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Positive outlook for Finland's technology industries

In common with their counterparts in other EU countries, Finland's technology industries - the electronics and electrotechnical industry, mechanical engineering, and the metal industry - have faced tough times over the last few years. There are now signs of a return to growth, however, and Finnish companies are well-placed to take advantage of this.
Technology Industries of Finland

The late 1990s were characterised by vigorous growth, backed by a strong upswing in the global economy. Largely led by the US, this boom was based on ICT, and generated excessively optimistic expectations about the 'new economy'. With the dawn of the new millennium, however, markets stopped expanding, with the result that exchange rates shifted unfavourably and companies lost their enthusiasm for new investments.

Excessive optimism was replaced by recession, and this quickly reached Western Europe and Finland.

Finland's technology companies were faced with falling demand. Exports declined by around 10% between 2000 and 2003. An upturn only really began to make itself felt in the Finnish technology sector in 2004, although employment is still trending downwards.

Graph 6. Areas of Applications - Potential Multisectoral Clusters.

Positive signals

Even during the downturn, there have been exceptions to the general decline, however, and a few product categories have achieved export growth. Areas that have bucked the trend include medical equipment, measurement equipment, valves, bearings and gears, ventilation equipment, and agricultural and forest machinery.

Positive signals strengthened during spring and summer 2004, indicating that a gradual improvement is now taking place in the main areas of the Finnish technology sector. The fact that the US economy is back on a growth track is a positive sign, and engineering industries are steadily recovering.

Globalisation is changing the economic structures of many countries and industries in today's world. Cyclical fluctuations, nevertheless, remain a natural part of the market economy, and the ability to cope with them is one of the key issues of survival for both companies and entire industries. The focus in both should be on long-term success rather than quick profits.

Very dynamic

Finnish technology industries are small in size, as are the country's population base and overall economy. When it comes to competence and specialisation, these industries possess great strength and potential.

Companies in the sector provide 200,000 jobs in Finland, and about 150,000 outside Finland. The electronics and electrotechnical industry accounts for about half of the sector's total output ?one of the highest percentages in Europe.

The largest Finnish companies are very international, and despite their somewhat narrow domestic market base, are among the leading players in their fields ? and Finnish companies have achieved impressive global market shares in a number of product categories.

Key strengths

Moving production offshore is a growing trend in traditional industries, and is also impacting Finnish technology industries as well.

New competitors on the world stage are trying to gain market share, based on rapidly growing markets, lower labour costs, and higher flexibility compared to the industrialised countries of the EU and North America. This is a very challenging situation, and calls for a lot of effort by companies to maintain their competitiveness. Taking full advantage of merging markets is particularly important.

Finnish technology companies are aware of these demands, and confident that they can continue to succeed, however, based on their key strengths. These include solid technological competence, high productivity, good networking abilities, and international diversification, combined with world-class know-how in niche areas.

Over the next few years, one of the factors working in Finland's favour will be the country's focus on the electronics, electrotechnical, and instruments industries.

These sectors have great potential in new, highly specialised system applications, such as welfare equipment, transport equipment, traffic infrastructure, environmental protection in construction and process automation, networking in industrial infrastructure systems, entertainment media, and logistics-related electronics.

Finnish companies are committed to working hard to be at the forefront of these developments.

Global market share of selected Finnish products.

Mechanical engineering industry   
Forest machinery    45%
Agricultural tractors (>120 hp)    9%
Pulp and paper machines    40%
Diesel and gas engines for ships and power plants    25%
Lifts and escalators    9%
Cranes and hoists    18%
Special-purpose ships    25%
Plywood machinery    17%
Glass manufacturing plants    30%
Sheet metal fabrication equipments    20-50%

Electronics industry 
Mobile phones 38%     38%
Meteorological radiosondes 67%     67%
Electroluminescent displays 60%     60%
Micro Electro Mechanical System (MEMS) sensors in cars 6%    6%
Low-g acceleration sensors 50%    50%
Heart rate monitors 48%    48%
Mammography equipment 15%    15%
Dental extraoral imaging     30%

These tables show the global market share of Finnish companies in selected product categories in 2003. Figures are based on company estimates and include output from overseas subsidiaries.

> Timo Airaksinen
(Published in High Technology Finland )