Technology Industry / Finnish Economic Outlook December 2018 12/31/2018 Technology Industries of Finland

Overcoming the Gap in GDP Will Require 3 Overcoming the Gap in GDP Will Require 3.0% Growth in Finland Annually in 2018-2023 12/31/2018 Technology Industries of Finland *) The IMF forecast for the euro area in April 2018: 2.4% in 2018, 2.0% in 2019, 1.7% in 2020, 1.5% in 2021, 1.5% in 2022, 1.4% in 2023 Source: Macrobond, IMF, Federation of Finnish Technology Industry

The Finnish Technology Industry Is Comprised of Five Sub-Sectors ELEKTRONICS AND ELECTROTECHNICAL INDUSTRY ABB, Ensto, Microsoft Mobile, Murata Electronics, Nokia, Planmeca, Polar Electro, Suunto, Vacon, Vaisala… METALS INDUSTRY Boliden, Componenta, Kuusakoski, Luvata, Outokumpu, Outotec, Ovako, Sacotec, SSAB … MECHANICAL ENGINEERING Abloy, Cargotec, Finn-Power, Fiskars, Glaston, Kone, Konecranes, Metso, Meyer Turku, Normet, Oras, Patria, Pemamek, Ponsse, Stala, Valmet, Valtra, Wärtsilä… INFORMATION TECHNOLOGY Affecto, Basware, Bilot, CGI, Comptel, Digia, Efecte, Enfo, F-Secure, Fujitsu Finland, IBM, Innofactor, Knowit, Microsoft, Nixu, Tieto… CONSULTING ENGINEERING A-Insinöörit, Citec, Elomatic, Etteplan, FCG, Granlund, Neste Jacobs, Pöyry, Ramboll, Rejlers, SITO, SWECO, WSP… 12/31/2018 Technology Industries of Finland

The Finnish Technology Industry Is Comprised of Five Sub-Sectors ELEKTRONICS AND ELECTROTECHNICAL INDUSTRY Data communications equipment, electrical machinery, medical technology Turnover (2017): 14.4 billion euros Personnel (2017): 37,800 METALS INDUSTRY Steel products, non-ferrous metals, castings, metallic minerals Turnover (2017): 10.1 billion euros Personnel (2017): 16,100 MECHANICAL ENGINEERING Machinery, metal products, vehicles Turnover (2017): 29.9 billion euros Personnel (2017): 127,900 INFORMATION TECHNOLOGY IT services, applications and programming Turnover (2017): 12.3 billion euros Personnel (2017): 66,900 CONSULTING ENGINEERING Expertise for construction industry and infrastructure Turnover (2017): 6.0 billion euros Personnel (2017): 50,900 12/31/2018 Technology Industries of Finland

The Technology Industry – the Largest Export Sector in Finland 51 % of total exports. Almost 315,000 employed directly in the sector, including indirect effects 665,000 people. Effect on value added totaling € 55 billion, or 28% of GDP value added. Bring to Finland € 18 billion tax revenue annually. Investments about EUR 5.0 billion annually in Finland. 70 % of private-sector R&D investment. 12/31/2018 Technology Industries of Finland

Value Added to the Economy Generated by the Technology Industry Is EUR 55 Billion, or over 28% of GDP * (2017) 31.12.2018 Teknologiateollisuus *) GDP value added was EUR 193.3 billion in 2017. Source: Economic Impact of the Technology Industry in Finland 11/2018

Technology Industry Generates nearly 650,000 Jobs in Finland (over 25% of All Employees) (2017) 10 jobs in the technology industry bring 11 jobs to the rest of the economy 31.12.2018 Teknologiateollisuus Source: Economic Impact of the Technology Industry in Finland 11/2018

den työpaikan palveluissa Every Job in the Technology Industry Generates almost another Job in the Services den työpaikan palveluissa 31.12.2018 Teknologiateollisuus *) Excl. the services industries in the technology industry. Source: Economic Impact of the Technology Industry in Finland 11/2018

Technology Industry Generates over 18 Billion Euros in Tax Revenue Annually in Finland 31.12.2018 Teknologiateollisuus Source: Economic Impact of the Technology Industry in Finland 11/2018

