finnish technology industry, august 2016

Technology Industry /Finnish Economic Outlook

August 2016

02.05.20232

• 50% of total Finnish exports.• Companies invest about EUR 5.5

billion annually in Finland.

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

• Almost 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.

The Technology Industry – the Largest Export Sector in Finland

02.05.20233

Mechanical EngineeringAbloy, Cargotec, Finn-Power, Fiskars, Glaston, Kone, Konecranes, Metso, Meyer Turku, Normet, Oras, Patria, Pemamek, Ponsse, Stala, Valmet, Valtra, Wärtsilä…

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

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

Metals IndustryBoliden, Componenta, Kuusakoski, Luvata, Outokumpu, Outotec, Ovako, Sacotec, SSAB …

Consulting EngineeringA-Insinöörit, Citec, Elomatic, Etteplan, FCG, Granlund, Neste Jacobs, Pöyry, Ramboll, Rejlers, SITO, SWECO, WSP...

The Finnish Technology Industry Is Comprised of Five Sub-Sectors

02.05.20234

The Finnish Technology Industry is Comprised of Five Sub-Sectors

Electronics and Electrotechnical Industry• Data communications equipment,electrical machinery, medical technology products• Turnover (2015): 14.6 billion euros• Personnel (2015): 40,600

Metals Industry• Steel products, non-ferrous metals, castings• Turnover (2015): 9.1 billion euros• Personnel (2015): 15,800

Mechanical Engineering• Machinery, metal products, vehicles• Turnover (2015): 28 billion euros• Personnel (2015): 124,600

Consulting Engineering• Expertise for construction industry and infrastructure• Turnover (2015): 5.5 billion euros• Personnel (2015): 48,200

Information Technology• IT services, applications and programming• Turnover (2015): 11 billion euros• Personnel (2015): 59,300

02.05.20235

Turnover of the Technology Industry in Finland

Source: Macrobond, Statistics Finland

Billion euros, at current prices

0

4

8

12

16

20

24

28

32

36

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Electronics and electrotechnical industryMechanical engineeringMetals industryConsulting engineeringInformation technology

02.05.20236

Export of Technology Industry Goods from Finland by Area in 2015Total goods exports 26.7 billion euros*

North America2.6 billion €9.6 %

Western Europe14.4 billion €53.7 %

Middle and Central East0.7 billion € 2.5 %

Asia3.8 billion €14.4 %

Africa0.5 billion €1.9 %

South and Middle America0.9 billion €3.3 %

Central and Eastern Europe3.8 billion €14.6 %

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

02.05.20237

Turnover of the Industry and Technology Industry in Finland

Index 2005=100 Change: 1-5,2016 / 1-5,2015, %

90

95

100

105

110

115

120

125

130

135

140

Technology Industry-3 %Industry-2 %

Latest information: May, 20162005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


02.05.20238

Turnover of the Technology Industry in Finland

Index 2005=100 Change: 1-5,2016 / 1-5,2015, %

50

75

100

125

150

175

200

225

250

Electronics andElectrotechnical Industry-5 %

Mechanical Engineering-1 %

Metals Industry-14 %

Consulting Engineering10 %

Information Technology0 %

Latest information: May, 20162005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


8.6.20159

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 April-June 2016

*) Excluding metals industry and game industry companies.

Change: II,2016 / II,2015 II,2016 / I,2016Export: -27 % -2 %Domestic: -17 % -6 %Combined: -24 % -3 %

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

8.6.201510

Value of Order Books in the Technology Industry* in Finland

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,00022,00024,00026,000

Export

Domestic


Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information 30.6.2016

*) Excluding metals industry and game industry companies.

Combined

Change: 30.6.2016 / 30.6.2015 30.6.2016 / 31.3.2016Export: +5 % -6 %Domestic: -1 % -4 %Combined: +4 % -6 %

02.05.202311Source: The Federation of Finnish Technology Industries’ order book survey, latest information July 2016.

