While incoming orders in the MEM industries saw massive declines during the last 18 months or so, the 4th quarter of 2012 showed the first signs of recovery. According to Swissmem's quarterly statistics, incoming orders rose by 9.8% compared to the same period of the previous year. However, this revival started at the very low levels of the previous year. Across the entire year, incoming orders dropped by 3.8%. As a result, capacity utilization in the fourth quarter of 2012 dropped to 83.6% (4th quarter 2011: 86.7%).
Sales figures also developed in a positive direction: revenues rose by 6.5% in the 4th quarter of 2012 and by 3% over the full twelve months. Large companies (with over 250 employees) were the main contributors to this growth. The growth in revenues at SMEs was much more sluggish. In the short term the slight increase in export prices (+0.9%) is helping businesses to increase their competitiveness.
Slowdown in goods exports
The positive development in incoming orders has not yet had an effect on goods exports. With the exception of precision instruments (+0.8%), the 2012 export figures recorded by the Swiss Directorate General of Customs were lower than those for the previous year in all product areas. Mechanical engineering (-12.3%) and metalworking (-7.8%) exports were affected the most, while the electronics and electrical engineering sectors saw a somewhat more moderate downturn (-3.5%).
The markets showed varying trends from region to region. Apart from the EU countries (-6.4%), which are still the main market for Swiss MEM products
with 59.6% of export sales, negative export figures were also recorded for Asia (-11.8%). However, exports to the USA (+2.7%) and Japan (+3.5%) rose. Overall, the MEM industry exported goods to the value of CHF 64.6 billion in 2012. This is 5.8% less than in the previous year.
Continued pressure to adapt
Despite the drop in exports, Swissmem is cautiously optimistic about the industry's situation in view of the latest developments. The signs of stabilization in the EU have, to a degree, taken the pressure off the market situation in recent months. This is also reflected in businesses' expectations. Their outlook for business development in the coming 12 months is more positive than in autumn 2012. At present, 40.1% of surveyed companies expect increases in orders from abroad. Three months ago, only 25.3% of businesses were of this view. In particular, further growth stimuli are anticipated from the Chinese, US and Eastern European markets.
However, the fact is that businesses – particularly SMEs – are under great pressure to adapt in the long term. In the EU, the main market, the outlook is not encouraging in view of the recessionary trends. Global competition continues to intensify, with strong competition from Asia. The Swiss franc, moreover, is still overvalued against the euro.
Focus on five areas of action
A study produced by the consultants McKinsey&Company with the help of Swissmem shows how the MEM industries can strengthen their competitiveness in the long term. It defines five areas of action to be addressed by MEM businesses:
- Globalization: The business models must have a stronger international focus to increase the proportion of exports that go to fast-growing markets and to optimize the structure of the value-added chain.
- Productivity: It is important to optimize purchasing and resource allocation continuously, to firmly anchor efficiency improvements in the company culture and to reduce costs right from the development stage.
- Agility: Opportunities offered by the more volatile economic environment must be seized consistently. At the same time, adjustments are necessary to render businesses more resilient to market turbulence.
- Innovation: Resource allocation must be prioritized in such a way that an innovative advantage can be created or maintained with regard to products, processes and business models.
- Qualified staff: Businesses must find new ways to recruit and train employees in order to maintain Switzerland's edge in terms of staff expertise and flexibility.
Prerequisite: favourable conditions
It is mainly up to companies themselves to increase their international competitiveness. To succeed in this endeavour, however, they require favourable operating conditions as well. These include in particular a liberal job market, low administrative costs and regulations, additional free trade agreements, good relationships with the EU, reinforcement of the dual education system and greater promotion of innovation. The challenge for policy-makers is to create precisely these conditions.
Zurich, 27 February 2013
For further information, please contact:
Ivo Zimmermann, Head of Communications
Tel.: +41 44 384 48 50 / mobile: +41 79 580 04 84
Please refer to www.mckinsey.ch for the study.