Turnover of the Technology Industry in Finland 12/31/2018 Technology Industries of Finland Source: Macrobond, Statistics Finland, Technology Industries of Finland

Export of Technology Industry Goods from Finland by Area in 2017 Total goods exports 30.6 billion euros* Central and Eastern Europe 5.11 billion € 16.6 % Western Europe 16.44 billion € 53.7 % North America 2.79 billion € 9.1 % Asia 4.51 billion € 14.7 % Middle and Central East 0.51 billion € 1.7 % South and Middle America 0.84 billion € 2.8 % Africa 0.43 billion € 1.4 % 12/31/2018 Technology Industries of Finland *) In addition to goods exports the sector exported services worth some 13 billion euros. Source: National Board of Customs, Statistics Finland

Technology, Forest and Chemical Industries Provide 81 % of Finland's Goods and Services Exports Revenue Goods and service exports: billion euros and the share of Finnish exports in 2017 12/31/2018 Technology Industries of Finland *) Service exports industry-specific data for the year 2017 are preliminary information. Source: Board of Customs, Statistics Finland (National Accounts, Foreign trade in services), Federation of Finnish Technology Industries

Turnover of the Industry and Technology Industry in Finland 12/31/2018 Technology Industries of Finland Source: Macrobond, Statistics Finland

Turnover of the Technology Industry in Finland 12/31/2018 Technology Industries of Finland Source: Macrobond, Statistics Finland

Value of New Orders in the Technology Industry* in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: III,2018 / III,2017 III,2018 / II,2018 Export: +27 % +4 % Domestic: +3 % -10 % Combined: +22 % 0 % *) Excl. metals industry, game industry and data center companies 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation July-September 2018.

Value of Order Books in the Technology Industry* in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: 30.9.2018 / 30.9.2017 30.9.2018 / 30.6.2018 Export: +22 % +8 % Domestic: +11 % -1 % Combined: +20 % +6 % *) *) Excl. metals industry, game industry and data center companies 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 30th September 2018.

Tender Requests* Received by Technology Industry Companies in Finland 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 *) ”Have you experienced a notable increase or decrease in the number of requests for tenders in recent weeks in comparison to the situation three months ago?”. Balance figure = the number of companies receiving more requests - the number of companies receiving less requests.” 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, the last questionnaire in October 2018

Tender Requests* Received by Technology Industry Anticipate Weaker Order Development in Winter 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 12/31/2018 Technology Industries of Finland *) Four quarters moving average. Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies

Value of New Orders in the Electronics and Electrotechnical Industry in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: III, 18 / III,2017 III,2018 / II,2018 Export: +18 % +2 % Domestic: -10 % +1 % Combined: +11 % 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation July-September 2018.

Value of Order Books in the Electronics and Electrotechnical Industry in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: 30.9.2018 / 30.9.2017 30.9.2018 / 30.6.2018 Export: +12 % +3 % Domestic: -8 % +2 % Combined: +7 % 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 30th September 2018.

Value of New Orders in the Mechanical Engineering in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: III,2018 / III,2017 III,2018 / II,2018 Export: +34 % +5 % Domestic: -14 % Combined: +29 % +2 % 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation July-September 2018.

Value of Order Books in the Mechanical Engineering in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: 30.9.2018 / 30.9.2017 30.9.2018 / 30.6.2018 Export: +26 % +9 % Domestic: +22 % -2 % Combined: +25 % +7 % 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 30th September 2018.

Value of New Orders in the Consulting Engineering in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: III,2018 / III,2017 III,2018 / II,2018 Export: +110 % +77 % Domestic: +41 % -20 % Combined: +49 % -12 % 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation July-September 2018.

Value of Order Books in the Consulting Engineering in Finland Million euros, at current prices Combined 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: 30.9.2018 / 30.9.2017 30.9.2018 / 30.6.2018 Export: -14 % +7 % Domestic: +46 % +11 % Combined: +32 % 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 30th September 2018.

Value of New Orders in the Information Technology* in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: III,2018 / III,2017 III,2018 / II,2018 Combined: +35 % -20 % *) Excl. game industry and data center companies 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation July-September 2018.