“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

Tender Requests* Received by Technology Industry Companies in Finland

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

8.6.201512

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

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Change: II,2016 / II,2015 II,2016 / I,2016Export: +2 % -2 %Domestic: +3 % -4 %Combined: +2 % -2 %


8.6.201513

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

0500

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

Export

Domestic

Combined


Change: 30.6.2016 / 30.6.2015 30.6.2016 / 31.3.2016Export: +7 % +2 %Domestic: +12 % 0 %Combined: +8 % +1 %


8.6.201514

Value on New Orders in the Mechanical Engineering in Finland

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,500

Combined

Export

Domestic


Change: II,2016 / II,2015 II,2016 / I,2016Export: -44 % -2 %Domestic: -25 % -11 %Combined: -40 % -5 %


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

8.6.201515

Value of Order Books in the Mechanical Engineering in Finland

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

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

Series3 Export

Combined


Change: 30.6.2016 / 30.6.2015 30.6.2016 / 31.3.2016Export: +5 % -9 %Domestic: -8 % -5 %Combined: +2 % -8 %


8.6.201516

Value of New Orders in the Consulting Engineering in Finland

0

50

100

150

200

250

300

350

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Change: II,2016 / II,2015 II,2016 / I,2016Export: -22 % -19 %Domestic: -1 % 0 %Combined: -4 % -2 %


8.6.201517

Value of Order Books in the Consulting Engineering in Finland

050

100150200250300350400450500550600650700750

Export

Domestic

Combined



Change: 30.6.2016 / 30.6.2015 30.6.2016 / 31.3.2016Export: -3 % -2 %Domestic: +13 % -1 %Combined: +10 % -1 %

8.6.201518

Value of New Orders in the Information Technology in Finland

050

100150200250300350400450500550600650700750800


Change: II,2016 / II,2015 II,2016 / I,2016Combined: -21 % -1 %


*) Excl. game industry companies

8.6.201519

Value of Order Books in the Information Technology in Finland

0100200300400500600700800900

1,0001,1001,2001,3001,4001,5001,6001,7001,800


Change: 30.6.2016 / 30.6.2015 30.6.2016 / 31.3.2016Combined: +1 % -4 %


*) Excl. game industry companies

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

30.7.201520

Personnel in the Technology Industry

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (30.6)

150,000

170,000

190,000

210,000

230,000

250,000

270,000

290,000

310,000

330,000

350,000

Personnel in Finland Personnel in subsidiaries abroad

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

Some 16,000 of personnel affected by temporary or part-time lay-offs 30.6.2016

7.5.201521

Technology Industry Personnel in Finland by Branch

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (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 industry Metals industryConsulting engineering Information technology

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

7.5.201522

Technology Industry Personnel in Subsidiaries Abroad by Branch

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Electronics and Electrotechnical Industry Mechanical engineering industry Metals industryConsulting engineering Information technology

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

02.05.202323

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

0100020003000400050006000700080009000

Number of individuals retired Number 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

02.05.202324

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

02.05.202325

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

- Turnover in Finland increased slihtly in 2015 compared to the year 2014. Turnover totalled EUR 68.2 billion. In the pre-crisis year 2008 it was EUR 86 billion.

- The monetary value of new orders reported between April-June 2016 was 24 % lower than in the corresponding period in 2015, and three per cent lower than in the preceding quarter. The 2015 comparison period included a major ship order.

- At the end of June, the value of order books was four per cent higher year-on-year, but six per cent below the value reported at the end of March.

- The turnover of technology industry companies is expected to remain at the same or a slightly lower level in the autumn of 2016 than in the corresponding period last year.

- Since 2008, personnel numbers in Finland have shrunk by 40,000 employees, totalling on average 286,000 at the end of June 2016.

Economic Outlook in the Technology Industry

02.05.202326

Outlook in the Global Economy is Uncertain

02.05.202327

GDP Has Grown in Europe and the USA , but only Very Slightly in Finland

Source: Macrobond

Index 2005=100

90

95

100

105

110

115

120

125

Latest information: 2016 Q22005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SwedenEstoniaUSAGermanyUKFranceSpainFinland

02.05.202328

Growth is Lowering in China, Remaining Fast in IndiaRecession Continues in Russia and in Brazil Share of global GDP in China, Brazil and Russia is 23%, in China 16% (adjusted for PP)

Source: Macrobond

GDP change over the previous year,

-15

-10

-5

0

5

10

15

20


IndiaChina (official)BrazilRussia

02.05.202329

GDP Growth Has Continued in Eurozone in June-July, but at the Slower Rate Purchase Managers’ Index (PMI), 50 = no change from previous month

