Tech industry: downturn continues

Declining sales trends continued in the Swiss tech industry in the third quarter 2024, with sales down 2.4% versus the prior-year period. Viewed over the full nine months of the year, the decline in sales amounts to 4.2%. New orders increased by 6.7% in the third quarter of this year compared to the same period of 2023. At first glance, this would appear to suggest a trend reversal. This is, however, not the case, with this increase purely the result of a statistical effect, given that the prior-year period was exceptionally poor. In actual fact, new orders fell by a total of 0.3% year on year in the first nine months of 2024. Capacity utilization likewise continued to see a downtrend in the third quarter of this year. At 82.9%, it was well below its long-term mean of 86.2%.  

Sharp decrease in exports to Germany  

The third quarter brought a 2.5% drop in goods exports for the tech industry compared with the same quarter in 2023. Viewed across all three quarters of 2024, exports fell 3.6% year on year, coming in at CHF 50.8 billion. Germany is giving major cause for concern. The Swiss tech industry saw exports to its biggest sales market fall by 8.4% over the first nine months of this year. Likewise down were goods exports to Italy (-7.2%), Austria (-5.0%) and France (-1.1%). In contrast, goods exports to the USA and Asia were up 3.1% and 0.6%, respectively, in the first nine months of the year. The most dynamic sales market continues to be India. In the period from January to September 2024, export volumes increased by 11.0%, with the positive momentum accelerating even further in the third quarter (+22.4%). These increases do not offset the weakness in the other markets, however. A look at the individual product groups shows that only products in the electrical engineering/electronics segment recorded export growth of 1.0% in the first nine months of 2024. Exports of all other product groups declined (metals -6.4%, mechanical engineering -4.6%, precision instruments -1.9%).

A look ahead gives little grounds for optimism

Switzerland’s tech industry remains under pressure. The primary factor behind this situation is economic weakness in the EU and, in particular, Germany. However, domestic demand is at a weak level, too. The difficult situation is increasingly threatening to affect employment in the tech industry. “Our advisory services on job reductions and short-time working have risen sharply over the past few weeks” says Swissmem Director Stefan Brupbacher. “Up to now, only a small number of companies have reduced their headcount because they want to retain their skilled workers. However, I fear that there will now be an increase in short-time working and redundancies.”

Further developments are fraught with uncertainty, and the mood within the companies has accordingly become much gloomier in the last few months. The latest survey of Swissmem’s member companies shows that the proportion of companies expecting orders from abroad to decline over the next twelve months has risen from 25% to 33%. Only 28% of company owners are anticipating a rise in the number of orders. Of those surveyed, 39% thought that the level of orders would remain the same. The figures for the Purchasing Managers’ Index (PMI), one of the key indicators, also leave little room for optimism and are very low in some areas in most export markets.  

“The best we can hope for in the next year is for the situation to stabilize”, comments Stefan Brupbacher. “On the other hand, should there be a trade war between the USA, China and the EU, this would further impact the Swiss tech industry, which exports 80% of its products”. Therein also lies Swissmem’s biggest worry:  If the new US President implements his planned customs policy (tariffs of 60% for China, and 10% to 20% for the rest of the world), this could potentially create dramatic consequences for the global economy. So it is all the more important for Switzerland – in the context of its negotiations on the Bilaterals III agreements – to convince the EU to treat Switzerland as an EEA state and to exclude it from any such new tariffs.  

India, USA and Mercosur

The only growth momentum expected by Swissmem’s member companies is from India and the USA. In view of the huge tariff increases being threatened by the new US President, the government must do all it can to make it easier for the Swiss export sector to access key markets. “The free trade agreement with India must be ratified as swiftly as possible”, urges Swissmem’s President Martin Hirzel. “It will open up new, substantial market opportunities in India’s dynamic growth market, especially for SMEs. The negotiations for a free trade agreement with the Mercosur countries now also need to be concluded, and discussions with the USA resumed. And last but not least, I am hoping for a beneficial conclusion to the negotiations on the Bilaterals III agreements”, adds Martin Hirzel.