finnish technology industry, october 2017

Technology Industry /Finnish Economic Outlook

October 2017

110/17/2017 Technology Industriesof Finland

The Finnish Technology Industry Is Comprised of

Five Sub-Sectors


ELEKTRONICS AND ELECTROTECHNICAL INDUSTRYABB, Ensto, Microsoft Mobile,

Murata Electronics, Nokia, Planmeca,

Polar Electro, Suunto, Vacon, Vaisala…

METALS INDUSTRY

Boliden, Componenta, Kuusakoski,

Luvata, Outokumpu, Outotec,

Ovako, Sacotec, SSAB …

MECHANICAL ENGINEERING

Abloy, Cargotec, Finn-Power, Fiskars,

Glaston, Kone, Konecranes, Metso,

Meyer Turku, Normet, Oras, Patria,

Pemamek, Ponsse, Stala, Valmet,

Valtra, Wärtsilä…

INFORMATION TECHNOLOGY

Affecto, Basware, Bilot, CGI, Comptel,

Digia, Efecte, Enfo, F-Secure, Fujitsu

Finland, IBM, Innofactor, Knowit,

Microsoft, Nixu, Tieto…

CONSULTING ENGINEERING

A-Insinöörit, Citec, Elomatic, Etteplan, FCG,

Granlund, Neste Jacobs, Pöyry, Ramboll,

Rejlers, SITO, SWECO, WSP…

The Finnish Technology Industry Is Comprised of

Five Sub-Sectors

3

ELEKTRONICS AND ELECTROTECHNICAL INDUSTRY• Data communications equipment, electricalmachinery, medical technology

• Turnover (2016): 13.3 billion euros• Personnel (2016): 38,000

METALS INDUSTRY• Steel products, non-ferrous metals, castings, metallic minerals


MECHANICAL ENGINEERING• Machinery, metal products, vehicles• Turnover (2016): 27.7 billion euros• Personnel (2016): 122,400

INFORMATION TECHNOLOGY• IT services, applications and programming


CONSULTING ENGINEERING• Expertise for construction industry and infrastructure



The Technology Industry –

the Largest Export Sector in Finland

4

• 50 % of total Finnish exports.

• Companies invest about EUR 5.0 billionannually in Finland.

• 70 % of private-sector R&D investment.

• Almost 295,000 employed directly in the sector, 700,000 employed in total, equalling about 30% of the entire Finnish labour force.

• Technology Industries of Finland has over1,600 member companies.


Turnover of the Technology Industry in Finland

5Source: Macrobond, Statistics Finland, Technology Industries of Finland 10/17/2017 Technology Industriesof Finland

6*) In addition to goods exports the sector exported services worth some 12.3 billion euros (2015).Source: National Board of Customs, Statistics Finland

Export of Technology Industry Goods from Finland by Area in 2016

Total goods exports 25.2 billion euros*

North America2.5 billion €9.8 %

Western Europe13.7 billion €53.9 %

South and Middle America0.8 billion €3.2 %

Central and Eastern Europe3.8 billion €15.0 %

Africa0.4 billion €1.7 %

Middle and Central East0.5 billion €1.8 %

Asia3.7 billion €14.6 %


Technology, Forest and Chemical Industries Provide 80 % of Finland's Goods and Services Exports Revenue Goods and service exports: billion euros and the share of Finnish exports in 2016*

7*) Service exports industry-specific data for the year 2015. Source: Board of Customs, Statistics Finland (National Accounts, Foreign trade in services)

Technology industry50%

Forest industry15%

Chemical industry15%

Other sectors20%


Turnover of the Industry and Technology Industry

in Finland

8Source: Macrobond, Statistics Finland10/17/2017 Technology Industriesof Finland

Turnover of the Technology Industry in Finland

9Source: Macrobond, Statistics Finland10/17/2017 Technology Industriesof Finland

Value of New Orders in the Technology Industry*

in Finland

10Source: The Federation of Finnish Technology Industries’ order book survey’s respondentcompanies, latest observation April-June 2017

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

13,000

Combined

Export

Domestic

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Million euros, at current prices

Change: II,2017 / II,2016 II,2017 / I,2017

Export: +60 % +31 %

Domestic: +15 % +8 %

Combined: +47 % +25 %

*) Excl. metalsindustry and gameindustry companies

Technology Industries of Finland

10/17/2017

Value of Order Books in the Technology Industry*

in Finland

11Source: The Federation of Finnish Technology Industries’ order book survey’s respondentcompanies, latest observation 30.6.2017

