Finnish technology industry, October 2016

1

Technology Industry /Finnish Economic Outlook

October 2016

05/02/2023 Technology Industries of Finland

2

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 INDUSTRYBoliden, Componenta, Kuusakoski, Luvata, Outokumpu, Outotec, Ovako, Sacotec, SSAB …

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

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

CONSULTING ENGINEERINGA-Insinöörit, Citec, Elomatic, Etteplan, FCG,Granlund, Neste Jacobs, Pöyry, Ramboll,Rejlers, SITO, SWECO, WSP…

3

The Finnish Technology Industry Is Comprised of Five Sub-Sectors

ELEKTRONICS AND ELECTROTECHNICAL INDUSTRY• Data communications equipment, electrical

machinery, medical technology• Turnover (2015): 14.6 billion euros• Personnel (2015): 40,600

METALS INDUSTRY• Steel products, non-ferrous metals,

castings, metallic minerals

• 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

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

CONSULTING ENGINEERING• Expertise for construction industry and

infrastructure • Turnover (2015): 5.5 billion euros • Personnel (2015): 48,200


The Technology Industry – the Largest Export Sector in Finland

4

• 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.

• Technology Industries of Finland has over 1,600 member companies.


Turnover of the Technology Industry in Finland

5Source: Macrobond, Statistics Finland 05/02/2023 Technology Industries of 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

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

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

North America2.6 billion €

Western Europe14.4 billion €53.7 %

South and Middle America0.9 billion €3.3 %

Central and Eastern Europe3.8 billion €14.6 %

Africa0.5 billion €1.9 %

Middle and Central East0.7 billion €2.5 %

Asia3.8 billion €14.4 %


Turnover of the Industry and Technology Industry in Finland

7Source: Macrobond, Statistics Finland

Index 2005=100 Change: 1-6,2016 / 1 -6,2015, %

90

95

100

105

110

115

120

125

130

135

140

Technology Industry-3 %Industry-2 %

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


Turnover of the Technology Industry in Finland

8

Index 2005=100 Change: 1-6,2016 / 1 -6,2015, %

50

70

90

110

130

150

170

190

210

230

250

270

Electronics andElectrotechnical Industry-5 %

Mechanical Engineering-2 %Metals Industry-13 %

Consulting Engineering9 %

Information Technology0 %

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

Source: Macrobond, Statistics Finland05/02/2023 Technology Industries of Finland

Value of New Orders in the Technology Industry* in Finland

9Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information April-June 2016

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

10,00011,00012,000

Combined

Export

Domestic

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

Million euros, at current prices

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

*) Excluding metals industry and game industry companies


Value of Order Books in the Technology Industry* in Finland

10Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information 30.6.2016

02,0004,0006,0008,000

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

Export

Domestic

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


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

*) Excluding metals industry and game industry companies


Combined

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


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

13

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Export

Domestic

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


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


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

Combined

Value of New Orders in the Mechanical Engineering in Finland


0500

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

Combined

Export

Domestic

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


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


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

Export Domestic

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


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


Combined

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 %


Value of Order Books in the Consulting Engineering in Finland


050

100150200250300350400450500550600650700750

Export Domestic

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


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


Combined

Value of New Orders in the Information Technology in Finland


050

100150200250300350400450500550600650700750800

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


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


Value of Order Books in the Information Technology* in Finland


0200400600800

1,0001,2001,4001,6001,800

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


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

*) Excluding game industry companies


Technology Industry Personnel

2005/02/2023 Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey

150000

175000

200000

225000

250000

275000

300000

325000

350000

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

Personnel in Finland Personnel in subsidiaries abroad(30.6)

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

Technology Industries of Finland

Technology Industry Personnel in Finland by Branch

2105/02/2023 Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey

0

25000

50000

75000

100000

125000

150000

175000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Electronics and Electrotechnical IndustryMechanical engineering

