Finland, Helsinki, IT, ICT, electronics, electro technical industry, information technology industry

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1 Finland, Helsinki, IT, ICT, electronics, electro technical industry, information technology industry The aim of this sector analysis of ICT and electronics industries in Finland is to improve the Danish industry s awareness and understanding of the Finnish market. The purpose is to present the Finnish ICT and electronics industries characteristics and trends as well as describe and evaluate the attractiveness of the Finnish market for Danish companies.

2 The exports from Denmark to Finland were DKK 21.6 billion (DKK 4,000 per capita) in In comparison to the Nordic markets Sweden and Norway, exports per capita to Finland are still low and there is potential for more. Danish exports per capita to Iceland are DKK 9,600, Sweden DKK 12,400 and Norway DKK 13,800. Finland is evenly competing of the placement for the 10 th largest export market of Denmark with Poland. The Finnish industry is B2B and technology driven. The relatively small home market alone does not generate enough demand for this type of investment goods and some 29% of the Finnish GDP is exported. In 2013 the exports of goods from Finland were DKK 420 billion in total. The main export countries for Finland are Sweden, Germany and Russia, each responsible for 9-12% of the Finnish exports. The United Stated, Netherlands, The United Kingdom and China make each 5-6%. Since 2011 the Finnish trade balance is slightly negative with imports being at 51% and exports at 49%. GDP per capita in Finland lied at DKK 266,500 in 2012 (DKK 278,000 in Denmark). The total GDP of Finland was DKK 1,442 billion in 2012 (DKK 1,826 billion in Denmark). The development of the Finnish GDP was negative in 2012 (- 1%) and 2013 (-1.4%). The Finnish GDP is estimated to grow by 0.5-1% in 2014 and by 1-1.5% in There are 5.45 million inhabitants in Finland. The Finnish IT services market is estimated at DKK 27 billion, which is on the same level as the Norwegian (DKK 30 billion) and the Danish (DKK 36 billion) market. For comparison, the Swedish IT services market is estimated at DKK 50 billion. Industry structure The production of low-priced electronics has been off-shored for the most part, for example in the case of Nokia products. But development and manufacturing of sophisticated electronics and investment goods still have a future in Finland. This is due to the high level of engineering and R&D know-how in Finland and due to the less intensive price competition in the niches. Among other things the cluster around Nokia has contributed to the development of this know-how and potential. This is a possibility for Danish suppliers of the ICT and electronics industry, and also for companies searching for acquisition targets. The Finnish ICT and electronics industries continue to contribute significantly to the Finnish economy. In Finland alone these industries have a combined annual turnover of DKK 170 billion and employ 102,000 people directly.

3 The device and manufacturing driven electronics and electro technical industry in Finland has an annual turnover of DKK 107 billion and employs around 47,000 people in Finland and 124,000 abroad. The largest companies active in Finland in these sub-sector companies are ABB, Ensto, Nokia, Murata Electronics, Nokia Solutions and Networks, Planmeca, Polar Elektro, Suunto, Vacon and Vaisala. In turn, the software and service driven information technology industry in Finland has an annual turnover of DKK 63 billion and employs around 55,000 people in Finland and 15,000 internationally. The largest IT companies active in Finland are Affecto, Basware, CGI, Comptel, Digia, Enfo, F-Secure, Fujitsu Services, Logica and Tieto. Manufacturing Manufacturing of high volume, low cost electronics has been off-shored from Finland. What remains is production of healthcare electronics, analytics devices and other more demanding and complex products. Also electronics that is needed for the modern machine industry products. The electronics manufacturing is partly in the hands of OEM manufacturers and partly EMS are responsible for manufacturing. EMS have a strong foothold, because many of the electronics companies are engineering and R&D driven and might have low production volumes. These kinds of companies are not necessarily interested in managing the production in-house. Some Finnish EMS companies have subsidiaries in the Baltic countries or in the Far East to facilitate production and purchasing. Standard components for production are sourced from local distributors or even directly from abroad. Suppliers of non-standard components and more unique solutions have local representation or serve the market from abroad. Public it spending and investments The total ICT spending of the Finnish government in 2012 were DKK 5.7 billion, which equalled to 1.45% of the government s budget or 11% of operational costs. The Finnish government and municipalities are under pressure to cut costs, but IT investments are in planning also for the upcoming years. For the years DKK billion have been reserved for IT investment projects in various administrational sectors. DKK 900 million of this has been reserved for already decided projects that have to do with ERP, document management systems, electronic administration systems and other. Savings should be reached before all by consolidating sector-independent ICT services to a new Government ICT Centre Valtori that was launched The potential of the savings is estimated at DKK million (13-21%) annually. Municipalities are estimated to spend DKK 6 billion in IT Since 2011 the spending has increased only very slightly by DKK 30 million. Primary schools in