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

26,000

Export

Domestic

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Change: 30.6.2017 / 30.6.2016 30.6.2017 / 31.3.2017

Export: +25 % +14 %

Domestic: -1 % +2 %

Combined: +18 % +10 %

*) Excl. metalsindustry and gameindustry companies

Combined


10/17/2017

Tender Requests* Received by Technology

Industry Companies in Finland

1217.10.2017 Teknologiateollisuus Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies,the last questionnaire is April 2017

-60

-50

-40

-30

-20

-10

0

10

20

30

40

Balance figure

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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

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


0500

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

Combined

Export

Domestic

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Change: II,2017 / II,2016 II,2017 / I,2017

Export: +11 % +4 %

Domestic: +45 % +30 %

Combined: +18 % +9 %


10/17/2017

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


Change: 30.6.2017 / 30.6.2016 30.6.2017 / 31.3.2017

Export: +8 % +4 %

Domestic: +26 % +27 %


Combined

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


10/17/2017

Value of New Orders in the MechanicalEngineering in Finland


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

Combined

Export

Domestic

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Change: II,2017 / II,2016 II,2017 / I,2017

Export: +113 % +53 %

Domestic: +3 % +7 %

Combined: +86 % +45 %


10/17/2017

Value of Order Books in the Mechanical

Engineering in Finland


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

10,00011,00012,00013,00014,00015,00016,000

Export

Domestic


Change: 30.6.2017 / 30.6.2016 30.6.2017 / 31.3.2017

Export: +31 % +17 %

Domestic: -10 % -2 %

Combinedä: +23 % +14 %

Combined

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


10/17/2017

Value of New Orders in the Consulting Engineering

in Finland


0

50

100

150

200

250

300

350

Combined

Export

Domestic

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Change: II,2017 / II,2016 II,2017 / I,2017

Export: -28 % -46 %

Domestic: +11 % +1 %

Combined: +5 % -8 %


10/17/2017

Value of Order Books in the Consulting

Engineering in Finland


0

100

200

300

400

500

600

700

800

Export

Domestic

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Change: 30.6.2017 / 30.6.2016 30.6.2017 / 31.3.2017

Export: +78 % +2 %

Domestic: +4 % +2 %


Combined


10/17/2017

Value of New Orders in the Information

Technology* in Finland


050

100150200250300350400450500550600650700750800850

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Change: II,2017 / II,2016 II,2017 / I,2017

Combined: -1 % -12 %

*) Excl. game industry companies


10/17/2017

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

2,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017


Change: 30.6.2017 / 30.6.2017 30.6.2017 / 31.3.2017

Combined: -2 % -5 %

*) Excl. game industry companies


10/17/2017

Technology Industry Personnel

2110/17/2017 Technology Industries of Finland Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey, Macrobond

(30.6)

Technology Industry Personnel in Finland by

Branch

2210/17/2017 Technology Industries of Finland Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey, Macrobond

(30.6)

Technology Industry Personnel in Subsidiaries

Abroad by Branch

2310/17/2017 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ labour force survey, Macrobond

Retirement of Technology Industry Personnel in

Finland

24

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 retired Number of individuals retiring (estimation)

Salaried employees

Blue collar employees

Individuals per year

Source: Wage inquiry of the Techonology Industries of Finland, Finnish Centre for Pensions, Statistics FinlandTechnology Industriesof Finland

10/17/2017

Retirement of Technology Industry Blue Collar

Employees in Finland

25

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 engineering Metals industry Electronics and electrotechnical industry

Individuals per year

Source: Wage inquiry of the Techonology Industries of Finland, Finnish Centre for Pensions, Statistics FinlandTechnology Industriesof Finland

10/17/2017

Overview of the Situation in the Technology

Industry and Outlook for Autumn 2017

26

- Turnover in Finland totalled some EUR 67.3 billion in 2016. This is about half per cent higherthan in 2015. In January-July 2017 turnover was 11 % higher than last year at the same time. In 2008, prior to the financial crises, the corresponding figure was EUR 86 billion.

- The monetary value of new orders reported between April-June 2017 was 25 % higher thanin January-March, and 47 % higher than in the corresponding period in 2016.

- At the end of June, the value of order books was 10 % higher than at the end of March, and 18 % higher than in June 2016.

- The turnover of technology industry companies in autumn 2017 is expected to be higherthan in the corresponding period last year.

- The number of personnel in Finland increased somewhat in January-June 2017. Personnel increased by two per cent, or by 6,000 employees from the average number in 2016. On average, the industry employed 296,000 people in June. In 2008, the industry employed a total of 326,000 people in Finland.