Metals industryConsulting engineering

Information technology


Technology Industry Personnel in Subsidiaries Abroad by Branch

2205/02/2023 Source: The Federation of Finnish Technology Industries’ labour force survey

0

25000

50000

75000

100000

125000

150000

175000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Electronics and Electrotechnical IndustryMechanical engineering

Metals industryConsulting engineering

Information technology


Retirement of Technology Industry Personnel in Finland

23

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 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 Industries of Finland

05/02/2023

Retirement of Technology Industry Blue Collar Employees in Finland

24

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

Individuals per year

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

05/02/2023

Overview of the Situation in the Technology Industry and Outlook for Autumn 2016

25

- 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.

05/02/2023

l


World Economic Outlook- Finland as a Part of Global Economy


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

2705/02/2023 Lähde: Macrobond

Index 2005=100

90

95

100

105

110

115

120

125

Latest information: 2016 Q32005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

SwedenEstoniaUSAGermanyUKFranceSpainFinland


2805/02/2023 Lähde: Macrobond

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

GDP change over the previous year, %

-15

-10

-5

0

5

10

15

20


IndiaChinaBrazilRussia


2905/02/2023 Latest information September 2016 Source: Markit

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


30

Industrial Production Volume

05/02/2023 Source: Macrobond

Index 2008=100

65

70

75

80

85

90

95

100

105

110

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

USAEU countriesJapanFinland


Industrial Production Volume in the EU Countries

3105/02/2023 Source: Macrobond

Index 2008=100

70

80

90

100

110

120

130

140

150

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

PolandEstoniaBelgiumAustriaGermanySwedenSpainItalyFinland


Global Industrial Production Growth Continues at a Slow Rate

3205/02/2023 Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Index 2008=100

80

90

100

110

120

130

140

150

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

Emerging countriesWorldDeveloped countries



Industrial Production in China is Unchanged Purchase Managers’ Index (PMI) in manufacturing industry in China



Industrial Production in Russia is Slightly Growing Purchase Managers’ Index (PMI) in manufacturing industry in China



Industrial Production in Brazil is Dropping Purchase Managers’ Index (PMI) in manufacturing industry in China


36Source: Macrobond

Industrial Production in USA is Slightly IncreasingPurchase Managers’ Index (PMI) in manufacturing industry 50 = no change from previous month

323436384042444648505254565860

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


05/02/2023

37Source: Macrobond

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

Change over previous year, %

-5

0

5

10

15

20

25

30

35

40

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


05/02/2023

38Souce: Macrobond

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)

Change over previous year, %

-20

-16-12

-8-4

048

12162024

2832

Latest information: 2016 Q22008 2009 2010 2011 2012 2013 2014 2015 2016

Russia Brazil


05/02/2023

39Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Global Trade is Developing Sluggish Import volume development

Index 2008=100

80

90

100

110

120

130

140

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

Emerging AsiaEmerging countriesWorldDeveloped countries


05/02/2023

Import to China Has Reduced from Several Countries

40Source: 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: August 20162008 2009 2010 2011 2012 2013 2014 2015 2016

North AmericaIndonesiaTaiwanSouth KoreaJapanEU countriesIndia


05/02/2023

Exports from EU Countries to Russia Have Fallen, but Stabilized

41Source: 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: July 20162005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

EstoniaUKBelgiumAustriaFranceGermanyItalyNetherlandsSwedenNorwayDenmarkFinland


05/02/2023

Russia’s Share* of Technology Industry Exports from Finland Has Lowered by Five Per Cent

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

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

048

1216202428323640


05/02/2023

43Lähde: IMF (July 2016)

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

ChinaIndia

Rest

of

East

ern

Euro

pe

Russ

ia

Braz

il M

exico

Re

st o

f La

tin A

mer

ica

Mid

dle

East

an

d Af

ricaAverage growth:

+3,1 %

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

Rest of Asia


05/02/2023

44Source: IMF (July 2016), Board of Customs

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

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 AmericaWestern Europe Japan