4 Finland have 2.84 computers per 10 students. Electronic learning environments are already widely used, but incorporating IT in to the learning in class has not developed far yet. Several municipalities have prepared to introduce electronic matriculation examinations in high schools in the upcoming years. The Hospital District of Helsinki and Uusimaa (HUS) are just starting a large IT project to renew the patient information system. The contract should be signed early This investment is estimated at DKK billion for the first 10 years. Private sector IT spending and investments The IT spending of private companies in Finland is estimated at roughly 5-6% of turnover in average. The expectation is that this level will remain or decrease slightly under IT investments have been partly postponed, and IT costs have been cut over the past years due to the economic uncertainties with those Finland has struggled after But some positive signs are handed, as IT service and software companies in Finland were able to increase their turnover by 11% under IOT (Internet of things) is seen to have potential in Finland in improving the competitive strength and in growth of new industry. In the practice IOT has already a small foothold in Finland. E.g. smart meters for electric energy and water consumption are widely spread and distance surveillance of machines is increasing. Potential is seen for example in applications that allow condition based maintenance and enable smart lighting. The Finnish industry is developing solutions to offer, but the trend indicates opportunities also for Danish companies that have suitable solutions. Cloud based services are taking over traditional information system and processes in Finland. The development has started, but it is still early days. The cloud related business was estimated at DKK 1 billion in 2012, and it is forecasted to be DKK 2.8 billion in The annual growth would be then 40%. Both the public and private sectors seem to adopt cloud services at a similar pace. Fast broadband and wireless networks are spreading also to rural areas, besides the existing good coverage in urban areas. Distance work, e-governance, new services provided over internet, and IOT contribute to the development. In a country of long distances e.g. video connection to a health centre could belong to the commonly used applications in the future. The Finnish government has supported the development of fast broadband network by DKK 1 billion subsidies, and by developing the regulatory environment. By the end of % of households, companies and public organizations should have a 100 MB broadband connection

5 not more than at 2 kilometres distance. Finland and Denmark have similar penetration rates of approximately 90%, but only 11% of Finnish households have a high speed fibre connection (Denmark 14%, Norway 20% and Sweden 26%). Finland holds the first place in the World Economy Forum 2014 index for network readiness followed by Singapore and Sweden. Data centres have been recently built in Finland by large international companies and local companies. To these belong e.g. Google, Yandex and DNA. This underlines the geographic stability, but also the perceived stability and reliability of the Finnish society. Start-up scene in Finland has grown under the past decade considerably in Finland. The atmosphere in general is favourable for entrepreneurship compared to the times before. The start-up scene has been partly labelled by companies that emerged after the wave of lay-offs at Nokia. Many of the start-ups are IT device or application driven. One important focus area is health care related analytics and treatment devices. City of Oulu in Finland is a fore runner in testing applications for mobile healthcare. Another focus area is the gaming industry that has grown rapidly under the past few years. ebusiness is growing in Finland by approx. 10% annually. The end consumer spending incl. VAT and delivery costs was DKK 79 billion in % of Finns have purchased online within the last 12 months. The competition is increasing, because foreign webshops have started to enter the market. The retail in Finland is highly consolidated, and the large local retail actors have been slow in launching webshops. There is still room for new credible actors in the Finnish ebusiness. ICT and electronics industries have strong traditions in Finland. Finland is an interesting target market for Danish ICT and electronics companies due to - Market size similar to Denmark - Closeness to further markets - Strong ICT and electronics industry cluster Finland is one of the nearby markets for Danish exporters, but often overseen. The geographical closeness, cultural similarities and similar market size with Denmark are motives to explore the opportunities in Finland. The importance of IT is recognized in Finland. Finns have a positive perception of Denmark and of Danes in general. Finland s strategic position and closeness to countries such as Russia and the Baltic countries enable Danish companies to use Finland as a gateway to other interesting markets. Danish companies can for example seek after co-operation with Finnish companies already active in Russia or in the Baltic countries.

6 The powerful industry cluster evolved around mobile communication under the last decades remains strong despite the changes at Nokia. Advanced engineering know-how is present within the country. This benefits the Finnish industry, but also Danish companies can profit from this as suppliers, investors or in other types of partnerships. Finland can be an interesting target market for end products and services of Danish companies. Finland can offer opportunities for Danish companies in a very similar way as the other Nordic countries. Although the country is not huge in terms of population it still represents around a potential doubling of the market for a company that is only active in Denmark. Exports to Finland per capita is still low compared to Sweden and Norway, which indicates that there is potential for more. Tero Kajander Mobile Direct terkaj@um.dk Danmarks Statistik Dansk Ehrverv FTTH Council Europe Government ICT Centre (Valtori) Ministry of Finance (Finland) Ministry of Transport and Communications (Finland) Statistics Finland The Federation of Finnish Technology Industries The Finnish Customs The Global Information Technology Report 2012 (World Economic Forum) The Hospital District of Helsinki and Uusimaa (HUS) TNS Gallup annual ebusiness surveys (Finland)

7 The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and investment promotion agency of Denmark. The Trade Council benefits from around ninety Danish Embassies, Consulates General and Trade Commissions abroad. The Trade Council advises and assists Danish companies in their export activities and internationalisation process according to the vision: Creating Value All the Way. The work in the Trade Council follows specific procedures and quality guidelines. In this way our customers are secured the best possible quality under the varying working and market conditions at any given point of time. Ministry of Foreign Affairs of Denmark The Trade Council Mannerheimintie 8 FI Helsinki helamb@um.dk