Value of Order Books in the Information Technology* in Finland Million euros, at current prices 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Change: 30.9.2018 / 30.9.2017 30.9.2018 / 30.6.2018 Combined: +1 % -6 % *) Excl. game industry and data center companies. 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ order book survey’s respondent companies, latest observation 30th September 2018. Teknologiateollisuus

Technology Industry Personnel in Finland Has Grown by nearly 15,000 this Year 12/31/2018 Technology Industries of Finland Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey

Technology Industry Personnel in Finland by Branch (Sep 30) 12/31/2018 Technology Industries of Finland Source: Statistics Finland, The Federation of Finnish Technology Industries’ labour force survey, Macrobond

Technology Industry Personnel in Subsidiaries Abroad by Branch 12/31/2018 Technology Industries of Finland Source: The Federation of Finnish Technology Industries’ labour force survey, Macrobond

Retirement of Technology Industry Personnel in Finland Individuals per year Salaried employees Blue collar employees 12/31/2018 Technology Industries of Finland Source: Wage inquiry of the Techonology Industries of Finland, Finnish Centre for Pensions, Statistics Finland

Retirement of Technology Industry Blue Collar Employees in Finland Individuals per year 12/31/2018 Technology Industries of Finland Source: Wage inquiry of the Techonology Industries of Finland, Finnish Centre for Pensions, Statistics Finland

Overview of the Situation in the Technology Industry and Outlook for the Rest of 2018 - Turnover in Finland totalled some EUR 72.7 billion in 2017. In January-August 2018, the turnover was up 5 % year-on-year. In 2008, prior to the financial crises, the corresponding figure was EUR 86 billion. - The monetary value of new orders reported between July-September 2018 was at the same level as in the preceding quarter, but 22 % higher than in the corresponding period in 2017. - At the end of September, the value of order books was 6 % higher than at the end of June, and 20 % higher than in September 2017. - The turnover of technology industry companies during the rest of 2018 is expected to be slightly higher than in the corresponding period last year. - The number of personnel in Finland increased strongly during January-September 2018. Personnel increased by slightly less than 5 %, or by almost 15,000 employees from the average number in 2017. On average, the industry employed some 314,000 people. In 2008, the industry employed a total of 326,000 people in Finland. - The recruitment activities picked up markedly between January and September. The companies recruited a total of 40,000 new employees, in 2017 a total of 42,500 employees. 12/31/2018 Technology Industries of Finland

World Economic Outlook - Finland as a Part of Global Economy 12/31/2018 Technology Industries of Finland

GDP also Grows in Finland, but the Backlog for the Other Euro Area Countries Is up to 8% 12/31/2018 Technology Industries of Finland Lähde: Macrobond

Finnish Exports Growth Has Come to an End during 2018, Backlog for the Other Euro Area Countries is 40% 12/31/2018 Technology Industries of Finland Source: Macrobond, Eurostat

Growth in Finland’s Exports and Private Consumption Has Declined during 2018 12/31/2018 Technology Industries of Finland Source: Macrobond, Statistics Finland

Gross Domestic Product Has Grown Long in Europe and the USA, Finland is Lagging Behind 12/31/2018 Technology Industries of Finland Souce: Macrobond

In China and India Growth Continues, also Brazil Is Now Growing Share of global GDP in China, India, Brazil and Russia is 31 % (adjusted for PP) 12/31/2018 Technology Industries of Finland Lähde: Macrobond

Economic Growth in the Euro Area Has Slowed Down Rapidly Purchase Managers’ Index (PMI), 50 = no change from previous month 12/31/2018 Technology Industries of Finland Latest information November 2018 Source: Markit

Industrial Production Has also Grown in Finland, but the Backlog to EU Average Is 15% 12/31/2018 Technology Industries of Finland Source: Macrobond

Industrial Production Volume in the EU Countries 12/31/2018 Technology Industries of Finland Source: Macrobond

Finland’s Industrial Production Has Lagged Behind the Competition Countries 12/31/2018 Technology Industries of Finland Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Industrial Production in China is Unchanged Purchase Managers’ Index (PMI) in manufacturing industry in China 12/31/2018 Technology Industries of Finland Latest information November 2018 Source: Markit

Industrial Production in Russia Is Growing Purchase Managers’ Index (PMI) in manufacturing industry in Russia 12/31/2018 Technology Industries of Finland Latest information November 2018 Source: Markit

