Finnish economy and technology industry, June 2015

Technology Industry /Finnish Economic Situation and Outlook

June 2015

2

• 50 % of total Finnish exports.

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

• Almost 270,000 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

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3

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, Codebakers, Comptel, Digia, Efecte, Enfo, F-Secure, Fujitsu Finland, IBM, Innofactor, Knowit, Microsoft, Nixu, Tieto…

Metals IndustryBoliden, Componenta, Kuusakoski, Luvata, Norilsk Nickel, 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

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4

The Finnish Technology Industry is Comprised of Five Sub-Sectors

Electronics and Electrotechnical Industry• Data communications equipment,electrical machinery, medical technology products• Turnover (2014): 15.1 billion euros• Personnel (2014): 42 300

Metals Industry• Steel products, non-ferrous metals, castings• Turnover (2014): 9.2 billion euros• Personnel (2014): 15 300

Mechanical Engineering• Machinery, metal products, vehicles• Turnover (2014): 27.2 billion euros• Personnel (2014): 118 900s

Consulting Engineering• Expertise for construction industry and infrastructure• Turnover (2014): 5.0 billion euros• Personnel (2014): 46 300

Information Technology• IT services, applications and programming• Turnover (2014): 10.0 billion euros• Personnel (2014): 53 000

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8.6.20155

Turnover of the Technology Industry in 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

Information technologyConsulting engineeringMetals industryMechanical engineeringElectronics and electrotechnical industry

Source: Macrobond, Statistics Finland

6 8.6.2015

Export of Technology Industry Goods from Finland by Area in 2014Total goods exports 26.2 billion euros*

North America2.6 billion €9.8%

North America2.6 billion €9.8%

Western Europe13.1 billion €50.1%

Western Europe13.1 billion €50.1%

Middle and Central East0.5 billion € 2.1%

Middle and Central East0.5 billion € 2.1%

Asia4.1 billion €15.8%

Asia4.1 billion €15.8%

Africa0.5 billion €1.8%

Africa0.5 billion €1.8%

South and Middle America0.9 billion €3.3%

South and Middle America0.9 billion €3.3%

Central and Eastern Europe4.5 billion €17.1%

Central and Eastern Europe4.5 billion €17.1%

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

7 8.6.2015

Turnover of the Industry and Technology Industry in Finland

Index 2005=100 Change: 1-2,2015 / 1-2,2014, %

90

95

100

105

110

115

120

125

130

135

140

Technology Industry3 %

Industry-5 %

Latest information: February, 20152005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


8 8.6.2015

Turnover of the Technology Industry in Finland

Index 2005=100 Change: 1-2,2015 / 1-2,2014, %

50

75

100

125

150

175

200

225

250

Electronics andElectrotechnical Industry-9 %

Mechanical Engineering4 %

Metals Industry8 %

Consulting Engineering6 %

Information Technology21 %

Latest information: February, 20152005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015


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 January-Mach 2015

*) Excluding metals industry and game industry companies.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Change: I,2015 / I,2014 I,2015 / IV,2014

Export: -12% -19%

Domestic: -5% +2%

Combined: -9% -14%

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

Export

Domestic


Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information 31.3.2015

*) Excluding metals industry and game industry companies.

Combined

Change: 31.3.2015 / 31.3.2014 31.3.2015 / 31.12.2014

Export: +9% -4%

Domestic: +30% +6%

Combined: +15% - 1%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

8.6.201511

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

0500

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

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Change: I,2015 / I,2014 I,2015 / IV,2014

Export: -14% -24%

Domestic: +25% +26%

Combined: -8% -18%

Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest information January-March 2015

8.6.201512

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: 31.3.2015 / 31.3.2014 31.3.2015 / 31.12.2014

Export: -1% -18%

Domestic: +53% +33%

Combined: +6% -11%


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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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

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Change: I,2015 / I,2014 I,2015 / IV,2014

Export: - 9% -12%

Domestic: -9% -1%

Combined: -9% -10%


8.6.201514

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: 31.3.2015 / 31.3.2014 31.3.2015 / 31.12.2014

