Technology Industry / Finnish Economic Outlook June 2019 7/3/2019 Technology Industries of Finland

Overcoming the Gap in GDP Will Require 3 Overcoming the Gap in GDP Will Require 3.0% Growth in Finland Annually in 2019-2023 7/3/2019 Technology Industries of Finland *) The IMF forecast for the euro area in January 2019: 1.6 in 2019, 1.7 in 2020, 1.5% in 2021, 1.5 % in 2022 and 1.4 % in 2023. Source: Macrobond, IMF, Federation of Finnish Technology Industry

The Finnish Technology Industry Is Comprised of Five Sub-Sectors 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… 7/3/2019 Technology Industries of Finland

The Finnish Technology Industry Is Comprised of Five Sub-Sectors ELEKTRONICS AND ELECTROTECHNICAL INDUSTRY Data communications equipment, electrical machinery, medical technology Turnover (2018): 15.3 billion euros Personnel (2018): 38,600 METALS INDUSTRY Steel products, non-ferrous metals, castings, metallic minerals Turnover (2018): 10.8 billion euros Personnel (2018): 16,400 MECHANICAL ENGINEERING Machinery, metal products, vehicles Turnover (2018): 31.7 billion euros Personnel (2018): 133,000 INFORMATION TECHNOLOGY IT services, applications and programming Turnover (2018): 13.0 billion euros Personnel (2018): 68,900 CONSULTING ENGINEERING Expertise for construction industry and infrastructure Turnover (2018): 6.3 billion euros Personnel (2018): 54,300 7/3/2019 Technology Industries of Finland

The Technology Industry – the Largest Export Sector in Finland 2018 Over 50 % of total exports. 320,000 employed directly in the sector, including indirect effects 660,000 people. Effect on value added totaling € 57 billion, or 28% of GDP value added. Bring to Finland € 18 billion tax revenue annually. Investments about EUR 5.0 billion annually in Finland. 70 % of private-sector R&D investment. 7/3/2019 Technology Industries of Finland

Value Added to the Economy Generated by the Technology Industry Is EUR 55 Billion, or over 28% of GDP * (2017) 3.7.2019 Teknologiateollisuus *) GDP value added was EUR 193.3 billion in 2017. Source: Economic Impact of the Technology Industry in Finland 11/2018

Technology Industry Generates nearly 650,000 Jobs in Finland (over 25% of All Employees) (2017) 10 jobs in the technology industry bring 11 jobs to the rest of the economy 3.7.2019 Teknologiateollisuus Source: Economic Impact of the Technology Industry in Finland 11/2018

Every Job in the Technology Industry Generates almost another Job in the Services (2017) 3.7.2019 Teknologiateollisuus *) Excl. the services industries in the technology industry. Source: Economic Impact of the Technology Industry in Finland 11/2018

Technology Industry Generates over 18 Billion Euros in Tax Revenue Annually in Finland (2017) 3.7.2019 Teknologiateollisuus Source: Economic Impact of the Technology Industry in Finland 11/2018

Turnover of the Technology Industry in Finland 7/3/2019 Technology Industries of Finland Source: Macrobond, Statistics Finland, Technology Industries of Finland

Export of Technology Industry Goods from Finland by Area in 2018 Total goods exports 32.5 billion euros* Central and Eastern Europe 5.06 billion € 15.5 % Western Europe 17.51 billion € 53.9 % North America 3.04 billion € 9.4 % Asia 5.04 billion € 15.5 % Middle and Central East 0.48 billion € 1.5 % South and Middle America 0.89 billion € 2.7 % Africa 0.48 billion € 1.5 % 7/3/2019 Technology Industries of Finland *) In addition to goods exports the sector exported services worth some 13 billion euros. Source: National Board of Customs, Statistics Finland

Technology, Forest and Chemical Industries Provide 81 % of Finland's Goods and Services Exports Revenue Goods and service exports: billion euros and the share of Finnish exports in 2017 7/3/2019 Technology Industries of Finland *) Service exports industry-specific data for the year 2017 are preliminary information. Source: Board of Customs, Statistics Finland (National Accounts, Foreign trade in services), Federation of Finnish Technology Industries

