The goal is "net zero." Not in terms of revenue, of course, but to "limit climate change and simultaneously maintain prosperity in Switzerland" through technological innovations, explains Swissmem President Martin Hirzel. The metalworking industry faces difficult times ahead.
The business situation for the Swiss tech industry (machinery, electrical and metal industries and related technology sectors) is currently still good. Both sales (+4.9%) and exports (+2.8%) increased in the first quarter of 2023 compared to the previous year.
However, the decline in orders in the first quarter (-4.8%) and the low global Purchasing Managers' Index (PMI) indicate significantly more challenging times ahead, according to experts. Furthermore, recent and anticipated interest rate hikes by major central banks are likely to further dampen economic activity and thus demand for Swiss tech products.
M. Hirzel
Furthermore, significant economic risks exist. These include the ongoing course of the war in Ukraine and the tensions between China and the USA. Companies are increasingly concerned about the subsidy competition between the USA and the EU, which is putting pressure on Switzerland as a business location. Opportunities for the tech industry arise primarily from technological innovations aimed at mitigating climate change. Swissmem therefore supports the Climate and Innovation Act (KIG), which will be put to a vote on June 18, 2023.
According to the figures, exports from the Swiss tech industry increased by 2.8 percent in the first quarter of 2023 compared to the same quarter of the previous year, reaching CHF 18.4 billion. Exports to all major markets increased. Specifically, they rose by 3.4 percent to the USA, 3.0 percent to Asia, and 2.9 percent to the EU. Export trends varied among the main product groups. While exports in mechanical engineering (6.0%), electrical engineering/electronics (5.4%), and precision instruments (1.2%) increased, exports of metals declined significantly (-5.7%). This latter figure demonstrates the extent to which companies operating in this sector are negatively impacted by the continued high energy prices and subsidies abroad.
The very strong business performance last year has apparently not led to a significant improvement in profitability for companies in the tech industry. Eighteen percent of firms still report a negative EBIT margin, and 27 percent report a positive but insufficient margin of less than 5 percent. "The increased raw material and energy prices due to the war in Ukraine, as well as ongoing problems in certain areas of the supply chains, have put significant pressure on margins," says Stefan Brupbacher, Director of Swissmem. "To preserve the companies' ability to invest and their innovative capacity, they must not be burdened with additional costs," he emphasizes. While the overall business situation is currently still good for most companies in the Swiss tech industry.
However, the differences between the sub-sectors are considerable. Energy-intensive companies, SMEs, and increasingly the mechanical engineering sector are under particular pressure. "In contrast, companies offering products and services related to the transformation of the energy supply system are enjoying strong business performance.".
Photos: Swissmem
The outlook for the coming months offers little cause for optimism. "Companies are currently living off the very strong order intake from last year," comments Stefan Brupbacher. "The decline in orders in the first quarter and the Purchasing Managers' Index (PMI), which is currently below the growth threshold in all major markets, point to a significant slowdown."
In addition to the tense geopolitical situation, climate change remains a major long-term challenge. "The tech industry provides the solutions to achieve climate goals. That's why the Swissmem board has decided to support the Climate and Innovation Act (KIG)," emphasizes Martin Hirzel. Swissmem also supports the OECD minimum tax. Both proposals will be put to a vote on June 18, 2023.
