Tech industry: Still no recovery; major risks

In 2024, sales in the Swiss tech industry fell by 4.6 percent year-on-year. The fourth quarter saw a drop of 5.7 percent compared with the same period in 2023. New orders stagnated at 2023 levels (+0.1 percent). Nevertheless, they increased slightly on the previous year in the fourth quarter (+1.3 percent). Capacity utilization reached 81.3 percent in the fourth quarter of 2024, substantially below its long-term average of 86.2 percent. The marked increase in short-time working reflects the declining capacity utilization within the tech industry. Headcount in the fourth quarter of 2024 totalled 329,000, 0.5 percent less than in the previous quarter.

Exports still falling

In 2024, goods exports by the technology industry fell by 3.1 percent year-on-year to CHF 68.3 billion. In the main product groups, metals exports declined by 6.2 percent, mechanical engineering by 4.9 percent, and precision instruments by 2.1 percent. The only segment to see slight growth in exports was electrical engineering/electronics (+1.3 percent). India (+9.4 percent) and the USA (+3.9 percent) were the only major markets to witness increasing exports. However, these increases were insufficient to offset the decrease in exports to the EU (-5.6 percent). Exports to Asia stagnated (-0.2 percent).

Major damage potential from blanket US tariffs

At present there are virtually no indications of a recovery in Switzerland's tech industry. The various trade conflicts are causing major uncertainty, and the global investment climate remains poor. The tech industry's development going forward depends to a large extent on how heavily Switzerland is affected by escalating trade conflicts. Swissmem Director Stefan Brupbacher is concerned: "The worst case scenario would be the EU responding in kind to blanket US tariffs and treating Switzerland as a third-party country for the purpose of this response. Such a step would affect up to 70 percent of the Swiss tech industry's exports, and the fallout would be dramatic". Companies expect growth stimuli to come from India, China and, above all, the USA. Should the USA ramp up its tariffs dramatically, such stimuli would be nipped in the bud.

Smart, pragmatic politics needed

In terms of foreign policy, Swiss diplomats need to pull out all the stops, persuading the US government that Switzerland is a fair-dealing partner. Removing industrial tariffs would be a valuable trump card to have up the country's sleeve. Looking to the EU, diplomats must do everything they can to prevent Switzerland being treated as a third-party state in reprisals. Furthermore, the Confederation must step up its efforts on the free trade front. "It's a race", Stefan Brupbacher emphasizes. "And the EU has overtaken us when it comes to Mercosur. By concluding a free trade agreement with India, though, Switzerland has a strategic advantage. It now needs to exploit that advantage by ratifying the agreement quickly. The industry expects the SP, Greens and NGOs to forego a referendum. It would benefit no one if the agreement fails".

Difficult situations increase the importance of stable long-term framework conditions. The "Bilaterals III" package would ensure such conditions exist between Switzerland and its most important trading partner. If the country succeeds in concluding the package, it should be protected against EU reprisals. "In a world in which unpredictable, power politics-motivated actions by the great powers are the new normal, non-discriminatory access to the EU single market would provide reliable economic security", says Swissmem President Martin Hirzel.

In terms of domestic policy, Switzerland must avoid silly economic policy mistakes. These include the Young Socialists' "For a future" initiative and the Responsible Business Initiative 2.0. Martin Hirzel gives an emphatic warning: "The Young Socialists' expropriation initiative affects one third of Swissmem members. In view of the dubious legality of the retroactivity clause, many owners are investigating the possibility of moving away. It's something that strikes at the very heart of our industry". Swissmem is working hard to have parliament declare the retroactivity clause void. That is the only thing that would prevent companies moving away in advance. The Responsible Business Initiative also runs contrary to international trends in sustainability regulations. Even the EU has acknowledged that it has strayed into micromanagement. 

There is also an urgent need for action on the security policy front. With the USA gradually withdrawing from its protective role, Europe needs to be able to defend itself. The war in Ukraine shows that it can only do so if it has its own defence industry. Switzerland is committed to armed neutrality. To fulfil this commitment and strengthen its own security, it needs an effective defence industry. Extremely restrictive export requirements have driven the industry out of the country in recent years. Swissmem expects the new Chairman of the DDPS to work towards better framework conditions for Switzerland's security and armaments industry as a matter of priority, particularly as regards the export conditions in the War Materiel Act. The Swiss defence industry cannot survive without exports, and Switzerland cannot guarantee its security without a defence industry of its own.   

The world is going through turbulent times. But each situation brings opportunities with it. Switzerland has to use smart, pragmatic domestic, foreign and security policies to exploit them. Then it will be possible to contain potential damage – and this will benefit everyone in the country.