Turnover of the Industry and Technology Industry in Finland 7/3/2019 Technology Industries of Finland Source: Macrobond, Statistics Finland

Turnover of the Technology Industry in Finland 7/3/2019 Technology Industries of Finland Source: Macrobond, Statistics Finland

Value of New Orders in the Technology Industry* in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: I,2019 / I,2018 I,2019 / IV,2018 Export: +20 % -1 % Domestic: -2 % +3 % Combined: +14 % 0 % *) Excl. metals industry, game industry and data center companies 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation January-March 2019

Value of Order Books in the Technology Industry* in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: 31.3.2019 / 31.3.2018 31.3.2019 / 31.12.2018 Export: +17 % +7 % Domestic: +3 % +5 % Combined: +14 % +6 % *) Excl. metals industry, game industry and data center companies 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31th March 2019.

Tender Requests* Received by the Technology Industry Companies in Finland 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 *) ”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.” 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, the last questionnaire in April 2019.

Value of New Orders in the Electronics and Electrotechnical Industry in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: IV,2018 / IV,2017 IV,2018 / III,2018 Export: +16 % +12 % Domestic: -13 % 0 % Combined: +9 % +10 % 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation October-December 2018

Value of New Orders in the Electronics and Electrotechnical Industry in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: I,2019 / I,2018 I,2019 / IV,2018 Export: +18 % +4 % Domestic: +3 % -8 % Combined: +15 % +1 % 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation January-March 2019

Value of Order Books in the Electronics and Electrotechnical Industry in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: 31.3.2019 / 31.3.2018 31.3.2019 / 31.12.2018 Export: +12 % +3 % Domestic: +8 % -4 % Combined: +2 % 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31th March 2019.

Value of New Orders in the Mechanical Engineering in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: I,2019 / I,2018 I,2019 / IV,2018 Export: +23 % -4 % Domestic: +1 % +6 % Combined: +18 % -3 % 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation January-March 2019

Value of Order Books in the Mechanical Engineering in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: 31.3.2019 / 31.3.2018 31.3.2019 / 31.12.2018 Export: +18 % +8 % Domestic: +3 % +9 % Combined: +16 % 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31th March 2019.

Value of New Orders in the Consulting Engineering in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: I,2019 / I,2018 I,2019 / IV,2018 Export: -1 % -4 % Domestic: +4 % +7 % Combined: +3 % +6 % 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31th March 2019.

Value of Order Books in the Consulting Engineering in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: 31.3.2019 / 31.3.2018 31.3.2019 / 31.12.2018 Export: -17 % -4 % Domestic: +14 % +6 % Combined: +9 % +5 % 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31th March 2019.

Value of New Orders in the Information Technology* in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: I,2019 / I,2018 I,2019 / IV,2018 Combined: -11 % +15 % *) Excl. game industry and data center companies 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31th March 2019.

Value of Order Books in the Information Technology* in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Change: 31.3.2019 / 31.3.2018 31.3.2019 / 31.12.2018 Combined: -1 % +6 % *) Excl. game industry and data center companies 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 31th March 2019. Teknologiateollisuus

Technology Industry Personnel in Finland and Abroad March 31 7/3/2019 Technology Industries of Finland Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey, Macrobond

Technology Industry Personnel Recruitment in Finland by Quarters 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ labour force survey

Technology Industry Personnel in Finland by Branch March 31 7/3/2019 Technology Industries of Finland Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey, Macrobond

Technology Industry Personnel in Subsidiaries Abroad by Branch 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ labour force survey, Macrobond

Technology Industry Personnel in Subsidiaries Abroad by Country Information from year 2018 7/3/2019 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ labour force survey