Industrial Production in Brazil Is Growing Purchase Managers’ Index (PMI) in manufacturing industry in Brazil 12/31/2018 Technology Industries of Finland Latest information November 2018 Source: Markit

Industrial Production in the USA is Growing Purchase Managers’ Index (PMI) in manufacturing industry 50 = no change from previous month 12/31/2018 Technology Industries of Finland Source: Macrobond

Changes in Foreign Exchange Rates Reflect Uncertainty about Customs and Economic Sanctions 12/31/2018 Technology Industries of Finland Source: Macrobond

Fixed Investments Have also Grown in Brazil 12/31/2018 Technology Industries of Finland Souce: Macrobond

Strongest Growth in World Trade Is already Behind Export volume 12/31/2018 Technology Industries of Finland Source: Macrobond, The CPB Netherlands Bureau for Economic Policy Analysis

Imports to China Have Increased from Several Countries 12/31/2018 Technology Industries of Finland Source: Macrobond

EU Exports to Russia Have Recovered only Slightly 12/31/2018 Technology Industries of Finland Source: Macrobond

Russia’s Share* of Technology Industry Exports from Finland Has Lowered to Some 5 Per Cent % 12/31/2018 Technology Industries of Finland *) Soviet Union up to 1991 Source: Finnish Customs

The World Economy Is Projected to Grow by 3.7% in 2018 GDP growth in 2018 / 2017, % India China Rest of Eastern Europe Average growth: +3,7 % Rest of Latin America Middle East and Africa Rest of Asia Mexico North America Brazil Russia Western Europe Japan The width of the bar indicates the share of global GDP in 2017 (adjusted for purchasing power parity), % 12/31/2018 Technology Industries of Finland Source: IMF (October 2018)

Demand in the Finnish Technology Industry Export Market is Expected to Grow by 2.7 % in 2018 GDP growth in 2018 / 2017, % India Rest of Latin America Mexico China Middle East and Africa Average growth: +2,7 % Rest of Eastern Europe Rest of Asia North America Western Europe Japan Brazil Russia The width of the bar indicates the export share of technology industry from Finland in 2016, % 12/31/2018 Technology Industries of Finland Source: IMF (October 2018), Finnish Customs

Finland’s Economic Growth Relies on Exports and Investments 12/31/2018 Technology Industries of Finland

Finnish Exports Have Lagged Behind the Competition Countries 12/31/2018 Technology Industries of Finland Source: Macrobond, Eurostat

Growth Paradox: the Downsized Industry Has Limited Opportunities to Increase Finnish Exports -18 % 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 12/31/2018 Technology Industries of Finland Source: Statistics Finland / industrial production volume index

The Decline in Exports and Recession: the Public Debt and Total Tax Rate Increased Significantly Increased cost burden requires cuts to public sector 12/31/2018 Technology Industries of Finland Source: Macrobond, Eurostat

Unlike the Competition Countries, in Finland Business Investment Is Still Below the Level in 2008 12/31/2018 Technology Industries of Finland Source: OECD, Economic Outlook (June 2018)

Investments in the Manufacturing and Technology Industry in Finland Do Not Promise Long-Term Strong Growth Production and R&D investments in Finland, million euros, at fixed 2017 prices 12/31/2018 Technology Industries of Finland Source: Statistics Finland, (National Accounts), The Confederation of Finnish Industries* investment survey (June 2018)

Industrial Productive and R&D Investment in Finland Have Not Yet Reached the 2007-2008 Levels Billion euros, at fixed 2010 prices 12/31/2018 Technology Industries of Finland *) Including software investments. Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey June 2018

Total Industry Investment in Finland Are Below the Consumption of Fixed Capital Billion euros, at fixed 2010 prices 12/31/2018 Technology Industries of Finland *) Including software investments. Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey June 2018

Industrial Productive Investment in Finland Have Reached the Level of Consumption of Productive Capital Billion euros, at fixed 2010 prices 12/31/2018 Technology Industries of Finland Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey June 2018

Industrial Production Capital in Finland Has Disappeared Significantly, Especially after 2008 Billion euros, at fixed 2010 prices 12/31/2018 Technology Industries of Finland Source: Statistics Finland (National Accounts), Confederation of Finnish Industries’ Investment Survey June 2018

