Opportunities and risks for the Swiss MEM industries

Transcription

1 Opportunities and risks for the Swiss MEM industries Romanian Business Forum, Zurich, 21 October 2015 Hans Hess President Swissmem 1 Wirtschaftsforum Schweiz Rumänien

2 Agenda 1. Key figures for the Swiss MEM industries 2. Challenges for the MEM industries 3. Opportunities for the Swiss export industry 2 Wirtschaftsforum Schweiz Rumänien

3 1. Key figures for the Swiss MEM industries 3 Wirtschaftsforum Schweiz Rumänien

4 Key figures of the MEM Industry, 2014 Total sales: CHF 85 billion Exports: CHF 66.2 billion (over 1/3 of all Swiss exports) Export share: 78% (of which around 60% to the EU) Share of GDP: 9% Workforce: 333,000 in Switzerland (incl. watch industry) Apprenticeships: 24,000 in Switzerland Structure: SME-based (over 95% of businesses) 4 Wirtschaftsforum Schweiz Rumänien

5 Machine tools - GF Machining Solutions 5 Wirtschaftsforum Schweiz Rumänien

6 Precision tools - Alesa, Seengen 6 Wirtschaftsforum Schweiz Rumänien

7 High power semiconductors - ABB, Lenzburg 7 Wirtschaftsforum Schweiz Rumänien

8 Precision castings - Wolfensberger, Bauma 8 Wirtschaftsforum Schweiz Rumänien

9 Rail vehicles - Stadler Rail, Bussnang 9 Wirtschaftsforum Schweiz Rumänien

10 Strong performance by the Swiss industry A 2012 report by think tank Avenir Suisse declares: "Switzerland is performing brilliantly as an industrial power" Industrial production per capita in Switzerland stands at $124,000/a (2x USA, 8x China) Thanks to high-end goods and automation Many Swiss industrial companies are global market leaders in their segments Swiss industry makes substantial contributions to key societal issues: energy, climate, food, mobility, etc. The MEM industries are fundamentally sound and strong, but need to adapt constantly 10 Wirtschaftsforum Schweiz Rumänien

11 Opportunities and risks for an export industry Customers: over 100x larger customer base worldwide than in our home market Of the 340,000 jobs in the MEM industries, around 80% (270,000) work for foreign customers MEM exports have a highly favourable impact on Switzerland's GDP The Swiss economy increasingly needs to see itself as one part of the world economy as a whole Industry must learn to deal with sharp global economic cycles 11 Wirtschaftsforum Schweiz Rumänien

12 Exports from the MEM industry in 2014 Exports: CHF 66.2 billion Export countries: 26.3% to Germany (+0.9% in 2014) 11.3% to the USA (+7.8% in 2014) 6.0% to France (+0.1% in 2014) 5.7% to China (+4.9% in 2014) 4.6% to Italy (-9.0% in 2014) Central Eastern Europe: 1.5% to Poland 1.2% to the Czech Republic 0.9% to Hungary 0.4% to Slovakia 0.4% to Romania BRICS: 0.9% BRA, 1.4% RUS, 1.4% IND, 0.4% RSA 12 Wirtschaftsforum Schweiz Rumänien

13 Doing business abroad is not without risk Other countries have other ways of doing things Laws and regulations Standards and specifications Customs and business practices Language/culture (misunderstandings) Currency/interest rate/inflation issues Payment practices Requirements concerning products Service & Support expectations... A certain degree of support is needed for SMEs (associations, consultants, banks, government) 13 Wirtschaftsforum Schweiz Rumänien

14 2. Challenges for the MEM industries 14 Wirtschaftsforum Schweiz Rumänien

15 Challenges for the MEM industries High wages, prices and unit labour costs Strong franc (15% over-valued versus the euro) New cost increase (15%) lowers margins Many efforts from recent years nullified Declining margins (to the point of op. losses) Weakening primary market Europe (DE?) Competition increasingly global (at home & abroad) Shortage of skilled labout further escalated Framework conditions unclear (bilateral approach? inheritance tax? tax reform III? energy strategy 2050? etc.) All stakeholders must act now to tackle these challenges 15 Wirtschaftsforum Schweiz Rumänien

16 Surge in Swiss franc overvaluation Euro exchange rate After scrapping of minimum exchange rate: surge in overvaluation of CHF to Euro to over 15% Purchasing power parity With minimum exchange rate: overvaluation of CHF to Euro around 6-7% 16 Wirtschaftsforum Schweiz Rumänien

17 1% 4% 4% 7% 8% 11% 10% 10% 12% 12% 12% 13% 13% 14% 14% 16% 19% 21% Expected decline in margins in percentage points 52% (earlier 55%) of companies expect margins to fall by 4-15 percentage points 20% 10% 0% N (Feb.): 169 N (Juni): >15.0 no response 17 Wirtschaftsforum Schweiz Rumänien

18 3. Opportunities for the Swiss export industry 18 Wirtschaftsforum Schweiz Rumänien

19 Innovation is the key to success For 3 years now, Switzerland has been the most innovative country in the world Innovation is the key to long-term success for the export industry How can this permanent innovative capacity be safeguarded? Through our businesses (process, culture) Through our universities & universities of applied sciences Through knowledge and technology transfer (Empa, CSEM, inspire) But in Switzerland as elsewhere, there is still huge potential for improvement in knowledge and technology transfer (CTI) 19 Wirtschaftsforum Schweiz Rumänien

