The Swiss technology sector is grappling with significant challenges as it confronts declining sales, exports, and orders. However, despite these hurdles, signs of stabilization in the market offer hope for recovery in 2024.
Challenges in the Swiss Tech Industry
The Swiss technology sector, encompassing mechanical, electrical, and metal industries (MEM), is currently navigating a difficult environment. According to the umbrella organization Swissmem, sales among industry member companies declined by 5.4% in the first quarter of 2024, with orders falling by 2.3% compared to the same period last year. Exports of goods saw a sharp decrease, dropping by 8.5%.
While large companies have been hit hardest, smaller companies (SMEs) experienced a more modest decline in sales. For the first time since the third quarter of 2021, the production capacity utilization of Swiss tech companies stood at 85.5%, below the long-term average of 86.2%.
Signs of Stabilization Amid the Downturn
Despite these challenges, Swissmem has reported some positive developments. Orders from abroad have stabilized, and domestic orders have even shown improvement, suggesting that the downturn may reach its bottom in 2024.
However, geopolitical uncertainties and increasing protectionism continue to pose risks to the global economy, particularly for the Swiss tech industry, which exports around 80% of its goods. The ongoing trade war between the USA and China remains a key threat to global trade.
Export Declines and Market-Specific Challenges
In the first quarter of 2024, Swiss exports fell in almost all markets, contributing to an overall decline of 8.5%. The tech industry exported goods worth 16.9 billion francs, with exports to Europe seeing the steepest drop at nearly 12%. Exports to the USA and Asia also declined by 2.6% and 0.9%, respectively.
Germany, the largest single market for Swiss tech goods, experienced a 12% decrease in exports. However, there was some positive news from Asia, as exports to China and India increased by over 7% and 8%, respectively.
Global Market Indicators and Future Outlook
The Purchasing Managers’ Indices (PMI) for key markets such as the USA and Europe remain below the growth threshold, signaling a tough business environment for the global tech industry. However, Swissmem notes that fewer companies now expect further declines in orders from abroad. Only 28% of Swiss tech companies expect an increase in incoming orders from abroad in the next twelve months, a slight improvement from the 37% who were pessimistic about future orders last year.
Conclusion
While the Swiss tech industry faces challenging times with declining sales and exports, there are signs that the situation could stabilize in 2024. Despite continued geopolitical uncertainties and the global impact of protectionism, Swiss tech companies are holding out hope for a recovery as both domestic and international orders show tentative signs of improvement.