Retirement of Technology Industry Personnel in Finland Individuals per year Salaried employees Blue collar employees 7/3/2019 Technology Industries of Finland Source: Wage inquiry of the Techonology Industries of Finland, Finnish Centre for Pensions, Statistics Finland

Retirement of Technology Industry Blue Collar Employees in Finland Individuals per year 7/3/2019 Technology Industries of Finland Source: Wage inquiry of the Techonology Industries of Finland, Finnish Centre for Pensions, Statistics Finland

Overview of the Situation in the Technology Industry and Outlook for the Spring 2019 - Turnover in Finland totalled some EUR 77 billion in 2018. The turnover was up 6 % year-on-year. In 2008, prior to the financial crises, the corresponding figure was EUR 86 billion. - The monetary value of new orders reported between January-March 2019 was at the same level as in the preceding quarter, but 14 higher than in the corresponding period in 2018. - At the end of March, the value of order books was 6 % higher than at the end of December, and 14 % higher than in March 2018. - The turnover of technology industry companies in the spring 2019 is expected to be higher than in the corresponding period last year. - The number of personnel employed by technology industry companies in Finland grew by over 3 per cent in January-March from the 2018 average. The industry employed some 318,500 people, up nearly 7,500 from 2018. In 2008, the industry employed a total of 326,000 people in Finland. - The recruitment activities increased again in January-March. Companies recruited a total of 12,500 new employees. 7/3/2019 Technology Industries of Finland

World Economic Outlook - Finland as a Part of Global Economy 7/3/2019 Technology Industries of Finland

GDP Growth Forecasts for 2019 Have Been Weakened in Recent Months Forecast period 7/3/2019 Technology Industries of Finland Source: Consensus Economics Teknologiateollisuus

GDP Is also Growing in Finland, but the Backlog for the Other Euro Area Countries Is up to 6.5% 7/3/2019 Technology Industries of Finland Lähde: Macrobond

Finnish Exports Backlog for the Other Euro Area Countries is Some 35% 7/3/2019 Technology Industries of Finland Source: Macrobond, Eurostat

Finland’s Economic Growth Has recently been Supported by Exports and Construction 7/3/2019 Technology Industries of Finland Source: Macrobond, Statistics Finland

Gross Domestic Product Has Grown Long in Europe and the USA, Finland is Lagging Behind 7/3/2019 Technology Industries of Finland Souce: Macrobond

In China, Growth Is Slowing Down, Brazil and Russia Are Experiencing a Weak Growth Share of global GDP in China, India, Brazil and Russia is 31 % (adjusted for PP) 7/3/2019 Technology Industries of Finland Lähde: Macrobond

Economic Growth in the Euro Area Has Slowed Down Rapidly Purchase Managers’ Index (PMI), 50 = no change from previous month 7/3/2019 Technology Industries of Finland Latest information May 2019 Source: Markit

New Orders in Manufacturing in the Euro Area Have Declined, with Small Growth in Services Purchase Managers’ Index (PMI), 50 = no change from previous month 7/3/2019 Technology Industries of Finland Latest information April 2019 Source: Markit

Industrial Production Has also Grown in Finland, but the Backlog to EU Average Is 15% 7/3/2019 Technology Industries of Finland Source: Macrobond

Industrial Production Volume in the EU Countries 7/3/2019 Technology Industries of Finland Source: Macrobond

Finland’s Industrial Production Has Lagged Behind the Competition Countries 7/3/2019 Technology Industries of Finland Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Industrial Production in China Is Mildly Increasing Purchase Managers’ Index (PMI) in manufacturing industry in China 7/3/2019 Technology Industries of Finland Latest information May 2019 Source: Markit

Industrial Production in Russia Is Not Growing Purchase Managers’ Index (PMI) in manufacturing industry in Russia 7/3/2019 Technology Industries of Finland Latest information May 2019 Source: Markit

Industrial Production in Brazil Is Not Growing Purchase Managers’ Index (PMI) in manufacturing industry in Brazil 7/3/2019 Technology Industries of Finland Latest information May 2019 Source: Markit

