Finnish technology industry, September 2017

Technology Industry /
Finnish Economic Outlook
September 2017
19/15/2017 Technology Industries
of Finland

The Finnish Technology Industry Is Comprised of
Five Sub-Sectors
of Finland
ELEKTRONICS AND ELECTROTECHNICAL
INDUSTRY
ABB, 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, electrical
machinery, medical technology
• Turnover (2016): 13.3 billion euros
• Personnel (2016): 38,000
METALS INDUSTRY
• Steel products, non-ferrous metals,
castings, metallic minerals
• Personnel (2016): 15,400
MECHANICAL ENGINEERING
• Machinery, metal products, vehicles
• Personnel (2016): 122,400
INFORMATION TECHNOLOGY
• IT services, applications and
programming
• Personnel (2016): 60,400
CONSULTING ENGINEERING
• Expertise for construction industry and
infrastructure
• Personnel (2016): 49,800
of Finland

The Technology Industry –
the Largest Export Sector in Finland
4
• 50 % of total Finnish exports.
• Companies invest about EUR 5.0 billion
annually 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 over
1,600 member companies.
of Finland

Turnover of the Technology Industry in Finland
5Source: Macrobond, Statistics Finland, Technology Industries of Finland9/15/2017 Technology Industries
of 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 America
2.5 billion €
9.8 %
Western Europe
13.7 billion €
53.9 %
South and
Middle America
0.8 billion €
3.2 %
Central and Eastern Europe
3.8 billion €
15.0 %
Africa
0.4 billion €
1.7 %
Middle and
Central East
0.5 billion €
1.8 %
Asia
3.7 billion €
14.6 %
of Finland

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 industry
50%
Forest industry
15%
Chemical industry
15%
Other sectors
20%
of Finland

Turnover of the Industry and Technology Industry
in Finland
8Source: Macrobond, Statistics Finland9/15/2017 Technology Industries
of Finland

Turnover of the Technology Industry in Finland
9Source: Macrobond, Statistics Finland9/15/2017 Technology Industries
of Finland

Value of New Orders in the Technology Industry*
in Finland
10Source: The Federation of Finnish Technology Industries’ order book survey’s respondent
companies, 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. metals
industry and game
industry companies
Technology Industries
of Finland
9/15/2017

Value of Order Books in the Technology Industry*
in Finland
companies, 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. metals
industry and game
industry companies
Combined
of Finland
9/15/2017

Tender Requests* Received by Technology
Industry Companies in Finland
1215.9.2017 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 three
months 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
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
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 %
of Finland
9/15/2017

Value of Order Books in the Electronics and
Electrotechnical Industry 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
6,500
7,000
7,500
8,000
8,500
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
of Finland
9/15/2017

Value of 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
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 %
of Finland
9/15/2017

Value of Order Books in the Mechanical
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
16,000
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
of Finland
9/15/2017

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 %
of Finland
9/15/2017

Value of Order Books in the Consulting
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
of Finland
9/15/2017

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
800
850
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
of Finland
9/15/2017

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
of Finland
9/15/2017

Technology Industry Personnel
219/15/2017 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
229/15/2017 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
239/15/2017 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 Industries
of Finland
9/15/2017

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 Industries
of Finland
9/15/2017

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 higher
than in 2015. In January-June 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 than
in 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 higher
than 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 total
of 22,600 new employees between January and June.
9/15/2017 Technology Industries of Finland

World Economic Outlook
- Finland as a Part of Global
Economy
279/15/2017 Technology Industries of Finland

Gross Domestic Product Has Grown in the Euro
Area for a Long Time, and Now also in Finland
28Lähde: MacrobondTechnology Industries
of Finland
9/15/2017

Recently, Finland's Economic Growth Has also
Been Supported by an Increase in Exports
29Source: Macrobond, Statistics FinlandTechnology Industries
of Finland
9/15/2017

GDP Has Grown for a Long Time in the Euro Area,
Now Also in Finland
309/15/2017 Lähde: MacrobondTechnology Industries
of Finland

319/15/2017 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)
of Finland

329/15/2017 Latest information August 2017
Source: Markit
GDP Growth in the Euro Area Has Picked up During
the last Months
Purchase Managers’ Index (PMI), 50 = no change from previous month
of Finland

Industrial Production Volume
339/15/2017 Source: MacrobondTechnology Industries
of Finland

Industrial Production Volume in the EU Countries
349/15/2017 Source: MacrobondTechnology Industries
of Finland

Industrial Production is Growing in Particular in
Emerging Countries
359/15/2017 Source: Macrobond, The CPB Netherlands Bureau for Economic Policy AnalysisTechnology Industries
of Finland