ChinaIndia

Rest of Asia

Rest

of

East

ern

Euro

pe

Russ

ia

Braz

il Rest

of L

atin

Am

erica

Mid

dle

East

and

Afri

ca

Average growth: +2.0 % M

exico

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

05/02/2023

Finland’s Economic Growth Relies on Exports and Investments

45Technology Industries of Finland

05/02/2023

Technology-, Forest- and Chemical Industry Cover 80 % of Finnish Export RevenuesGoods and services exports: billion euros and the shares of Finnish exports 2015

46Source: Board of Customs, Statistics Finland (National Accounts, Foreign Trade of Services)

Technology industry38 billion €

50%

Forest industry12.21 billion €

16%

Chemical industry10.94 billion €

14%

Other branches15.43 billion €

20%

Technology industry Forest industry Chemical industry Other branchesTechnology Industries of Finland

05/02/2023

47Source: Macrobond, Eurostat

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

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


Exports realized


05/02/2023

Finnish Exports Lagging Behind Competitors


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

75

100

125

150

175

200

225

250

275


PolandEstoniaCzech RepublicGermanySpainBelgiumSwedenFinland


05/02/2023

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

49

707580859095

100105110115120125

5500%

6000%

6500%

7000%

7500%

8000%

8500%

9000%

9500%

10000%

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-21 %

2008 2009 2010 2011 2012 2013 2014 2015 2016

-22 %

Source: Statistics Finland / National Accounts, Industrial volume indexTechnology Industries of Finland

05/02/2023


Growth of Public Expenditures, Debt and Tax Ratio in Finland Increased 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


05/02/2023

Upswing of Investments Recuired in Finland of Investments Required in Finland

5105/02/2023 Source: OECD, Economic Outlook

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e859095

100105110115120125130135140145150155

Corporate sector fixed investments, index 2005=100

Swedenthe NetherlandsUSAGermanySwitzerlandFinland


52Source: Statistics Finland (National Accounts, Confederation of Finnish Industries’ Investment Survey (June 2016)

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

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

1,0002,0003,0004,0005,0006,0007,0008,0009,000

10,00011,00012,000

Manufacturing industry Technology industry, including information technology and consulting engineering



05/02/2023

Investments and productivity* are Decisive for Finland’s Success Productivity of export sector is 10 % lower than in 2007-2008, productivity of entire national economy is 3 % lower

53*) 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 Source: Statistics Finland / National Accounts

Index 2005=100

75

80

85

90

95

100

105

110

115

120

125

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Manufacturing industryTechnology industryTotal economy


05/02/2023

54*) 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

The Competitiveness Pact in the Labour Market was an Essential Achievement Unit labour costs in the whole economy = labour costs / productivity, including the influence of effective exchange rates

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201990

95

100

105

110

115

120

125

Finland compared to the Eurozone, actual changeThe Competitiveness Pact + moderate wage increases in the coming yearsGovernment's objective for improving the cost competitiveness

Finland’s cost competitiveness declines

Finland’s cost competitiveness improves

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2005,I =100


05/02/2023

What Should Be Done in Finland?

55

• 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.


05/02/2023

Long-Term Outlook and Challenges

56

• Global Structural Change Set to Continue Apaceo Industrial production and services will relocate to rapidly developing economic areaso 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 Changeo A challenge as costs are set to grow faster than in competitor countries o An opportunity for new environmental and energy technologies


05/02/2023

Teknologiateollisuus


5705/02/2023

The Federation’s Member Companies 2014

58

7106938%

2808914%

2599717%

5861731%

143991%

80 5%

46 3%

23 1%

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

1–249 employees 500–999 employees1000– employees250–499 employees


05/02/2023

The Federation’s SME Member Companies 2014

59

506 35%

475 33%

258 18%

206 14%

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

1–19 employees20–49 employees

50–99 employees100–249 employees

52617%

1504721%

1826327%

3249845%


05/02/2023

Economy & Finance

Finnish technology industry, October 2016