- The recruitment activities have picked up markedly in 2017. The companies recruited a totalof 22,600 new employees between January and June.

10/17/2017 Technology Industries of Finland

World Economic Outlook

- Finland as a Part of Global Economy


Gross Domestic Product Has Grown in the Euro

Area for a Long Time, and Now also in Finland

28Lähde: MacrobondTechnology Industries of Finland

10/17/2017

Recently, Finland's Economic Growth Has also

Been Supported by an Increase in Exports

29Source: Macrobond, Statistics FinlandTechnology Industries of Finland

10/17/2017

GDP Has Grown for a Long Time in the Euro Area, Now Also in Finland

3010/17/2017 Lähde: MacrobondTechnology Industriesof Finland

3110/17/2017 Lähde: Macrobond

In China and India Growth Continues, also Brazil Is Returning to Growth Share of global GDP in China, India, Brazil and Russia is 31 % (adjusted for PP)

Technology Industriesof Finland

3210/17/2017 Latest information September 2017 Source: Markit

GDP Growth in the Euro Area Has Picked up During the last MonthsPurchase Managers’ Index (PMI), 50 = no change from previous month


Industrial Production Volume

3310/17/2017 Source: MacrobondTechnology Industriesof Finland

Industrial Production Volume in the EU Countries

3410/17/2017 Source: MacrobondTechnology Industriesof Finland

Industrial Production is Growing Globally

3510/17/2017 Source: Macrobond, The CPB Netherlands Bureau for Economic Policy AnalysisTechnology Industriesof Finland


Industrial Production in China is Declining Slightly

Purchase Managers’ Index (PMI) in manufacturing industry in China



Industrial Production in Russia is Growing

Purchase Managers’ Index (PMI) in manufacturing industry in China



Industrial Production in Brazil Is IncreasingPurchase Managers’ Index (PMI) in manufacturing industry in China


39Source: Macrobond

Industrial Production in USA is GrowingPurchase Managers’ Index (PMI) in manufacturing industry

50 = no change from previous month


10/17/2017

40Source: Macrobond

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


10/17/2017

41Souce: Macrobond

Fixed Investment in Brazil Continue to DecreaseShare of Russia in European GDP is 13 % (adjusted for PP)

Share of Brazil in Latin American GDP is 35 % (adjusted for PP)


10/17/2017

42Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

World Trade Has Picked up Again Import volume development


10/17/2017

Imports to China Have Increased from Several

Countries, but Are Slowing Down

43Source: MacrobondTechnology Industriesof Finland

10/17/2017

Exports from EU Countries to Russia Have Fallen,

but Stabilized

44Source: MacrobondTechnology Industriesof Finland

10/17/2017

Russia’s Share* of Technology Industry Exports

from Finland Has Lowered to Some Five Per Cent

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

02468

1012141618202224262830323436384042

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017(1

-7)


10/17/2017

%

46Source: IMF (April 2017)

Global Economy is Expected to Grow by 3,6 % in

2017 GDP growth in 2017, %

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

0 10 20 30 40 50 60 70 80 90 100

North America

Western EuropeJapan

China India

Rest

of

Easte

rnEuro

pe

Russia

Bra

zil M

exic

o Rest

of

Latin

A,m

erica

Mid

dle

East

and A

fric

a

Average growth: +3,6 %

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

Rest of Asia


47Source: IMF (April 2017), Board of Customs

Demand in the Finnish Technology Industry Export

Market is Expected to Grow by 2.2 % in 2017 GDP growth 2017 / 2016, %

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

0 10 20 30 40 50 60 70 80 90 100

North America

Western Europe

Japan

ChinaIndia

Rest ofAsia

Rest

of

Easte

rn E

uro

pe

Russia B

razil

Rest

of

Latin

Am

erica

Mid

dle

East

and A

fric

a

Average growth: +2.2 % M

exic

o

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


Finland’s Economic Growth Relies on Exports and Investments

48Technology Industriesof Finland

10/17/2017

49Source: Macrobond, Eurostat

Finland's Exports Are still at Low Level


10/17/2017

Finnish Exports Lagging Behind Competitors

50Source: Macrobond, EurostatTechnology Industriesof Finland

10/17/2017

Economic Growth is Constrained by the 20% Drop in Production Capacity and a High Rate of Utilization Investments are vital for the production and export recovery

