Industry Report by UniCredit Bank Austria:
Austria’s electrical industry continues to enjoy strong growth in 2017
- Following an increase in production of 9.7% in 2016, the industry expects growth of at least 8% in 2017
- Excellent economic development sees employment increase by 2.8% as of September
- Export successes in investment-related sectors reduce the foreign trade deficit, which was caused in particular by the import boom in electronic consumer goods
- Austria’s electrical industry secures its competitive position thanks to innovative strength and significant investment in research
Austria’s electrical industry is continuing to enjoy strong growth in 2017. With the industry recording a 9.7% increase in production in 2016, it is expecting to see a further increase in production of at least 8% in 2017, driven by the recovery in demand across a broad front. The latest Industry Report by UniCredit Bank Austria examines this result. “The boom involved the manufacture of electronic products and the production of electrical equipment and, based on the optimistic growth forecasts for key foreign sales markets, is not expected to lose much momentum going into 2018. The sector sales of 19.2 billion euros in 2016 is expected to increase to over 21 billion euros this year”, says UniCredit Bank Austria economist Günter Wolf.
The excellent economic development is also reflected in the high level of employment growth of 2.8% as of September 2017. Estimates made by companies regarding further employment growth also improved in October. The number of jobs in the electrical industry will reach almost 69,000 on average for the year. This means that the electrical industry provides almost 12% of all industry jobs – a much higher share than at any other point over the last ten years.
Growth leaders and losing sectors
Increasing employment figures and optimistic company expectations in October indicate that the high growth rates are set to continue to the end of 2017. Manufacturers of electronic components and devices in particular demonstrated a level of optimism in the latest economic survey that was last seen in mid-2012. The growth leader in the segment is the semiconductor sector, which, following a growth in sales of 20% in 2016, has recorded a further boost of 31% up to July 2017. In total, the sector has produced active electronic components and printed circuit board assemblies worth 3.3 billion euros, making up 17% of the industry sales. Manufacturers of medical technology, batteries and accumulators, as well as electric motors and other devices for the energy sector, are also recording excellent growth in 2017. Proportionately, the production of devices and equipment for the energy sector is also the largest sector of the electrical industry, making up around 38% of sales.
Manufacturers of information technology, consumer electronics and electrical household appliances, on the other hand, are reporting a significant drop in sales in some cases. In the case of information technology in particular, many end products are being sold on price alone despite the relatively technology-intensive product range. For instance, IT equipment has become cheaper over the long term, both in terms of imports into and exports out of Austria, despite significant improvements in performance. “In this segment, cost-effective production in large quantities is an essential competitive factor, with manufacturers having disappeared from many high-wage countries a long time ago”, explains Günter Wolf. “This means that the rapidly growing demand for products must be met by imports, as clearly demonstrated by the growing foreign trade deficits.” In 2016, the foreign trade deficit relating to computers, telephones and consumer electronics products was 2.4 billion euros, making up more than half of the total Austrian foreign trade deficit (exports worth 3.6 billion euros compared to imports of 6 billion euros).
Electrical industry achieves high global market shares with investment goods
Despite the high deficits in the electronics area, the balance of trade in the electrical industry has improved overall in the long term. It is only in the last two years that the balance has returned to negative, to 760 million euros in 2016, owing to a sharp increase in imports. Almost all sectors of the electrical and electronics industry related to investment goods achieved export surpluses: In 2016, 1.1 billion euros with products for the energy sector, 850 million euros with printed circuit boards, passive components, energy storage and other electric vehicle equipment, and 437 million euros with integrated circuits, medical technology and measurement and testing equipment.
Austria’s share in the global export of electrotechnical and electronic products has only decreased slightly in the last ten years, from 0.9% to 0.8%. According to UniCredit Bank Austria industry analyst Wolf, “A remarkably small decline not only when compared to the EU as a whole, where the comparable share fell from 30% to 21%, but also when taking into account the increase in demand and therefore the import boom in electronic consumer goods.” Even though Austria’s semiconductor sector does not play a major role in the global market overall, the global market shares in sub-areas of the sector, such as in vehicle electronics, are relatively high. Above-average and predominantly rising shares in global exports are also being recorded by manufacturers of devices for power generation and distribution and, above all, by manufacturers of devices for traffic surveillance and
management (the global market share in the segment is 7.5%).
Strong competitive position thanks to significant investment in research and above-average innovative strength
In a global market, the ability of companies to create innovative products and processes is crucial – not only when it comes to opportunities for growth, but often also when it comes to economic survival. As one of the most research-friendly and innovative industries in Europe, Austria’s electrical industry is therefore at the very least well-equipped. Overall, companies in the electrical industry invest 8.3% of sales in research and development and 88% of the companies in this industry are considered to be “innovation-active” according to the European Community Innovation Survey (the average R&D rate in the EU for the industry is below 5%, while the average share of innovation-active companies is 71%).
“The foreign trade performance and the development of structural indicators show that Austria’s electrical industry is not only meeting the structural requirements needed to survive under the prevailing conditions, the high import pressure and the stagnant demand in key segments, but is also able to secure its competitive position for the long term”, concludes Wolf.
Enquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0) 5 05 05-41954;