Industrial Production Growth in the USA Is Weakening Purchase Managers’ Index (PMI) in manufacturing industry 50 = no change from previous month 7/3/2019 Technology Industries of Finland Source: Macrobond

Political Uncertainty Destabilises Global Economic Stability - Exchange Rates Are Changing a Lot 7/3/2019 Technology Industries of Finland Source: Macrobond

Fixed Investment Growth in Brazil and Russia Has Stopped 7/3/2019 Technology Industries of Finland Souce: Macrobond

World Trade Is Going Down to Lower Level Export volume 7/3/2019 Technology Industries of Finland Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Imports to China Have Decreased from Several Countries 7/3/2019 Technology Industries of Finland Source: Macrobond

EU Exports to Russia Have Recovered only Slightly 7/3/2019 Technology Industries of Finland Source: Macrobond

Russia’s Share* of Technology Industry Exports from Finland Has Lowered to Below 5 Per Cent % 7/3/2019 Technology Industries of Finland *) Soviet Union up to 1991 Source: Finnish Customs

The World Economy Is Projected to Grow by 3.3% in 2019 GDP growth 2019 / 2018, % India China Average growth: +3,3 % Rest of Asia Rest of Latin America Middle East and Africa Rest of Eastern Europe Mexico Brazil Russia North America Western Europe Japan The width of the bar indicates the share of global GDP in 2018 (adjusted for purchasing power parity), % 7/3/2019 Technology Industries of Finland Source: IMF (January 2019)

Demand in the Finnish Technology Industry Export Market is Expected to Grow by 2.5 % in 2019 GDP growth 2019 / 2018, % India Rest of Latin America China Average growth: +2,5 % Mexico Middle East and Africa Russia Rest of Eastern Europe Brazil North America Western Europe Japan The width of the bar indicates the export share of technology industry from Finland in 2018, % 7/3/2019 Technology Industries of Finland Source: IMF (January 2019), Finnish Customs

Finland’s Economic Growth Relies on Exports and Investments 7/3/2019 Technology Industries of Finland

Finnish Exports Have Lagged Behind the Competitor Countries 7/3/2019 Technology Industries of Finland Source: Macrobond, Eurostat

The Additional Debt of the State and Municipalities Has Stopped and the Overall Tax Rate Has Fallen 7/3/2019 Technology Industries of Finland Source: Macrobond, Eurostat

Unlike the Competitor Countries, in Finland Business Investment Is Still Below the Level in 2008 7/3/2019 Technology Industries of Finland Source: OECD, Economic Outlook (November 2018)

Investments in the Manufacturing and Technology Industry in Finland Do Not Promise Long-Term Strong Growth Production and R&D investments in Finland, million euros, at fixed 2017 prices 7/3/2019 Technology Industries of Finland Source: Statistics Finland, (National Accounts), The Confederation of Finnish Industries* investment survey (January 2019)

Industrial Productive and R&D Investment in Finland Have Not Yet Reached the 2007-2008 Levels Billion euros, at fixed 2010 prices 7/3/2019 Technology Industries of Finland *) Including software investments. Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey January 2019

Total Industry Investment in Finland Are Below the Consumption of Fixed Capital Billion euros, at fixed 2010 prices 7/3/2019 Technology Industries of Finland *) Including software investments. Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey January 2019

Industrial Productive Investment in Finland Have Reached the Level of Consumption of Productive Capital Billion euros, at fixed 2010 prices 7/3/2019 Technology Industries of Finland Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey January 2019

Industrial Production Capital in Finland Has Disappeared Significantly, Especially after 2008 Billion euros, at fixed 2010 prices 7/3/2019 Technology Industries of Finland Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey January 2019

Industrial Fixed (Tangible) Investment Growth in Finland Has Lagged behind that of Competitors Billion euros, at fixed 2010 prices, index 2005=100 7/3/2019 Technology Industries of Finland Source: Eurostat (National Accounts), Confederation of Finnish Industries’ investment survey, January 2019

