1. Impacts of globalisation on the IT Sector
WTO Information Technology Symposium
Impacts of globalisation on the IT Sector
Growth and market dynamics in OECD countries, China and India
Graham Vickery
OECD
Wednesday, 28 March 2007

2. Overview – ongoing restructuring
Growth in the ICT supply side is sustained and expected to continue across all segments
Growth more balanced across OECD. ICT supply growth more sustainable than late 1990s. Highest in Internet-related applications and support systems
Non-OECD and Eastern Europe supply and markets growing much faster and taking larger share
Drivers are shifting from technology push => commercial applications and new uses. User-driven applications increasingly important
Challenges for ICT policy to build competitiveness

3. IT industry - developments and outlook
Recent developments
Output and markets robust in the US. Now stronger in Japan and Europe. Other Asian countries growing rapidly
ICT markets: OECD share down % => %
Non-OECD countries (incl. Russia, India and China) took 13 of top 15 market growth positions
Top 250 ICT firms (over ½ of global ICT industry)
Growth across the board. Revenue growth :
Total 250 firms 23.5%, OECD 20%, India 680%, Chinese Taipei 200%, Singapore 132%, Hong Kong-China 100%, South Korea 28%
China and India increasingly important. Their growth currently driven by foreign investment and sourcing

4. Structural change and adjustment
Structural change in the ICT sector
Late 1990s 20-30% annual OECD growth
2000s slower. Many products => commodities
Rapid growth: new / niche products, software and services, and Emerging Markets (E. Europe, Asia)
ICT R&D dynamic although signs of slow-down
Major adjustment pressures
Open source (the “Linux effect”)
Online delivery of IT services (the “Google” effect)

5. ICT sector increasing share of GDP Share of ICT valued added in business sector 1995 and 2003, percentages 2 4 6 8 10 12 14 16 18
Finland
Korea (7)
Ireland (7)
United Kingdom
United States
New Zealand (1,4,6)
Hungary
Netherlands
Sweden
OECD 25
Austria
Norway
Denmark
France
Portugal (1,7)
EU 14
Belgium (7)
Australia (2,3)
Canada
Japan (5)
Germany (5,7)
Italy
Spain
Czech Republic (5,7)
Greece (5,6,7)
Slovak Republic (5,7)
Mexico
2003
1995 %
Source: OECD Information Technology Outlook 2006, SNA compatible

6. Top 250 firms rebound Performance trends 2000-05 Current USD, index 2000 = 100
Source: OECD Information Technology Outlook 2006

7. And they increase R&D intensity Top 250 ICT firm R&D intensity by sector, R&D spending as a share of revenue, percentages
2000
2005
Software
Comms equipment
Electronics & components
IT equipment
Services
Telecommunications 2 4 6 8 10 12 14 16
Source: OECD Information Technology Outlook 2006

8. The shift to Asia World semiconductor market 1990-2005 USD billion, current prices50
100
150
200
250
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
North America
Japan
Europe
Rest of Asia
Source: OECD Information Technology Outlook 2006

9. ICT globalisation and trade
New wave of global restructuring of ICT production
Global restructuring of ICT production
ICT sector a leader in international trade and M&As 9% of business VA, 13% of goods trade, 20% of M&As
Trade in ICT goods: new highs
Trade in ICT services: growing strongly
Ireland leader in computer and information services exports (still number 3 in packaged software)
ICT FDI and M&As high: Business cycle effect
M&As: ICT and comms services continued high share
Some shift to Eastern Europe and non-OECD

10. ICT goods trade has tended to increase Share of ICT goods in total goods exports, Percentages 0% 5%
10%
15%
20%
25%
30%
35%
Korea
Hungary
Ireland
Mexico
Japan
Netherlands
Finland
United States
Czech Republic
United Kingdom
Sweden
Luxembourg
Germany
Portugal
France
Denmark
Austria
Slovak Republic
Turkey
Poland
Spain
Canada
Belgium
Italy
Switzerland
Greece
Australia
New Zealand
Norway
Iceland
1996
2004
Source: OECD Information Technology Outlook 2006

11. And grow in all segments OECD trade in ICT goods, 1996-2004
USD billion, current prices
Communication equipment
IT & related equipment
Electronic components
Audio & Video equipment
Other ICT related goods
1 800
1 600
1 400
1 200
1 000
800
600
400
200
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: OECD Information Technology Outlook 2006

12. With new trade competition ICT goods exports 1996-2004 Current USD, 1996 = 100
China
Mexico and Eastern Europe
Other OECD
1 000
900
800
700
600
500
400
300
200
100
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: OECD Information Technology Outlook 2006

13. New sources of trade – ICT-enabled services Exports of computer and information services and business services Percentage of world totals
Source: OECD Information Technology Outlook 2006

14. Exports of computer and information services and business services Billion current USD and share of GDP
Source: OECD Information Technology Outlook 2006

15. Employment potentially affected by ICT-enabled services offshoring Share of employment 1995-2004
Source: OECD Information Technology Outlook 2006

