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WTO Information Technology Symposium Impacts of globalisation on the IT Sector

WTO Information Technology Symposium Impacts of globalisation on the IT Sector Growth and market dynamics in OECD countries, China and India Graham Vickery OECD www.oecd.org/sti/it o graham.vickery@oecd.org Wednesday, 28 March 2007. Overview – ongoing restructuring.

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WTO Information Technology Symposium Impacts of globalisation on the IT Sector

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  1. WTO Information Technology Symposium Impacts of globalisation on the IT Sector Growth and market dynamics in OECD countries, China and India Graham Vickery OECD www.oecd.org/sti/ito graham.vickery@oecd.org Wednesday, 28 March 2007

  2. Overview – ongoing restructuring • Growth in the ICT supply side is sustained and expected to continue across all segments • Growth more balanced across OECD. ICT supply growth more sustainable than late 1990s. Highest in Internet-related applications and support systems • Non-OECD and Eastern Europe supply and markets growing much faster and taking larger share • Drivers are shifting from technology push => commercial applications and new uses. User-driven applications increasingly important • Challenges for ICT policy to build competitiveness

  3. IT industry - developments and outlook • Recent developments • Output and markets robust in the US. Now stronger in Japan and Europe. Other Asian countries growing rapidly • ICT markets: OECD share down 2000 89% => 2006 83% • Non-OECD countries (incl. Russia, India and China) took 13 of top 15 market growth positions 2000-2005 • Top 250 ICT firms (over ½ of global ICT industry) • Growth across the board. Revenue growth 2000-2005: Total 250 firms 23.5%, OECD 20%, India 680%, Chinese Taipei 200%, Singapore 132%, Hong Kong-China 100%, South Korea 28% • China and India increasingly important. Their growth currently driven by foreign investment and sourcing

  4. Structural change and adjustment • Structural change in the ICT sector • Late 1990s 20-30% annual OECD growth • 2000s slower. Many products => commodities • Rapid growth: new / niche products, software and services, and Emerging Markets (E. Europe, Asia) • ICT R&D dynamic although signs of slow-down • Major adjustment pressures • Open source (the “Linux effect”) • Online delivery of IT services (the “Google” effect)

  5. % 2003 1995 18 16 14 12 10 8 6 4 2 0 Italy EU 14 Spain Finland Mexico Austria France Canada Denmark Hungary OECD 25 Norway Sweden Japan (5) Korea (7) Ireland (7) Belgium (7) Netherlands United States Portugal (1,7) Australia (2,3) Germany (5,7) United Kingdom Greece (5,6,7) Czech Republic (5,7) New Zealand (1,4,6) Slovak Republic (5,7) ICT sector increasing share of GDPShare of ICT valued added in business sector1995 and 2003, percentages Source:OECD Information Technology Outlook 2006, SNA compatible

  6. Top 250 firms reboundPerformance trends 2000-05Current USD, index 2000 = 100 Source:OECD Information Technology Outlook 2006

  7. And they increase R&D intensityTop 250 ICT firm R&D intensity by sector, 2000-05R&D spending as a share of revenue, percentages 2000 2005 Software Comms equipment Electronics & components IT equipment Services Telecommunications 0 2 4 6 8 10 12 14 16 Source:OECD Information Technology Outlook 2006

  8. North America Japan Europe Rest of Asia 250 200 150 100 50 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 The shift to AsiaWorld semiconductor market 1990-2005USD billion, current prices Source:OECD Information Technology Outlook 2006

  9. ICT globalisation and trade • New wave of global restructuring of ICT production • Global restructuring of ICT production • ICT sector a leader in international trade and M&As9% of business VA, 13% of goods trade, 20% of M&As • Trade in ICT goods: new highs • Trade in ICT services: growing strongly • Ireland leader in computer and information services exports(still number 3 in packaged software) • ICT FDI and M&As high: Business cycle effect • M&As: ICT and comms services continued high share • Some shift to Eastern Europe and non-OECD

  10. 35% 1996 2004 30% 25% 20% 15% 10% 5% 0% Italy Spain Japan Korea Ireland Mexico Austria Poland Turkey Iceland France Finland Greece Norway Canada Hungary Sweden Belgium Portugal Australia Germany Denmark Switzerland Netherlands New Zealand Luxembourg United States United Kingdom Slovak Republic Czech Republic ICT goods trade has tended to increaseShare of ICT goods in total goods exports, 1996-2004 Percentages Source: OECD Information Technology Outlook 2006

  11. And grow in all segmentsOECD trade in ICT goods, 1996-2004 USD billion, current prices Communication equipment IT & related equipment Electronic components Audio & Video equipment Other ICT related goods 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: OECD Information Technology Outlook 2006

  12. With new trade competitionICT goods exports 1996-2004Current USD, 1996 = 100 China Mexico and Eastern Europe Other OECD 1 000 900 800 700 600 500 400 300 200 100 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source:OECD Information Technology Outlook 2006

  13. New sources of trade – ICT-enabled servicesExports of computer and information services and business servicesPercentage of world totals Source:OECD Information Technology Outlook 2006

  14. Exports of computer and information services and business servicesBillion current USD and share of GDP Source:OECD Information Technology Outlook 2006

  15. Employment potentially affected by ICT-enabled services offshoringShare of employment 1995-2004 Source:OECD Information Technology Outlook 2006

  16. China and ICTs • China increasingly important in production and trade in ICT goods and services • Strategy: Host foreign ICT firms or third-party contract manufacturers (unlike Japan and Korea) • Chinese ICT firms developing rapidly despite relatively limited size and technological know-how. Investing overseas to obtain technology, brands and distribution • ICT industry must make transition from low-cost manufacturing to higher value-added products • Services high potential, but not yet

  17. China biggest ICT goods exporter in 2004, and increasingImports and exports,billion current USD Source:OECD Information Technology Outlook 2006

  18. China imports components and exports computers, telecoms, audiovisual equipmentTrade balances, billion current USD 80 60 1996 1997 40 1998 20 1999 0 2000 2001 -20 2002 Audio&video equipment -40 Other ICT goods equipment Computer&related 2003 Telecommunication equipment -60 2004 Electronic components -80 2005 -100 Source:OECD Information Technology Outlook 2006

  19. China deficits with Asia, surpluses everywhere elseTrade balances,billion current USD Source:OECD Information Technology Outlook 2006

  20. Rising to the challenge?IT policies for growth and competitiveness • Co-ordination and priority setting • Promoting ICT R&D and innovation • Increasing business use (and improving government efficiency via e-government) • Expanding ICT skills and employment (education) • Digital content • Enhancing network infrastructure (broadband) • ICT business environment (IPRs)

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