51

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

70

75

80

85

90

95

100

105

110

115

120

125

Industrialproduction ability(production withcapacity in fulluse), left. Scale

Industrialproduction(2008=100), leftscale

Capacity utilizationrate, %, right scale

-19 %

2008 2009

2010 2011 2012 2013 2014 2015 2016 2017

-21 %

Source: Statistics Finland / National Accounts, Industrial volume indexTechnology Industriesof Finland

10/17/2017

52Source: Macrobond, Eurostat

Growth of Public Expenditures, Debt and Tax Ratio

in Finland Increased cost burden requires cuts to public sector


10/17/2017

Corporate Investments in Finland Are in Real Terms Almost 6 Billion Euros Lower than in 2008 Production and R&D investments in Finland

53Source: Statistics Finland, National Accounts

20

21

22

23

24

25

26

27

28

29

30

31

32

2008 2009 2010 2011 2012 2013 2014 2015 2016

Billion euros, in the 2016 price level


10/17/2017

Companies in Finland Have Invested Significantly

Less than in Competing Countries

54Source: OECD, Economic Outlook (June 2017)

70

75

80

85

90

95

100

105

110

115

120

125

130

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e

USA

Switzerland

Sweden

Netherlands

Germany

Finland

Corporate investments, index 2008 = 100


10/17/2017

55Source: Statistics Finland, (National Accounts), The Confederation of Finnish Industries* investment survey (June 2017)

Investments in the Manufacturing and Technology

Industry in Finland Do Not Promise Long-Term

Strong Growth

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

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e

Manufacturing industry (incl. technology industry)Technology industry (incl. information technology and consulting engineering)

Production and R&D investments in Finland, million euros, at current prices


10/17/2017

Investments and productivity* are Decisive for

Finland’s SuccessProductivity of export sector is 10 % lower than in 2007-2008, productivity of entirenational economy is 3 % lower

56*) Productivity is measured as real value added per hours worked. When productivity grows (the curve rises) value added growsmore than hours worked. Value added = turnover – purchasing of materials and servicesValue added = labour costs + rents + depreciations + profitsSource: Statistics Finland / National Accounts


10/17/2017

Rapid Growth in Labour Costs Has Weakened the Ability of Companies to Invest in Finland

57*) Both wages and R & D investments include R&D staff wage costs Source: Statistics Finland (National Accounts)

50

55

60

65

70

75

80

85

90

95

100

105

110

115

2008 2009 2010 2011 2012 2013 2014 2015 2016

Corporate wages andsocial security costs*

Corporate productionand R&D investments*

Corporate profits aftertaxes

At current prices, index 2008=100


10/17/2017

58

Finland’s Price and Cost Competitiveness vis-à-vis

the Euro Countries Is still to be ImprovedUnit labour costs in the whole economy = labour costs / productivity, including the influence of effective exchange rates

94

96

98

100

102

104

106

108

110

112

114

2000=100

2005=100

2008=100

Finland’s price and cost competitiveness declines

Finland’s priceand costcompetitivenessimproves

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


*) In the ECB Harmonised Competitiveness Index, the average effective exchange rate of each country is calculated vis-à-vis 38 main trade partners, as well as the development of unit labour costs for the total economy.Latest information April-June 2017. Source: European Central Bank

What Should Be Done in Finland?

59

• Support the renewal of the industry.

• Taxes should support growth and investment in Finland.

• Support decision making in companies related to compensationand working time

• No new European nor national burdens on companies, whichare deteriorating the competitiveness.


10/17/2017

Long-Term Outlook and Challenges

60

• Global Structural Change Set to Continue Apace

o Industrial production and services will relocate to rapidly developing economic areas

o 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

o Due to an increase in retirement, the sector’s annual recruitment need in Finland will

rise considerably in the coming years.

o The availability of reasonably-priced energy also threatens to become an investment

bottleneck in Finland

• Combating Climate Change

o A challenge as costs are set to grow faster than in competitor countries

o An opportunity for new environmental and energy technologies


10/17/2017


61Teknologiateollisuus10/17/2017

The Federation’s Member Companies 2016

62

250–499 employees

69,03539%

29,78717%

28,01616%

50,68328%

1,42192 %

845 %

402 % 22

1 %

Number of enterprises / 1 567 Number of personnel / 177 521

1–249 employees 500–999 employees

1000– employees


10/17/2017

The Federation’s SME Member Companies 2016

63

48134%

479 33 %

25818%

20314%

Number of enterprises / 1 421 Number of personnel / 69 035

5,1097%

15,29022%

17,92426%

30,71245%

1–19 employees

20–49 employees

50–99 employees

100–249 employees


finnish technology industry, october 2017

Economy & Finance