

The Big Challenge for Finland after 2008

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Finnish Exports up to EUR 20 – 30 Billion Short of Annual Target Level

10111213141516171819202122232425262728

Exports needed to avoid extra running into debt in the public sector

Exports, realized

Working day and seasonally adjusted index.Latest information January-March 2014. Source: Statistics Finland / National Accounts

Export of goods and services by quarter, billion euros, at current prices

36

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Finnish Exports lagging Behind Competitors

3713.04.2023

The Share of Industry in GDP in Finland 1900-2013

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 20100%

5%

10%

15%

20%

25%

30%

35%

Industry Industry + service sectors in the technology industry

Source: Statistics Finland 13.04.2023 38

13.04.2023

Finland’s Industrial Production and Exports Will not Regain the Level of 2008 with the Present Production CapacityFinland’s production capasity has decreased by 20 %

70

75

80

85

90

95

100

105

110

115

120

125

Industrial produc-tion ability (pro-duction with ca-pacity in full use)

Finland's goods and services exports (2008=100)

Industrial per-sonnel (2008=100)

Industrial produc-tion (2008=100)

-16%

-22%

-18%

Working hours and seasonally adjusted time series. Source: Statistics Finland / National Accounts, Industrial volume index

39

2008 2009 2010 2011 2012 2013 2014

-21%

Growth of Public Debt and Tax Rate Out of ControlIncreased cost burden requires cuts to public sector

4013.04.2023

Industrial Investments Alarmingly Low

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Industry Technology industry

Industrial fixed and R&D Investments in Finland

Source: Statistics Finland, Confederation of Finnish Industries’ Investment Survey (June 2014)

13.04.2023 41


4213.04.2023

2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014e 2015e90

95

100

105

110

115

120

125

130

135

140

Germany

Netherlands

Sweden

USA

Switzerland

Finland

Finland not Attracting Companies’ InvestmentCompanies’ Fixed Investments in Different Countries

Source: OECD, Economic Outlook, May 2014

Index, 2005=100

Turning Point of Productivity Development in Finland in 2008After 2008 Finland has lost considerable volume production in electronics, forest and machinery industries**

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201395

100

105

110

115

120

125

130

135

140

145

150

155

160

Manufacturing indus-try

Technology industry

National economy

2000 = 100

Source: Statistics Finland / National Accounts

*) Productivity is measured as real value added per hours worked. When productivity grows (the curve rises) value added grows more than hours worked. Value added = turnover – purchasing of materials and servicesValue added = labour costs + rents + depreciations + profits

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**) The structure of current industry does not enable the similar productivity development as during the years 2000-2008.

Unit Labour Costs at the National Economy Level (Including the Effective Exchange Rates)

90

95

100

105

110

115

120

Compared to Germany Compared to Spain Compared to ItalyCompared to the Netherlands Compared to Austria Compared to Finland

*) In the ECB Harmonised Competitiveness Index, the average effective exchange rate of each country is calculated vis-à-vis 20 to 30 main trade partners, as well as the development of unit labour costs for the total economyLatest information I/2014. Source: European Central Bank

Finland’s cost competitivenessdeclines

2005,I =100

Finland’s cost competitivenessimproves

13.04.2023 44

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

45

Compact of Growth and Jobs Has at the Most Slight Effect on Finland’s Cost CompetitivenessFinland’s relative unit labour costs compared to Germany

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

1.30

FinlandGermanyFinland New

Source: Confederation of Finnish Industries 13.04.2023

What should be done?

• Support the renewal of the industry• Taxes should support growth and investment in Finland• Support decision making in companies related to

compensation and working time• No new European nor national burdens on companies,

which are deteriorating the competitiveness

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Long-Term Outlook and Challenges

• Global Structural Change Set to Continue Apace– Industrial production and services will relocate to rapidly developing

economic areas– Strong growth, large markets, cheap labour and increasing expertise will

increase the attractiveness of these regions.

• Competition over Skills and Raw Materials Set to Increase– Due to an increase in retirement, the sector’s annual recruitment need in

Finland will rise considerably in the coming years.– The availability of reasonably-priced energy also threatens to become an

investment bottleneck in Finland

• Combating Climate Change– A challenge as costs are set to grow faster than in competitor countries – An opportunity for new environmental and energy technologies

13.04.2023 47

Finnish Technology Industry Situation and Outlook, September 2014

Economy & Finance

Transcript of Finnish Technology Industry Situation and Outlook, September 2014