Finnish technology industry, May 2016

Technology Industry /Finnish Economic Outlook

May 2016

• 50% of total Finnish exports.

• 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.

2

The Technology Industry –the Largest Export Sector in Finland

16.5.2016

Mechanical Engineering

Abloy, Cargotec, Finn-Power, Fiskars,

Glaston, Kone, Konecranes, Metso,

Meyer Turku, Normet, Oras, Patria,

Pemamek, Ponsse, Stala, Valmet, Valtra,

Wärtsilä…

Electronics and

Electrotechnical Industry

ABB, Ensto, Microsoft Mobile,

Murata Electronics, Nokia,

Planmeca, Polar Electro, Suunto,

Vacon, Vaisala…

Information Technology

Affecto, Basware, Bilot, CGI,

Comptel, Digia, Efecte, Enfo,

F-Secure, Fujitsu Finland, IBM,

Innofactor, Knowit, Microsoft,

Nixu, Tieto…

Metals Industry

Boliden, Componenta,

Kuusakoski, Luvata, Outokumpu,

Outotec, Ovako, Sacotec,

SSAB …

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

16.5.20163

The Finnish Technology Industry is Comprised of Five Sub-Sectors

Electronics and

Electrotechnical Industry

• Data communications equipment,

electrical machinery, medical technology

products

• Turnover (2015): 13.2 billion euros

• Personnel (2015): 40,500

Metals Industry

• Steel products, non-ferrous

metals, castings


• Personnel (2015): 15,100

Mechanical Engineering

• Machinery, metal products,

vehicles


• Personnel (2015): 121,000

Consulting Engineering

• Expertise for construction industry

and infrastructure


• Personnel (2015): 47,300

Information Technology

• IT services, applications

and programming


• Personnel (2015): 57,900

16.5.20164

16.5.20165

Turnover of the Technology Industry in Finland

Source: Macrobond, Statistics Finland

16.5.20166

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

North America

2.6 billion €

9.6 %

Western Europe

14.4 billion €

53.7 %

Middle and

Central East

0.7 billion €

2.5 %

Asia

3.8 billion €

14.4 %

Africa

0.5 billion €

1.9 %

South and Middle America

0.9 billion €

3.3 %

Central and Eastern Europe

3.8 billion €

14.6 %

*) In addition to goods exports the sector exported services worth some 10 billion euros.

Source: National Board of Customs, Statistics Finland

16.5.20167

Turnover of the Industry and Technology Industry in Finland


16.5.20168

Turnover of the Technology Industry in Finland


8.6.20159

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 January-March 2016

*) Excluding metals industry

and game industry

companies.

Change: I,2016 / I,2015 I,2016 / IV,2015

Export: +4 % -14 %

Domestic: -10 % -25 %

Combined: 0 % -16 %

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

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



latest information 31.3.2016

*) Excluding metals industry

and game industry

companies.

Combined

Change: 31.3.2016 / 31.3.2015 31.3.2016 / 31.12.2015

Export: +25 % 0 %

Domestic: 0 % -4 %

Combined: +17 % -2 %

Source: The Federation of Finnish Technology Industries’ order book survey,

latest information April 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

16.5.201611

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

0500

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

Combined

Export

Domestic


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

Change: I,2016 / I,2015 I,2016 / IV,2015

Export: +12 % -13 %

Domestic: -37 % -50 %




8.6.201513

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

0500

1,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,0007,5008,0008,5009,000

Export

Domestic

Combined


Change: 31.3.2016 / 31.3.2015 31.3.2016 / 31.12.2015

Export: +16 % -7 %

Domestic: -30 % -38 %




8.6.201514

Value on 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

5,000

5,500

Combined

Export

Domestic


Change: I,2016 / I,2015 I,2016 / IV,2015

Export: -5 % -15 %

Domestic: +17 % +4 %

Combined: 0 % -10 %



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

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

14,000

15,000

Export

Domestic

Combined


Change: 31.3.2016 / 31.3.2015 31.3.2016 / 31.12.2015

Export: +36 % +2 %

Domestic: +3 % +2 %

Combined: +28 % +2 %



8.6.201516

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 2015 2016

Change: I,2016 / I,2015 I,2016 / IV,2015

Export: +33 % +20 %

Domestic: +10 % +11 %

Combined: +12 % +12 %



8.6.201517

Value of Order Books in the Consulting Engineering in Finland

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

Export

Domestic

Combined




Change: 31.3.2016 / 31.3.2015 31.3.2016 / 31.12.2015

Export: -2 % +10 %

Domestic: +25 % +6 %

Combined: +20 % +7 %

8.6.201518

Value of New Orders in the Information Technology in Finland

0

50

100

150

200

250

300

350

400

450

500

550

600

650

700

750

800Million euros, at current prices

Change: I,2016 / I,2015 I,2016 / IV,2015

Combined: -15 % -31 %



*) Excl. game

industry companies

8.6.201519

Value of Order Books in the Information Technology in Finland

0100200300400500600700800900

1,0001,1001,2001,3001,4001,5001,6001,7001,8001,900


Change: 31.3.2016 / 31.3.2015 31.3.2016 / 31.3.2015

Combined: +3 % -6 %



*) Excl. game

industry companies

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

30.7.201520

Personnel in the Technology Industry

150,000

170,000

190,000

210,000

230,000

250,000

270,000

290,000

310,000

330,000

350,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(31.3)

Personnel in Finland Personnel in subsidiaries abroad

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

Some 14,000 of personnel

affected by temporary or

part-time lay-offs 31.3.2016

7.5.201521

Technology Industry Personnel in Finland by Branch

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016(31.3)Electronics and Electrotechnical Industry Mechanical engineering industry

Metals industry Consulting engineeringInformation technology

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

7.5.201522

Technology Industry Personnel in SubsidiariesAbroad by Branch

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Electronics and Electrotechnical Industry Mechanical engineering industryMetals industry Consulting engineeringInformation technology

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

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 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

16.5.201623

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 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

16.5.201624

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

companies.