Investment Rate in Industrial Fixed Investments Is at a Low Level in Finland Tangible investments / value added, % 7/3/2019 Technology Industries of Finland Source: Eurostat (National Accounts), Confederation of Finnish Industries’ investment survey, January 2019

Industrial Intangible Investments Industrial Intangible Investments * in Finland Have almost Halved since 2005 Billion euros, at fixed 2010 prices, index 2005=100 7/3/2019 Technology Industries of Finland *) Intangible investments include research and development and software investments etc. Source: Eurostat (National Accounts), Confederation of Finnish Industries’ investment survey, January 2019

Investment Rate of Industrial Intangible Investments Investment Rate of Industrial Intangible Investments* Has Dropped Significantly in Finland Intangible investments / value added, % 7/3/2019 Technology Industries of Finland *) Intangible investments include research and development and software investments. Source: Eurostat (National Accounts), Confederation of Finnish Industries’ investment survey, January 2019

Investments and productivity* are Decisive for Finland’s Success 7/3/2019 Technology Industries of Finland *) Productivity is measured as real value added per hours worked. When productivity grows (the curve rises) value added grows more than hours worked. Source: Statistics Finland

In Industrial Productivity Development, Finland Has a Gap of 17% Compared to EU Average, 11% Compared to Sweden and 9% to Germany Value added in manufacturing industry at fixed prices / hours worked 2008=100 7/3/2019 Technology Industries of Finland Latest information October-December 2018. Source: Eurostat: Quarterly National Accounts

In GDP Productivity Development, Finland Has a Gap of 6% Compared to EU Average and Some 3% to Sweden and Germany GDP at fixed prices / hours worked 2008=100 7/3/2019 Technology Industries of Finland Latest information October-December 2018. Source: Eurostat: Quarterly National Accounts

Investment Rate of Companies Is Lower in Finland than in Other Small European Countries Corporate fixed investment compared to value added, % (excl. financial sector) 7/3/2019 Technology Industries of Finland Lates information October-December 2018. Source: Eurostat

Finland’s Price and Cost Competitiveness vis-à-vis the Euro Countries Is still to be Improved Unit labour costs in the whole economy = labour costs / productivity, including the influence of effective exchange rates Finland’s price and cost competitiveness declines Finland’s price and cost competitiveness improves 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 7/3/2019 Technology Industries 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 October-December 2018. Source: European Central Bank

Technology Industries of Finland 7/3/2019 Technology Industries of Finland

The Federation’s Member Companies 2017 250–499 employees Number of enterprises / 1 587 Number of personnel / 175 974 1–249 employees 500–999 employees 1000– employees 7/3/2019 Technology Industries of Finland

The Federation’s SME Member Companies 2017 Number of enterprises / 1 439 Number of personnel / 68 763 1–19 employees 20–49 employees 50–99 employees 100–249 employees 7/3/2019 Technology Industries of Finland

Operating Profit in the Member Companies of Technology Industries of Finland in 2017 Operating profit-% = operating result / turnover * 100 (before taxes and financial income and expenses) Companies in random order 7/3/2019 Technology Industries of Finland Source: Statistics Finland

Net Profit in the Member Companies of Technology Industries of Finland in 2017 Net profit -% = net profit / turnover * 100 (after tax and financial income and expenses) Good (21 %) Satisfactory (23 %) Weak (33 %) Unprofitable (23 %) Companies in random order 7/3/2019 Technology Industries of Finland Source: Statistics Finland

Return on Assets in the Member Companies of Technology Industries of Finland in 2017 Return on assets -% = (net income + financial expenses + taxes) / (capital invested in the financial year) * 100 Companies in random order 7/3/2019 Technology Industries of Finland Source: Statistics Finland

Equity Ratio in the Member Companies of Technology Industries of Finland in 2017 Equity ratio -% = (total equity + total appropriations accrued) / adjusted balance sheet * 100 Companies in random order 7/3/2019 Technology Industries of Finland Source: Statistics Finland