Investments and productivity* are Decisive for Finland’s Success 12/31/2018 Technology Industries of Finland *) Productivity is measured as real value added per hours worked. When productivity grows (the curve rises) value added grows more than hours worked. Source: Statistics Finland

In Industrial Productivity Development, Finland Has a Gap of 20% Compared to EU Average and 15% Compared to Sweden and Germany Value added in manufacturing industry at fixed prices / hours worked 2008=100 12/31/2018 Technology Industries of Finland Latest information July-September 2018. Source: Eurostat: Quarterly National Accounts

In GDP Productivity Development, Finland Has a Gap of 7% Compared to EU Average and 5% to Sweden and Germany GDP at fixed prices / hours worked 2008=100 12/31/2018 Technology Industries of Finland Latest information July-September 2018. Source: Eurostat: Quarterly National Accounts

Investment Rate of Companies in Finland Is Lower in Finland than in Other Small European Countries Means 8 bill.€, as now in Finland 25 bill.€ 12/31/2018 Technology Industries of Finland Source: Eurostat Teknologiateollisuus

Finland’s Price and Cost Competitiveness vis-à-vis the Euro Countries Is still to be Improved Unit labour costs in the whole economy = labour costs / productivity, including the influence of effective exchange rates Finland’s price and cost competitiveness declines Finland’s price and cost competitiveness improves 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 12/31/2018 Technology Industries of Finland *) In the ECB Harmonised Competitiveness Index, the average effective exchange rate of each country is calculated vis-à-vis 38 main trade partners, as well as the development of unit labour costs for the total economy. Latest information April-June 2018. Source: European Central Bank

What Should Be Done in Finland? Support the renewal of the industry. Taxes should support growth and investment in Finland. Support decision making in companies related to compensation and working time No new European nor national burdens on companies, which are deteriorating the competitiveness. 12/31/2018 Technology Industries of Finland

Long-Term Outlook and Challenges Global Structural Change Set to Continue Apace Industrial production and services will relocate to rapidly developing economic areas Strong growth, large markets, cheap labour and increasing expertise will increase the attractiveness of these regions. Competition over Skills and Raw Materials Set to Increase Due to an increase in retirement, the sector’s annual recruitment need in Finland will rise considerably in the coming years. The availability of reasonably-priced energy also threatens to become an investment bottleneck in Finland Combating Climate Change A challenge as costs are set to grow faster than in competitor countries An opportunity for new environmental and energy technologies 12/31/2018 Technology Industries of Finland

Technology Industries of Finland 12/31/2018 Technology Industries of Finland

The Federation’s Member Companies 2017 250–499 employees Number of enterprises / 1 587 Number of personnel / 175 974 1–249 employees 500–999 employees 1000– employees 12/31/2018 Technology Industries of Finland

The Federation’s SME Member Companies 2017 Number of enterprises / 1 439 Number of personnel / 68 763 1–19 employees 20–49 employees 50–99 employees 100–249 employees 12/31/2018 Technology Industries of Finland

Operating Profit in the Member Companies of Technology Industries of Finland in 2017 Operating profit-% = operating result / turnover * 100 (before taxes and financial income and expenses) Companies in random order 12/31/2018 Technology Industries of Finland Source: Statistics Finland

Net Profit in the Member Companies of Technology Industries of Finland in 2017 Net profit -% = net profit / turnover * 100 (after tax and financial income and expenses) Good (21 %) Satisfactory (23 %) Weak (32 %) Unprofitable (24 %) Companies in random order 12/31/2018 Technology Industries of Finland Source: Statistics Finland

Return on Assets in the Member Companies of Technology Industries of Finland in 2017 Return on assets -% = (net income + financial expenses + taxes) / (capital invested in the financial year) * 100 Companies in random order 12/31/2018 Technology Industries of Finland Source: Statistics Finland

Equity Ratio in the Member Companies of Technology Industries of Finland in 2017 Equity ratio -% = (total equity + total appropriations accrued) / adjusted balance sheet * 100 Companies in random order 12/31/2018 Technology Industries of Finland Source: Statistics Finland