Latest information July 2016. Source: Markit

02.05.202330

Industrial Production Volume

Source: Macrobond

Index 2008=100

65

70

75

80

85

90

95

100

105

110

Latest information: July, 20162008 2009 2010 2011 2012 2013 2014 2015 2016

USAEU countriesJapanFinland

02.05.202331

Industrial Production Volume in EU Countries

Source: Macrobond

Index 2008=100

70

80

90

100

110

120

130

140

150

Latest information: June, 20162008 2009 2010 2011 2012 2013 2014 2015 2016

PolandEstoniaBelgiumAustriaGermanySwedenSpainItalyFinland

02.05.202332

Global Industrial Production Growth Continues at Slow Rate

Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Index 2008=100

80

90

100

110

120

130

140

150

Latest information: May 20162008 2009 2010 2011 2012 2013 2014 2015 2016

Emerging countriesWorldDeveloped countries

02.05.202333

Industrial Production in China is Unchanged Purchase Managers’ Index (PMI) in manufacturing industry in China50 = no change from previous month


02.05.202334

Industrial Production in Russia is Dropping SlightlyPurchase Managers’ Index (PMI) in manufacturing industry in Russia50 = no change from previous month


02.05.202335

Industrial Production in Brazil is DroppingPurchase Managers’ Index (PMI) in manufacturing industry in Russia50 = no change from previous month


02.05.202336

Industrial Production in USA is IncreasingPurchase Managers’ Index (PMI) in manufacturing industry in Russia50 = no change from previous month

Lähde: Macrobond

323436384042444648505254565860

Latest information: July, 20162005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

02.05.202337

Growth of Residence Construction Has Lowered in China Share of China in Asian GDP is 42% (adjusted for PP)

Source: Macrobond

Change over previous year, %

-5

0

5

10

15

20

25

30

35

40

Latest information: June 20162005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

02.05.202338

Fixed Investments in Russia and Brazil are FallingShare of Russia in European GDP is 13% (adjusted for PP)Share of Brazil in Latin American GDP is 35% (adjusted for PP)

Source: Macrobond

Change over previous year, %

-20-16-12

-8-4048

121620242832

Latest information: 2016 Q12008 2009 2010 2011 2012 2013 2014 2015 2016

RussiaBrazil

02.05.202339

Import to Emerging Countries Has LoweredImport volume development

Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Index 2008=100

80

90

100

110

120

130

140

Latest information: May 20162008 2009 2010 2011 2012 2013 2014 2015 2016

Emerging AsiaEmerging countriesWorldDeveloped countries

02.05.202340

Import to China Has Reduced from Other Countries

Source: Macrobond

US dollars, at current prices, 3 month moving sum, change over previous year, %

-60

-40

-20

0

20

40

60

80

100

120

Latest information: July 20162008 2009 2010 2011 2012 2013 2014 2015 2016

North AmericaIndonesiaTaiwanSouth KoreaJapanEU countriesIndia

02.05.202341

Exports from EU Countries to Russia Have Fallen, but Stabilized

Source: Macrobond

Export value in each countries's own currency, 12 months sliding sum, index 2005 = 100

0

50

100

150

200

250

300

350

400

450

Latest information: June 20162005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

EstoniaUKBelgiumAustriaFranceGermanyItalyNetherlandsSwedenNorwayDenmarkFinland

02.05.2023

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

0

4

8

12

16

20

24

28

32

36

40

Russia’s* Share of Technology Industry Exports from Finland Has Declined Again to the Level of Five Per Cent

%

*) Soviet Union up to 1991. Source: Finnish Customs

02.05.202343

Exchange Rates in Emerging Countries are Varying

Source: Macrobond

Euro exchange rate compared to other currencies,2014 January = 100

70

80

90

100

110

120

130

140

150

160

170

180

190

200

Latest information: 16 August 2016

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov2014 2015 2016

Russia roubleBrazil realSouth Africa randMexico pesoTurky liraSweden kronaMalesia ringgitUK poundIndonesia rupiaChina juanThailand bahtUS dollar

02.05.2023

Global Economy is Expected to Grow by 3.1 % in 2016 GDP growth in 2016, %

Source: IMF (July 2016)

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100-4-3-2-10123456789

North America

Western EuropeJapan

China

India

Rest of Asia R

est o

f Eas

tern

Eur

ope

Rus

sia

Bra

zil

Mex

ico Res

t of L

atin

A

mer

ica

Mid

dle

East

and

Afr

ica

The width of the bar indicates the share of global GDP in 2015 (adjusted for purchasing power parity), %

Average growth: +3,2 %

02.05.2023

Export Demand for Technology Industry in Finland Will Grow by 2.0% in 2016 GDP growth 2016/2015, %