Export: +14% +3%

Domestic: +45% +4%

Combined: +20% +3%


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Value on New Orders in the Consulting Engineering in Finland

0

40

80

120

160

200

240

280

320

Combined

Export

Domestic


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Change: I,2015 / I,2014 I,2015 / IV,2014

Export: -13% -28%

Domestic: +4% -12%

Combined: +2% -14%


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Value of Order Books in the Consulting Engineering in Finland

0

50

100

150

200

250

300

350

400

450

500

550

Export

Domestic

Combined



Change: 31.3.2015 / 31.3.2014 31.3.2015 / 31.12.2014

Export: -5% -9%

Domestic: +15% +4%

Combined: +12% +2%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Value on New Orders in the Information Technology in Finland

0

100

200

300

400

500

600

700

800


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Change: I,2015 / I,2014 I,2015 / IV,2014

Combined: -18% -11%


*) Excl. game industry companies

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Value of Order Books in the Information Technology in Finland

0100200300400500600700800900

1,0001,1001,2001,3001,4001,5001,6001,700


2007 2008 2009 2010 2011 2012 2013 2014 2015

Change: 31.3.2015 / 31.3.2014 31.3.2015 / 31.12.2014

Combined: +7% 0%


*) Excl. game industry companies

19Source: The Federation of Finnish Technology Industries’ order book survey, latest information April 2015.

“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

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Tender Requests* Received by Technology Industry Companies in Finland

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

20

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

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

8.6.2015

Personnel in the Technology Industry

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

Some 15 000 of employees affected by temporary or part-time lay-offs 31.3.2015

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (31.3)

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 industry

Consulting engineering Information technology

8.6.201521

Technology Industry Personnel in Finland by Branch

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

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

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 industry

Consulting engineering Information technology

8.6.201522

Technology Industry Personnel in Subsidiaries Abroad by Branch

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

23

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

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

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

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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

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

- Turnover in Finland in 2014 increased slightly compared to 2013. 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 2014 was 9 % lower than in the corresponding period in 2014, and 14% lower than in the preceding quarter.

- At the end of March, the value of order books was 15% higher year-on-year, but slightly lower the value reported at the end of December.

- The turnover of technology industry companies in the spring of 2015 is expected to be slightly higher than in the corresponding period year earlier.

- Since 2008, personnel numbers in Finland have shrunk by 53,000 employees, totalling 273,000 at the end of March 2015.

Situational Overview and Outlook

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26

Divergence in the Development of Export

Markets

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27

Industrial Production Volume

Source: Macrobond 8.6.2015

Index 2008=100

65

70

75

80

85

90

95

100

105

110

Latest information: April, 20152008 2009 2010 2011 2012 2013 2014 2015

SuomiJapanEU countriesUSA

28

Industrial Production Volume in EU Countries

Source: Macrobond 8.6.2015

Index 2008=100

70

80

90

100

110

120

130

140

Latest information: April, 20152008 2009 2010 2011 2012 2013 2014 2015

SpainFinlandItalySwedenGermanyAustriaBelgiumEstoniaPoland

29

Weak Growth in Manufacturing Industry inEurozone in Early 2015 Purchase Managers’ Index (PMI), 50 = no change from previous month

Latest information May 2015. Source: Markit

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30

Russian Economy is in Negative CirclePurchase Managers’ Index (PMI) in manufacturing industry in Russia50 = no change from previous month

Latest information May 2015. Source: Markit

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31

Global Economy is Expected to Grow by 3.5% in 2015GDP growth in 2015, %

Source: IMF (January 2014)

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

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

North America

Western Europe

Japan

ChinaIndia

Rest of Asia

Res

t o

f E

aste

rn

Eu

rop

e

Ru

ssia

Bra

zil

Mex

ico

Res

t o

f L

atin

Am

.

Mid

dle

Eas

t an

d A

fric

a

The width of the bar indicates the share of global GDP in 2014 (adjusted for purchasing power parity), %.

