Despite initial glimmers of hope: the dry spell in the tech industry continues
Zurich (ots)
The Swiss technology industry (mechanical and electrical engineering and related technology sectors) had a challenging year in 2023. Compared with 2022, new orders received were down by 8.4%, exports by 2.6%, and sales by 0.8%. The generally good order backlog from the previous year prevented a more serious fall in sales. The further course of business is hard to predict, although there are some initial glimmers of hope. The decline in new orders received slowed somewhat in the fourth quarter of 2023 and the global purchasing managers' indices - while at a low level -are showing a slightly positive trend. The difficult currency situation has also improved a little recently. If these trends continue, the downturn may bottom out in mid-2023. It is now vital to improve the framework conditions by successfully concluding the free trade agreements with India and Mercosur, as well as a negotiated solution in the context of Bilaterals III.
In 2023, sales in the Swiss tech industry fell by 0.8% year-on-year. While this decline may not seem dramatic at first glance, it is considerably higher when adjusted for inflation. The fall in sales also intensified towards the end of 2023 and came to -2.7% in the fourth quarter compared with the same period of the previous year.
New orders saw a sharp decrease of 8.4% year-on-year. However, the negative momentum in new orders received slowed towards the end of the year. In the fourth quarter of 2023 they were 3.6% below the figure for the same period of 2022, and thus clearly above the previous quarter. Capacity utilization reached 87.1% in the fourth quarter of 2023, still slightly above its long-term average of 86.2%. The number of employees in the tech industry came to 331,900 in the fourth quarter of 2023. Employment was thus 1.7% above the prior-year period, and only 500 positions below the previous quarter.
Small number of positive exceptions in exports
In 2023, tech industry goods exports decreased by 2.6% year-on-year to CHF 70.5 billion. In the main product groups, metals exports fell by 9.0%, precision instruments by 2.0%, and mechanical engineering by 1.1%. Only in the electrical engineering/electronics segment was there a slight rise in exports of 0.4%. All key sales regions followed a negative trend. Exports to the US were down by 5.6%, those to Asia by 3.2%, and those to the EU by 2.4%. The key sales market of Germany in particular is weakening, as its share of total exports fell below 23% in the fourth quarter. Very few markets saw an increase, with exports to India, for example, rising by 7.9%. The latest development in goods exports to China is also pleasing. They were up 9.3% in the fourth quarter of 2023 compared with the same period of the previous year.
Uncertain outlook for the tech industry
The problems of the past year are primarily attributable to the industrial recession in practically all key markets. Stefan Brupbacher, Director of Swissmem, assesses the situation as follows: "The majority of companies had well filled order books when the downturn started. They were able to work these down over the past year, which cushioned the effect of the fall in sales. However, the sharp decline in new orders is worrying. Despite this difficult situation, companies have not yet resorted to large-scale short-time working or even redundancies. They need their skilled workers in order to continue to defy the adverse environment with innovations, automation and Swiss quality."
It is difficult to predict how this year will pan out. Martin Hirzel, President of Swissmem, comments: "The decline in new orders eased off in the fourth quarter of 2023. Together with the slightly positive trend in the purchasing managers' indices and the latest currency adjustments, this gives us hope that the downturn may bottom out in mid-2024, if these developments continue." Swissmem's member companies also share this cautiously positive expectation. 27% of the companies surveyed are anticipating an increase in orders from abroad in the coming 12 months, which is seven percentage points more than last autumn. They are expecting growth impetus to come mainly from India, China, Germany and US. In contrast, 37% of companies still believe that orders will decline. "The situation is very precarious", warns Hirzel. "The Swiss franc remains overvalued by around 5% against the euro compared with purchasing power parity. Another appreciation surge or political shock could quickly exacerbate the downward spiral".
Market access, market access, market access!
The Swiss technology industry exports almost 80% of its products. Access to global sales markets is therefore a key requirement for it. The focus is currently on India. Goods exports by the tech industry to India have risen by 60% since 2020, and exceeded one billion Swiss francs in terms of value for the first time in 2023. Martin Hirzel emphasizes that "It is very important that we conclude the negotiations on a free trade agreement with India quickly. With a population of 1.4 billion, the Indian market has enormous potential for our industry." Market access to China, Mercosur and other Southeast Asian countries also needs to be improved. "When the US and the EU are employing protectionism and subsidies, this is a pragmatic approach for Switzerland with its small, open economy", adds Hirzel.
Progress must also be made with regard to relations with the EU. "Swissmem emphatically supports the negotiations between Switzerland and the EU on the Bilaterals III", he emphasizes. "The EU will remain Switzerland's most important trading partner in the long term. The tech industry relies on a stable relationship with the EU."
For further information please contact:
Noé Blancpain, Head of Communications and Public Affairs
Tel. +41 44 384 48 65 / mobile +41 78 748 61 63
E-mail n.blancpain@swissmem.ch
Philippe Cordonier, Head of Swissmem Romandie
Tel. +41 21 613 35 85 / mobile +41 79 644 46 77
E-mail p.cordonier@swissmem.