finnish technologyindustrymay2014

Technology Industry / Finnish Economic Situation and Outlook May 2014

21.5.2014 2

The Technology Industry Is Comprised of Five Sub-sectors

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

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

Electronics and Electrotechnical Industry ABB, Ensto, Murata Electronics, Nokia, Nokia Solutions and Networks, Planmeca, Polar Electro, Suunto, Vacon, Vaisala…

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

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

3

The Technology Industry in Finland

Mechanical Engineering • Machinery, metal products, vehicles • Turnover (2013): 26.5 billion euros • Personnel (2013): 132 600

Electronics and Electrotechnical Industry • Data communications equipment, instruments, electrical machinery • Turnover (2013): 14.3 billion euros • Personnel (2013): 46 600

Information Technology • IT services, applications and programming • Turnover (2013): 8.4 billion euros • Personnel (2013): 55 200

Metals Industry • Steel products, non-ferrous metals, castings • Turnover (2013): 9.5 billion euros • Personnel (2013): 15 900

Consulting Engineering • Expertise for construction industry and infrastructure • Turnover (2013): 5.5 billion euros • Personnel (2013): 45 700

21.5.2014

• 55% of total Finnish exports.

• 80% of private-sector R&D investment.

• Almost 290,000 employed directly in the sector, 720,000 employed in total, equalling about 30% of the entire Finnish labour force.

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

21.5.2014 4

The Technology Industry – the Most Important Sector in Finland

21.5.2014 5

02468

10121416182022242628303234

2005 2006 2007 2008 2009 2010 2011 2012 2013

Mechanical engineering

Electronics andelectrotechnical industry

Metals industry

Information technology

Consulting engineering

Turnover of the Technology Industry in Finland

Source: Statistics Finland, The Federation of Finnish Technology Industries

Billion euros, at current prices

21.5.2014 6

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

*) In addition to goods exports the sector exports services worth about 12 billion euros. Source: National Board of Customs, Statistics Finland

North America 2.2 billion € 8.8 %

Western Europe 11.4 billion € 46.1 %

Middle and Central East 0.7 billion € 2.8 %

Asia 4.1 billion € 16.5 %

Africa 0.5 billion € 2.1 %

South and Middle America 1.0 billion € 4.1 %

Central and Eastern Europe 4.9 billion € 19.6 %

Turnover of the Industry and Technology Industry in Finland

80

90

100

110

120

130

140

150 2005 = 100

Industry

Technologyindustry

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: 1,2014 / 1,2013, %

Seasonally adjusted turnover index, latest information 1/2014.

Source: Statistics Finland

-3 %

-6 %

21.5.2014 7

Turnover of the Technology Industry in Finland

50

60

70

80

90

100

110

120

130

140

150

160

170

180

190

200 2005 = 100

Information technology

Consulting engineering

Mechanical engineering

Metals industry

Electronics and electrotechnicalindustry

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: 1,2014 / 1,2013, %

Source: Statistics Finland

Seasonally adjusted turnover index, latest information 1/2014. Share of total turnover in 2012: mechanical engineering 41 %, electronics and electrotechnical industry 26 %, metals industry 14 %, information technology 11 %, consulting engineering 8 %

+5 %

+11 %

-5 %

-12 %

-8 %

21.5.2014 8

21.5.2014

Value of New Orders in the Technology Industry* in Finland

01 0002 0003 0004 0005 0006 0007 0008 0009 000

10 00011 00012 000

Combined

Export

Domestic

Million euros, at current prices

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

*) Excluding metals industry and game industry companies.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Change: I,2014 / I,2013 I,2014 / IV,2013 Export: +5 % -8 % Domestic: +13 % +22 % Combined: +7 % -1 %

9

21.5.2014

02 0004 0006 0008 000

10 00012 00014 00016 00018 00020 00022 00024 000

Export

Domestic

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 31.3.2014

*) Excluding metals industry and game industry companies.