- Turnover in Finland lowered slihtly in 2015 compared to the year 2014. Turnover totalled

EUR 66 billion. In the pre-crisis year 2008 it was EUR 86 billion.

- The monetary value of new orders reported between January-March 2016 was at the

same level than in the corresponding period in 2015, but 16 % lower than in the preceding

quarter.

- At the end of March, the value of order books was 17 % higher year-on-year, but 2 %

lower the value reported at the end of December.

- The turnover of technology industry companies in the spring of 2016 is expected to

remain at the same level or a slightly lower level as in the corresponding period last year.

- Since 2008, personnel numbers in Finland have shrunk by 48,000 employees, totalling

on average 278,000 at the end of March 2016.

Economic Outlook in the Technology Industry

16.5.201625

Outlook in the Global Economy is Uncertain

16.5.201626

16.5.201627

GDP Has Been Growing in Western Europe and USA , Except in Finland

Source: Macrobond

16.5.201628

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

Source: Macrobond

GDP Growth Has Continued in Eurozone in April, butat the Slower RatePurchase Managers’ Index (PMI), 50 = no change from previous month

Latest information April 2016.

Source: Markit 16.5.201629

Industrial Production Volume

Source: Macrobond16.5.201630

Industrial Production Volume in EU Countries


16.5.201632

Global Industrial Production Growth Continues at Slow Rate

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

16.5.201633

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


Source: Markit

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



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



16.5.201636

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

Lähde: Macrobond

16.5.201637

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

Source: Macrobond

16.5.201638

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

16.5.201639

Import to Emerging Countries Has LoweredImport volume development

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

16.5.201640

Import to China Has Reduced from Other Countries

Source: Macrobond

Exports from EU Countries to Russia is Falling


02468

1012141618202224262830323436384042

197

5

197

6

197

7

197

8

197

9

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

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200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

16.5.2016

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

%

*) Soviet Union up to 1991.

Source: Finnish Customs

16.5.201643

Exchange Rates in Emerging Countries are Varying

Source: Macrobond

16.5.2016

Global Economy is Expected to Grow by 3.2 % in 2016 GDP growth in 2016, %

Source: IMF (April 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

China

India

Rest of

Asia

Restof

Easte

rn E

uro

pe

Ru

ssia

Bra

zil

Me

xic

o Rest

of

Lati

n

Am

eri

ca

Mid

dle

East

an

d A

fric

a

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

Average growth:

+3,2 %

16.5.2016

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

Source: IMF (April 2016), Board of Customs

-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

China

India

Rest of

Asia

Rest

of

Easte

rn

Eu

rop

e

Ru

ssia

Bra

zil

Mexic

oR

est

of

Lati

n

Am

eri

ca

Mid

dle

East

an

d A

fric

a

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

Average growth:

+2.0%

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

%

16.5.201646

Industrial Production Development by Year


The Big Challenge for Finland after 2008

16.5.201648

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

Source: Macronond, Statistics Finland / National Accounts16.5.201649

Finnish Exports Lagging Behind Competitors

Source: Macrobond, Eurostat16.5.201650

The Share of Industry in GDP in Finland 1900-2014

0%

5%

10%

15%

20%

25%

30%

35%

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

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 Accounts16.5.201651

16.5.201652

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

-20%

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%

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

Source: Macrobond, Statistics Finland 16.5.201653

85

90

95

100

105

110

115

120

125

130

135

140

145

150

155

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e

Corporate sector fixed investments, index 2005=100

Sweden

The Netherlands

USA

Germany

Switzerland

Finland

16.5.201654

Upswing of Investments Required in Finland

Source: OECD, Economic Outlook 2015

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

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

Manufacturing industry Technology industry

Industrial Companies’ Investment Plans Indicate an Increase in Investments Both in 2015 and 2016Industrial fixed and R&D investments in Finland

Source: Statistics Finland, Confederation of Finnish Industries’

Investment Survey (January 2016)


16.5.201655

95

100

105

110

115

120

125

130

135

140

145

150

155

160

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

Manufacturing industry

Technology industry

National economy

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

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 services

Value added = labour costs + rents + depreciations + profits

**) The production capasity of

current industry does not enable the

similar productivity development as

during the years 2000-2008

16.5.201656

Index, 2000=100

90

95

100

105

110

115

120

Compared to Belgium Compared to Germany Compared to Spain

Compared to Italy Compared 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 III/2015. Source: European Central Bank

Finland’s price

and cost

competitiveness

declines

2005,I =100

Finland’s price

and cost

competitiveness

improves

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

16.5.201657

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?

16.5.201658

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

16.5.201659

The Federation of Finnish Technology Industries

16.5.201660

The Federation’s Member Companies 2014

61

71,06938%

28,08914%

25,99717%

58,61731%

1,43991%

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 industries16.5.2016

62

The Federation’s SME Member Companies 2014

50635%

475 33%

25818%

20614%

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

1–19 employees

20–49 employees

50–99 employees

100–249 employees

5,2617%

15,04721%

18,26327%

32,49845%

Source: The Federation of Finnish Technology industries16.5.2016

Economy & Finance

Finnish technology industry, May 2016