20 Efficiency gains through automation High wage costs must be offset by high productivity Automation of production allows competitive costs Modern machines have a great deal of potential to improve such factors as Speed Flexibility Cost efficiency Make continuing and ongoing use of technological progress and innovation Excellent service & support worldwide increases productivity 20 Wirtschaftsforum Schweiz Rumänien

21 Using more global value chains Value chains are becoming more global (use international advantages) Proximity to global customers is becoming ever more important (need, speed, flexibility) Protectionism and high import duties also mean a local presence is essential Strategy: to make specific use of different countries strengths (to use globalization as an opportunity in SMEs too) The traditional export model is adapting and becoming a global network Swiss SMEs also need to become more and more globalized 21 Wirtschaftsforum Schweiz Rumänien

22 Cutting costs through excellence in procurement The importance of procurement and purchasing is often underestimated Purchasing has a major influence on profit margins and capital tie-up Suppliers have a lot of knowledge that can help save money use it! Instead of "bleeding each other dry", start working together to optimize costs Natural hedging in purchasing ($, ) reduces currency impact on margins Excellence in procurement is key Suppliers are valuable partners for cost reduction programmes 22 Wirtschaftsforum Schweiz Rumänien

23 Significance of Central Eastern Europe for the MEM industries Varying economic developments As a potential sales market Part of the EU single market As an attractive procurement market (lowcost suppliers) As an attractive manufacturing base Low production costs Workers who are keen to learn Geographically close to Switzerland 23 Wirtschaftsforum Schweiz Rumänien

24 Wages in the manufacturing sector N 49,54 CH 40,87 B 39, Switzerland S DK 36, D West 36, F 34, D 34, NL 32, FIN 31, A 31, L 30, I 25, J 25, USA 24, UK 23, E 21, GR 16, CZ 9,32 H 7,02 PL 6,46 RO 3,5 BG 2, Central Eastern Europe Stundenlohn Personalzusatzkosten Source: Institut der deutschen Wirtschaft High wage costs are putting industry jobs at risk 24 Wirtschaftsforum Schweiz Rumänien

25 Swiss MEM industries in Romania Best in class MEM companies with a foothold in Romania Examples: Precicast SA, Novazzano, Ticino Postcasting unit in Arad, Greenfield, 4000m 2, 70 employees Schurter AG, Lucerne Manufacturing of electronic components and assemblies in Ilfov, 3150m 2, 190 employees 25 Wirtschaftsforum Schweiz Rumänien

26 PRECICAST SA Extended footprint in Romania 26 Wirtschaftsforum Schweiz Rumänien

27 PRECICAST today Precicast was founded in 1970 and is a leading European investment casting company. The plant covers an area of 16,000 m2 Alloys: - Nickel based - Cobalt based - Alloyed & unalloyed steels 27 Wirtschaftsforum Schweiz Rumänien Number of employees: ~ 450 Sales volume : ~ CHF 100 M Quality standard: EN ISO9001 Structures: - Equiaxed - Directional solid - Single crystal ISO NADCAP Markets: - IGT, Aeronautical/Aerospace - Medical, General Mechanics - Turbochargers

28 Development of the competitive position Post casting unit in Romania (Arad) Goals of the initiative to open a post casting unit in Arad Increase competitiveness reduce costs Create a supplementary and redundant capacity unit for post casting activities with Novazzano Align with the strategy and Why Romania needs? of major customers Language: Romanian is the only latin language in Eastern Europe (locals can understand percent of the Italian language source: Lexiophiles) Geographical location (air and road transport) 28 Wirtschaftsforum Schweiz Rumänien Precicast SA property 4000 m2

29 Excellence in post casting activities EffeTre (Dec 2014) 29 Wirtschaftsforum Schweiz Rumänien

30 Excellence in post casting activities ISO certification Ongoing Expected by: June 2016 Health & Safety System certification 30 Wirtschaftsforum Schweiz Rumänien

31 SCHURTER Electronic Components S.R.L in Romania Advantages, Experience and Improvements

32 Advantages for Schurter in Romania Good cost/quality ratio Geographical location: not in the center of Europe, but still well connected Availability of a young workforce Italian language is familiar, English is widespread Additional advantages of the Bucharest region: Good education level Good connections (international airport just 30 minutes away) Good infrastructure: hotels, support companies (IT, engineering, finance), culture 32 Wirtschaftsforum Schweiz Rumänien

33 Eight years of experience in Romania Willingness to cooperate is high Reliable workers are available Outside the cities, major cultural differences compared to Switzerland Not easy for a Swiss company to manage initially due to corruption and bureaucracy -> Local management is needed Some of the labour laws are still incomprehensible to Schurter Social security is not as well established as in Switzerland 33 Wirtschaftsforum Schweiz Rumänien

34 Improvement needs Infrastructure: few highways deficient public transport Extensive bureaucracy in the public sector Local authorities were initially hesitant to enter into cooperation with foreign companies Corruption has almost disappeared, but attempts are still present The situation has improved in the last few years. After 8 years, Schurter AG is still convinced that Romania was the right choice 34 Wirtschaftsforum Schweiz Rumänien

35 Swissmem stands up for Swiss industry! 35 Wirtschaftsforum Schweiz Rumänien