Source: IMF (July 2016), Board of Customs

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100-4-3-2-10123456789

North America

Western EuropeJapan

China

India

Rest of Asia

Res

t of E

aste

rn

Euro

pe

Rus

sia

Bra

zil

Mex

ico

Res

t of L

atin

A

mer

ica

Mid

dle

East

and

Afr

ica

The width of the bar indicates the export share of technology industry from Finland in 2015, %

Average growth: +2.0%

02.05.202346

The Big Challenge for Finland after 2008

02.05.202347

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

Source: Macronond, Statistics Finland / National Accounts

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

Exports neededto avoid extrarunning intodebt in thepublic sector

10

12

14

16

18

20

22

24

26

28

30


Exportsrealized

02.05.202348

Finnish Exports Lagging Behind Competitors

Source: Macrobond, Eurostat

Export of goods and services by quarter, billion euros, at current prices, index 2005=100

75

100

125

150

175

200

225

250

275

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

PolandEstoniaChech RepublicGermanySpainBelgiumSwedenFinland

02.05.202349

The Share of Industry in GDP in Finland 1900-2015

1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 20150%

5%

10%

15%

20%

25%

30%

35%

Industry* Industry + service sectors in the technology industry

*) During 1900-1974 industry covers also mines, energy, water and refuse collection sectors. Source: Statistics Finland / National Accounts

02.05.202350

70

75

80

85

90

95

100

105

110

115

120

125

55

60

65

70

75

80

85

90

95

100

Industrial pro-duction ability (production with capacity in full use), left. Scale

Industrial pro-duction (2008=100), left scale

Capacity utiliza-tion rate, %, right scale-22%

2008 2009 2010 2011 2012 2013 2014 2015

-21%

Source: Statistics Finland / National Accounts, Industrial volume index

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

02.05.202351

Growth of Public Debt and Tax Rate in FinlandIncreased cost burden requires cuts to public sector


Central and local government debt and public expenditures, billion euros, at nominal prices

0

10

20

30

40

50

60

70

80

90

100

110

120

39,5

40,0

40,5

41,0

41,5

42,0

42,5

43,0

43,5

44,0

44,5

45,0

45,5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total tax ratio, % of GDPright axisCentral government debt,left axisPublic expenditures, during the quarter,left axisLocal government debt,left axis

Latest information: 2016 Q1

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e2016e2017e859095

100105110115120125130135140145150155Corporate sector fixed investments, index 2005=100

SwedenThe NetherlandsUSAGermanySwitzerlandFinland

02.05.202352

Upswing of Investments Required in Finland

Source: OECD, Economic Outlook 2016

02.05.202353

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e0

2,000

4,000

6,000

8,000

10,000

12,000

Manufacturing industry Technology industry

Industrial Companies’ Investment Plans Indicate a Weak Economic Growth Industrial fixed and R&D investments in Finland

Source: Statistics Finland (National Accounts, Confederation of Finnish Industries’ Investment Survey (June 2016)


02.05.202354

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201595

100105110115120125130135140145150155160

Manufacturing industry

Technology industry

National economy

Turning Point of Productivity* Development in FinlandProductivity of export sector is 10 % lower than in 2007-2008, productivity of entire national economy is 3 % lower

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

Index, 2000=100

02.05.202355

90

95

100

105

110

115

120

Compared to Belgium Compared to Germany Compared to SpainCompared to Italy Compared to the Netherlands Compared to AustriaCompared 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 I/2016. Source: European Central Bank

Finland’s price and costcompetitivenessdeclines

2005,I =100

Finland’s price and costcompetitivenessimproves

Unit Labour Costs at the National Economy LevelUnit labour costs = labour costs / productivity, including the influence of effective exchange rates

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

02.05.202356

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

What should be done?

02.05.202357

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

Long-Term Outlook and Challenges

02.05.202358

The Federation of Finnish Technology Industries

02.05.202359

The Federation’s Member Companies 2014

7106938%

2808914%

2599717%

5861731%

143991%

80 5%

46 3%

23 1%

Number of enteprises / 1 583 Number of personnel / 183 772

1–249 employees

250–499 employees

500–999 employees

1000– employees

Source: The Federation of Finnish Technology industries

02.05.202360

The Federation’s SME Member Companies 2014

506 35%

475 33%

258 18%

206 14%

Number of enterprises / 1 439 Number of personnel / 71 069

1–19 employees

20–49 employees

50–99 employees

100–249 employees

52617%

1504721%

1826327%

3249845%

Source: The Federation of Finnish Technology industries

finnish technology industry, august 2016

Economy & Finance