Source: Markit
Industrial Production in China is Declining Slightly
Purchase Managers’ Index (PMI) in manufacturing industry in China
of Finland

Source: Markit
Industrial Production in Russia is Growing
of Finland

Source: Markit
Industrial Production in Brazil Is Increasing
of Finland

39Source: Macrobond
Industrial Production in USA is Growing
Purchase Managers’ Index (PMI) in manufacturing industry
50 = no change from previous month
of Finland
9/15/2017

40Source: Macrobond
Growth of Residence Construction Has Lowered in
China
Share of China in Asian GDP is 42% (adjusted for PP)
of Finland
9/15/2017

41Souce: Macrobond
Fixed Investment in Brazil Continue to Decrease
Share of Russia in European GDP is 13 % (adjusted for PP)
Share of Brazil in Latin American GDP is 35 % (adjusted for PP)
of Finland
9/15/2017

42Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis
World Trade Has Picked up Again
Import volume development
of Finland
9/15/2017

Imports to China Have Increased from Several
Countries, but Are Slowing Down
43Source: MacrobondTechnology Industries
of Finland
9/15/2017

Exports from EU Countries to Russia Have Fallen,
but Stabilized
44Source: MacrobondTechnology Industries
of Finland
9/15/2017

Russia’s Share* of Technology Industry Exports
from Finland Has Lowered to Some Five Per Cent
45*) Soviet Union up to 1991
Source: Finnish Customs
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
42
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(1-6)
of Finland
9/15/2017
%

46Source: IMF (April 2017)
Global Economy is Expected to Grow by 3,5 % 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 Europe
Japan
China India
Restof
EasternEurope
Russia
Brazil
Mexico
RestofLatin
A,merica
MiddleEast
andAfrica
Average growth:
+3,5 %
The width of the bar indicates the share of global GDP in 2015 (adjusted for purchasing power parity), %
Rest of
Asia
of Finland

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
China
India
Rest of
Asia
Restof
EasternEurope
Russia
Brazil
RestofLatinAmerica
MiddleEastandAfrica
Average growth:
+2.2 %
Mexico
The width of the bar indicates the export share of technology industry from Finland in 2015, %
of Finland

Finland’s Economic Growth
Relies on Exports and
Investments
48Technology Industries
of Finland
9/15/2017

49Source: Macrobond, Eurostat
Finland's Exports Are still Low and Insufficient to
Finance the Public Sector
of Finland
9/15/2017

Finnish Exports Lagging Behind Competitors
50Source: Macrobond, EurostatTechnology Industries
of Finland
9/15/2017

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
Industrial
production ability
(production with
capacity in full
use), left. Scale
Industrial
production
(2008=100), left
scale
Capacity utilization
rate, %, right scale
-19 %
2008 200
9
2010 2011 2012 2013 2014 2015 2016 2017
-21 %
Source: Statistics Finland / National Accounts, Industrial volume indexTechnology Industries
of Finland
9/15/2017

52Source: Macrobond, Eurostat
Growth of Public Expenditures, Debt and Tax Ratio
in Finland
Increased cost burden requires cuts to public sector
of Finland
9/15/2017

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
of Finland
9/15/2017

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
of Finland
9/15/2017

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
of Finland
9/15/2017

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
56
*) 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
Source: Statistics Finland / National Accounts
of Finland
9/15/2017

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 and
social security costs*
Corporate production
and R&D investments*
Corporate profits after
taxes
At current prices, index 2008=100
of Finland
9/15/2017

58
Finland's Price and Cost Competitiveness Vis-à-vis
the Euro Area Has Improved Recently
Unit 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 price
and cost
competitiveness
improves
01 02 03 05 06 07 08 09 10 11 12 13 14 15 16 17
of Finland
*) 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 January-March 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 compensation
and working time
• No new European nor national burdens on companies, which
are deteriorating the competitiveness.
of Finland
9/15/2017

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
of Finland
9/15/2017

Technology Industries of
Finland
61Teknologiateollisuus9/15/2017

The Federation’s Member Companies 2016
62
250–499 employees
69,035
39%
29,787
17%
28,016
16%
50,683
28%
1,421
92 %
84
5 %
40
2 % 22
1 %
Number of enterprises / 1 567 Number of personnel / 177 521
1–249 employees 500–999 employees
1000– employees
of Finland
9/15/2017

The Federation’s SME Member Companies 2016
63
481
34%
479
33 %
258
18%
203
14%
Number of enterprises / 1 421 Number of personnel / 69 035
5,109
7%
15,290
22%
17,924
26%
30,712
45%
1–19 employees
20–49 employees
50–99 employees
100–249 employees
of Finland

Finnish technology industry, September 2017

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Finnish technology industry, September 2017