Average growth: +3.5%

15.04.2023 31

8.6.2015

32

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

Source: IMF (January 2015), Board of Customs

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

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

NorthAmerica

Western Europe Japan

ChinaIndia

Rest of Asia

Res

t o

f E

aste

rn

Eu

rop

e

Ru

ssia

Bra

zil

Mex

ico

Res

t o

f L

atin

Am

.

Mid

dle

Eas

t an

d A

fric

a

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

Average growth: +2.0%

15.04.2023 32

8.6.2015

33

Exports from EU Countries to Russia is Falling

Source: Macrobond8.6.2015

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

50

100

150

200

250

300

350

400

450

Latest information: April 20152005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

FinlandDenmarkNorwaySwedenNetherlandsItalyGermanyFranceAustriaBelgiumUKEstonia

34

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

e

0

4

8

12

16

20

24

28

32

36

40

Russia’s Share of Technology Industry Exports Will Decline Again to the Level of Approximately Five Per Cent

%

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

8.6.2015

35

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

%

8.6.2015

36

Industrial Production Development by Year

Source: Macrobond8.6.2015

Index 2005=100

75

100

125

150

175

200

225

250

275

300

325

350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

FinlandEuro zoneJapanUSABrazilRussiaSouth-KoreaIndiaChina

37

The Big Challenge for Finland after 2008

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38

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

Source: Macronond, Statistics Finland / National Accounts8.6.2015

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

Latest information: 2015 Q12005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Exportsrealized

39

Finnish Exports Lagging Behind Competitors

Source: Macrobond, Eurostat 8.6.2015

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

75

100

125

150

175

200

225

250

Viimeisin tieto: 2015 Q12005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

FinlandSwedenBelgiumSpainGermanyChech RepublicEstoniaPoland

40

The Share of Industry in GDP in Finland 1900-2013

1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100%

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

8.6.2015

41 12.6.2015

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 over 20 %

42

Growth of Public Debt and Tax Rate Out of ControlIncreased cost burden requires cuts to public sector

Source: Macrobond, Statistics Finland 8.6.2015

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

41,5

42,0

42,5

43,0

43,5

44,0

44,5

45,0

45,5

46,0

46,5

47,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Local government debtPublic expenditures

Total tax ratio, % of GDP

Central government debt

Latest information: 2014 Q4

43

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Industry Technology industry

Industrial Investments Should be IncreasedIndustrial fixed and R&D investments in Finland

Source: Statistics Finland, Confederation of Finnish Industries’ Investment Survey (June 2014)


8.6.2015

44

Upswing of Investments Required Finland

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e 2015e80

85

90

95

100

105

110

115

120

125

130

135

USA

The Nether-lands

Switzerland

Sweden

Germany

Finland

Source: OECD, Economic Outlook 2014

Index, 2005=100

8.6.2015

45

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201395

100

105

110

115

120

125

130

135

140

145

150

155

160

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 servicesValue added = labour costs + rents + depreciations + profits

**) The structure of current industry does not enable the similar productivity development as during the years 2000-2008

8.6.2015

Index, 2000=100

46

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 IV/2014. Source: European Central Bank

Finland’s costCompetitivenessdeclines

2005,I =100

Finland’s 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

8.6.2015

47

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?

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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

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49

The Federation of Finnish Technology Industries

8.6.2015

50

The Federation’s Member Companies 2013

7064638%

2686014%

3146817%

5774931%

146391%

80 5%

46 3%

23 1%

Number of enteprises / 1 612 Number of personnel / 186 723

1–249 employees

250–499 employees

500–999 employees

1000– employees

Source: The Federation of Finnish Technology industries8.6.2015

51

The Federation’s SME Member Companies 2013

514 35%

475 33%

265 18%

209 14%

Number of enterprises / 1 463

Number of personnel / 70 646

1–19 employees

20–49 employees

50–99 employees

100–249 employees

51397%

1494721%

1881427%

3174645%

Source: The Federation of Finnish Technology industries8.6.2015

Finnish economy and technology industry, June 2015

Economy & Finance

Transcript of Finnish economy and technology industry, June 2015