16. China and ICTs
China increasingly important in production and trade in ICT goods and services
Strategy: Host foreign ICT firms or third-party contract manufacturers (unlike Japan and Korea)
Chinese ICT firms developing rapidly despite relatively limited size and technological know-how. Investing overseas to obtain technology, brands and distribution
ICT industry must make transition from low-cost manufacturing to higher value-added products
Services high potential, but not yet

17. China biggest ICT goods exporter in 2004, and increasing Imports and exports, billion current USD
. Although OECD trade data for 2005 for ICT goods is not yet available, the Chinese Monthly Customs Statistics for January to December 2005 and the first two months of 2006 show a continued strong upward trend for ICT-related imports and exports. China’s growing ICT trade in 2005 was bolstered by its elimination of tariffs on ICT products in January 2005 following its obligations under the WTO’s Information Technology Agreement. While only complete data for 2005 will allow for thorough analysis, the adjustments in July 2005, with revaluation of the Chinese CNY by about 2% against the USD, do not seem to have significantly affected Chinese ICT exports. According to MOFCOM, China's exports of computer products in 2005 amounted to USD 104.8 billion. Exports of telecommunication in 2005 amounted to USD 72.3 billion (up by 37.8% from 2004) and exports of electronic products to USD 24.5 billion (up by 32.7% from 2004) (MOFCOM, 2006b, 2006c, 2006d).[i] This trend has continued in the first two months of 2006, led by mobile phones and ICT goods mostly manufactured with imported integrated circuits.[ii] While growth in Chinese imports of all goods was nearly halved to 11.5% from 2004 to 2005, its imports of computers, telecommunication equipment and electrical machinery continued to rise significantly (WTO, 2006).
Source: OECD Information Technology Outlook 2006

18. China imports components and exports computers, telecoms, audiovisual equipment Trade balances, billion current USD 80 60
1996
1997 40
1998 20
1999
2000
-20
2001
Audio&video
equipment
2002
-40
Other ICT goods
equipment
Telecommunication
equipment
Computer&related
2003
. Although OECD trade data for 2005 for ICT goods is not yet available, the Chinese Monthly Customs Statistics for January to December 2005 and the first two months of 2006 show a continued strong upward trend for ICT-related imports and exports. China’s growing ICT trade in 2005 was bolstered by its elimination of tariffs on ICT products in January 2005 following its obligations under the WTO’s Information Technology Agreement. While only complete data for 2005 will allow for thorough analysis, the adjustments in July 2005, with revaluation of the Chinese CNY by about 2% against the USD, do not seem to have significantly affected Chinese ICT exports. According to MOFCOM, China's exports of computer products in 2005 amounted to USD 104.8 billion. Exports of telecommunication in 2005 amounted to USD 72.3 billion (up by 37.8% from 2004) and exports of electronic products to USD 24.5 billion (up by 32.7% from 2004) (MOFCOM, 2006b, 2006c, 2006d).[i] This trend has continued in the first two months of 2006, led by mobile phones and ICT goods mostly manufactured with imported integrated circuits.[ii] While growth in Chinese imports of all goods was nearly halved to 11.5% from 2004 to 2005, its imports of computers, telecommunication equipment and electrical machinery continued to rise significantly (WTO, 2006).
-60
2004
Electronic
components
-80
2005
-100
Source: OECD Information Technology Outlook 2006

19. China deficits with Asia, surpluses everywhere else Trade balances, billion current USD
. Although OECD trade data for 2005 for ICT goods is not yet available, the Chinese Monthly Customs Statistics for January to December 2005 and the first two months of 2006 show a continued strong upward trend for ICT-related imports and exports. China’s growing ICT trade in 2005 was bolstered by its elimination of tariffs on ICT products in January 2005 following its obligations under the WTO’s Information Technology Agreement. While only complete data for 2005 will allow for thorough analysis, the adjustments in July 2005, with revaluation of the Chinese CNY by about 2% against the USD, do not seem to have significantly affected Chinese ICT exports. According to MOFCOM, China's exports of computer products in 2005 amounted to USD 104.8 billion. Exports of telecommunication in 2005 amounted to USD 72.3 billion (up by 37.8% from 2004) and exports of electronic products to USD 24.5 billion (up by 32.7% from 2004) (MOFCOM, 2006b, 2006c, 2006d).[i] This trend has continued in the first two months of 2006, led by mobile phones and ICT goods mostly manufactured with imported integrated circuits.[ii] While growth in Chinese imports of all goods was nearly halved to 11.5% from 2004 to 2005, its imports of computers, telecommunication equipment and electrical machinery continued to rise significantly (WTO, 2006).
Source: OECD Information Technology Outlook 2006

20. Rising to the challenge? IT policies for growth and competitiveness
Co-ordination and priority setting
Promoting ICT R&D and innovation
Increasing business use (and improving government efficiency via e-government)
Expanding ICT skills and employment (education)
Digital content
Enhancing network infrastructure (broadband)
ICT business environment (IPRs)