Combined

Change: 31.3.2014 / 31.3.2013 31.3.2014 / 31.12.2013 Export: -5 % -2 % Domestic: +6 % +11 % Combined: -2 % +1 %

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

10

Tender Requests* Received by Technology Industry Companies

Source: The Federation of Finnish Technology Industries’ order book survey, latest information: April 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 21.5.2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

21.5.2014

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 Change: I,2014 / I,2013 I,2014 / IV,2013 Export: -5 % -25 % Domestic: -4 % +30 % Combined: -5 % -21 %


12

21.5.2014

0500

1 0001 5002 0002 5003 0003 5004 0004 5005 0005 5006 0006 5007 0007 5008 0008 500

Export

Domestic

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

Combined


Change: 31.3.2014 / 31.3.2013 31.3.2014 / 31.12.2013 Export: -6 % -21 % Domestic: -17 % +22 % Combined: -7 % -18 %


13

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

21.5.2014

Value of New Orders in the Mechanical Engineering in Finland

0500

1 0001 5002 0002 5003 0003 5004 0004 5005 000

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: I,2014 / I,2013 I,2014 / IV,2013 Export: +19 % +22 % Domestic: +46 % +35 % Combined: +24 % +24 %


14

21.5.2014

01 0002 0003 0004 0005 0006 0007 0008 0009 000

10 00011 00012 00013 00014 00015 00016 000

Export

Domestic

Value of Order Books in the Mechanical Engineering in Finland

Combined


Change: 31.3.2014 / 31.3.2013 31.3.2014 / 31.12.2013 Export: -4 % +9 % Domestic: +10 % +15 % Combined: -2 % +10 %

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information 31.3.2014 15

21.5.2014

Value of New Orders in the Consulting Engineering in Finland

020406080

100120140160180200220240260280300320

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: I,2014 / I,2013 I,2014 / IV,2013 Export: -11 % -9 % Domestic: +11 % +5 % Combined: +8 % +3 %


16

21.5.2014

0

50

100

150

200

250

300

350

400

450

500

550

600

Export

Domestic

Value of Order Books in the Consulting Engineering in Finland

Combined



2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: 31.3.2014 / 31.3.2013 31.3.2014 / 31.12.2013 Export: -1 % -3 % Domestic: +18 % +10 % Combined: +15 % +8 %

17

21.5.2014

Value of New Orders in the Information Technology in Finland

050

100150200250300350400450500550600650700750800


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Change: I,2014 / I,2013 I,2014 / IV,2013 Combined: -5 % +7 %


18

*) Excl. game industry companies.

21.5.2014

Value of Order Books in the Information Technology in Finland

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000Million euros, at current prices

2007 2008 2009 2010 2011 2012 2013 2014

Change: 31.3.2014 / 31.3.2013 31.3.2014 / 31.12.2013 Combined: +6 % +7 %


19

*) 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: 31.3.2014 / 31.3.2013, %

Average: -2 %

Companies in random order

Median: +1 %

21.5.2014 20

Personnel in the Technology Industry

020 00040 00060 00080 000

100 000120 000140 000160 000180 000200 000220 000240 000260 000280 000300 000320 000340 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(31.3)

Personnel in Finland Personnel in subsidiaries abroad

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

Some 18 000 of employees affected by temporary or part- time lay-offs 31.3.2014

21.5.2014 21

Technology Industry Personnel in Finland

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(31.3.)

Electronics and electrotechnical industry Mechanical engineeringMetals industry Consulting engineeringInformation technology

Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey 21.5.2014 22

21.5.2014 23

Retirement of Technology Industry Personnel

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

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

21.5.2014 24

Retirement of Technology Industry Blue Collar Employees

0

500

1000

1500

2000

2500

3000

3500

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Mechanical engineeringMetals industryElectronics 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 64 billion. Turnover in the pre-crisis year 2008 was EUR 82 billion.

• - The monetary value of new orders in January-March 2014 was 7 % higher than in the corresponding period of 2013, but slightly lower than at the level of the preceding quarter.

• - At the end of March, the value of order books was 2 % lower year on year, but slightly higher the value reported at the end of December.

• - The turnover of technology industry companies in the spring 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 over 30,000 employees, totalling 288,000 at the end of March 2014.

