Electrical and Digital Industry Facing Slight Growth Dip

 

After a robust business performance in 2023, the Electro and Digital Industry Association (ZVEI e.V.), based in Frankfurt am Main/Hesse, expects a 2% decline in production for 2024. According to the association, companies are planning higher investments despite geopolitical concerns.

“2023 has been quite decent for the German electrical and digital industry overall”, Dr Gunther Kegel, President of ZVEI, evaluates the past year during the ZVEI annual kick-off press conference. "For the third consecutive time, real, price-adjusted production increased, by 1.4% based on figures until November." This has shown the industry's resilience in a challenging environment. "However, it's also true that companies were able to work through historically high order backlogs when new orders started declining from the second quarter onwards." The nominal revenues of the industry reached a record high of 242 billion euros last year (+8%).

Once again, the heterogeneous industry showed varied developments. The highest production growth was seen in batteries (+7%), followed by electronic components (+6%), energy technology (+4%) and automation (+3%). Consumer goods, on the other hand, experienced a significant decline (-13%). "It's gratifying that employment could be further increased," says Kegel. In Germany alone, the industry employed 910,000 people (+12,000 compared to 2022).

EU ist the most important export market

The electrical and digital industry is globally positioned like few others. In 2023, exports (including re-exports) increased by four percent to 256 billion euros, with more than half (133 billion euros) remaining in the European Union. "Given growing geopolitical tensions, the European domestic market is becoming increasingly important," explains the ZVEI President. "If the EU wants to maintain an independent role between the USA and China, it must consistently focus the domestic market on growth and refrain from industry-foreign regulations like the EU Supply Chain Act." The next EU Commission must stop the regulatory tsunami and bureaucracy that weakens the competitiveness of companies.

Considering the current challenging economic environment with inflation, relatively high interest rates, and elevated energy prices, ZVEI is cautious for 2024. Dr Kegel states, "The industry is facing a growth downturn. On an annual basis, we expect real production to decrease by two percent."

That companies in the electrical and digital industry continue to firmly support the industrial location of Germany and Europe is evident in a recent ZVEI member survey. Four out of five companies state a preference for investing in their own country. For more than half, Europe, and equally, China are attractive investment locations. Overall, 60% of companies plan to increase their investment activity worldwide, despite all firms assessing the current geopolitical and political situation as uncertain. "Companies want to continue seizing the opportunities that arise in this phase of industrial transformation," explains Kegel, emphasizing that the megatrends of electrification, digitalisation, and automation remain intact. "As the only major industry in manufacturing, our real production is higher today than before Corona."

Strengthening key technologies in ecosystems

The expenses of the electrical and digital industry for research and development (22.1 billion euros) and investments (9 billion euros) are at a record level and above the pre-Corona level. Many of the over 13,000 patents filed annually contribute to the three megatrends. "Our industry is well-positioned in patents for green technologies but faces increasing competition from China," says Wolfgang Weber, CEO of ZVEI. "In terms of industrial policy, 'Green Tech' is highly esteemed and strongly supported by the state in China."

High spendings on research and development

The Industrial Association ZVEI, based in Frankfurt am Main/Hesse, advocates for the common interests of the electrical and digital industry in Germany and internationally. It represents an industry with around 242 billion euros in revenue in 2023 and more than 910,000 employees domestically. The association has more than 1,100 member companies, which employ around 90% of the workforce in the electrical and digital industry in Germany. Members range from global players to medium-sized and family-owned enterprises.

About one-third of the revenue of the German electrical and digital industry comes from innovative products and systems. Every third innovation in manufacturing is based on solutions from both sectors. The basis for this innovation is the high spending on research and development, amounting to around 20 billion euros annually, with over six billion euros allocated to investments. (bm)

Caption: Industry Revenue 2018 to 2023 (in bn. €)/Source: Electro and Digital Industry Association, Frankfurt am Main