21.5.2014 25

21.5.2014 26

Better growth outlook in Western Europe - Recession in Russia will have significant impacts in Finland

Industrial Production Volume Industrial production volume in EU countries 10 %, but in Finland 19 % lower since early 2008

21.5.2014 27

Industrial Production Volume in EU Countries

21.5.2014 28

Improving Growth in Euro Area

Latest information April 2014. Source: Markit, Eurostat

Teollisuuden ja palvelualojen ostopäällikköindeksi

21.5.2014 29

Growth Continues in Developing Countries, but Slower than During Last Years

Latest information April 2014. Source: Markit, HSBC

Teollisuuden ja palvelualojen ostopäällikköindeksi

21.5.2014 30

Russian Economy Has Entered a Recession

Viimeisin tieto huhtikuu 2014. Lähde: Markit, HSBC

21.5.2014 31

World Economic Growth in 2014e

Source: IMF (April 2014)

-1

0

1

2

3

4

5

6

7

8

9

10

0 10 20 30 40 50 60 70 80 90 100

North America

Western Europe Japan

China

India Rest of Asia

Res

t of E

aste

rn E

urop

e

Rus

sia B

razi

l M

exic

o R

est o

f Lat

in A

mer

ica

Mid

dle

East

, Afr

ica

GDP growth in 2014, %

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

Average growth: +3,6 %

21.5.2014 32

World Economic Growth in 2014e with the Export Shares

Source: IMF (April 2014), Board of Customs

-1

0

1

2

3

4

5

6

7

8

9

10

0 10 20 30 40 50 60 70 80 90 100

North America

Western Europe Japan

China

India

Rest of Asia

Res

t of E

aste

rn

Euro

pe

Rus

sia

Bra

zil

Mex

ico

Res

t of L

atin

Am

eric

a

Mid

dle

Eas

t, A

frica

GDP growth in 2014, %

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

Average growth: +2,4 %

21.5.2014 33

21.5.2014 34

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

%

21.5.2014

80

100

120

140

160

180

200

220

240

260

280

300

320

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

China

Korea

India

Russia

Finland

Brazil

USA

Euroarea

Japan

Source: Consensus Economics

Industrial Production Development by Year

2005=100

35

21.5.2014 36

The Big Challenge for Finland after 2008

21.5.2014

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

10111213141516171819202122232425262728

Exports needed toavoid extra runninginto debt in thepublic sector

Exports, realized

Working day and seasonally adjusted index. Latest information October-December 2013. Source: Statistics Finland / National Accounts

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

37

2005 2006 2007 2008 2009 2010 2011 2012 2013

Finnish Exports lagging Behind Competitors

90100110120130140150160170180190200210220230

Estonia

Poland

ChechRepublicGermany

TheNetherlandsBelgium

Sweden

Finland

Working day and seasonally adjusted index. Latest information October-December 2013. Source: Eurostat

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

2005 = 100

38 21.5.2014

2005 2006 2007 2008 2009 2010 2011 2012 2013

The Share of Industry in GDP in Finland 1900-2012

0%

5%

10%

15%

20%

25%

30%

35%

Industry Industry + service sectors in the technology industry

Source: Statistics Finland 21.5.2014 39

21.5.2014 40

90

95

100

105

110

115

120

125

130

135

140

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

Germany

Netherlands

Sweden

USA

Switzerland

Finland

Finland not attracting Companies’ Investment Companies’ Fixed Investments in Different Countries

Source: OECD, Economic Outlook, November 2013

Indeksi, 2005=100

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 economy Latest information IV/2013. Source: European Central Bank

Finland’s cost competitiveness declines

2005,I =100

Finland’s cost competitiveness improves

21.5.2014 41

2005 2006 2007 2008 2009 2010 2011 2012 2013

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

21.5.2014 42

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

21.5.2014 43

finnish technologyindustrymay2014

Economy & Finance

industry technology

construction industry

game industry companies

electrotechnical industry

finland source

metals industry steel

fujitsu finland

stx finland