EU an ICT laggard in latest figures on the sector worldwide

An international analysis of the ICT sector shows the EU ranked third in terms of value added in 2014, challenged by the spectacular progression of China, which reached the second position behind US after overtaking the EU, Japan and South Korea.

The figures come from the European Commission Joint Research Centre’s (JRC’s) latest edition of its Prospective Insights in ICT R&D (PREDICT) report, published this week.

The JRC claims this the most complete and extensive analysis available of the ICT sector, including expenditure on research and development in Europe and beyond, spanning from 1995 to the most recent year for which official statistics are available.

The 20-year view over 40 countries offered by the report shows the ICT sector has tripled in value added in the last 20 years

The ICT sector received a high share of the total R&D business expenditure at global level in 2014, with almost a quarter of total business expenditure in R&D being in the ICT sector at a global level (16% in the EU).

R&D intensity, that is the ratio of corporate investment to total value added in the EU was 5.3 per cent, similar to China’s (5.2 %), but much behind South Korea (21.1%), the US (12.3%) and Japan (11.0%).

The US was the leader in business expenditure on research and development, spending €64 billion in 2014, followed by China (€33 billion) and the EU (more than €29 billion).

Together with South Korea (€ 23 billion) and Japan (€ 21 billion), these five geographical regions represented 89 per cent of corporate investment in ICT in the 40 countries in the study.

The ICT sector globally tripled in size 1995-2014

The ICT sector of the 40 economies has tripled in value added from1995-2014.

Since 1995, when neither Google, Facebook nor Wikipedia existed, and MP3s, DVDs and USBs were new, the US ICT sector doubled, the EU’s multiplied by 2.3.

Asian countries led by China, India and Taiwan experienced even bigger growth. In 2014 the US had the largest ICT sector, closely followed by China, while the EU ranked third at €546.2 billion. The weight of the ICT sector in the total EU economy reached 3.9 per cent, behind China and India (4.7%), the US (5.3%) and Japan (5.4%), while in Taiwan ICT accounted for 15.9 per cent of the economy.

ICT services are driving the ICT sector

The ICT services subsector, which includes computer and related activities and telecoms, is the leading subsector representing 73.1 per cent of the total value added of the ICT sector globally, while the manufacturing sub-sector constitutes the remaining 26.9 per cent.

Manufacturing is significant in terms of value added for Taiwan, South Korea, China and Japan. In the EU, ICT services represent more than 90 per cent of total ICT value added in 2014, while ICT manufacturing industries amount to about 9 per cent of total ICT value added.

Over the time of the study, the EU witnessed a structural decline in corporate investment in the ICT manufacturing sector, with a fall of 17 per cent from 2006 to 2014, whereas the ICT services sector saw an increase of 49 per cent over the same period.

ICT employment growing in all countries

Employment in the ICT sector grew in all 40 countries, except Russia, between 1995 and 2014. Employment in the EU ICT sector was 5.7 million in 2014, 1.4 times higher than in 1995. The overall growth in ICT sector employment was interrupted by slight declines during two short periods, between 2001-2003 and 2008-2010.

Within the sector, employment in ICT services grew for all countries except Russia, but employment in ICT manufacturing decreased in the majority of countries, and most markedly in Norway and Canada (by around 45%), Japan, Australia and the EU (around 30%). Only India, China, Brazil and Taiwan experienced a growth in ICT manufacturing employment.

In Europe, the growth rates of productivity in the ICT sector from 1995 to 2014 meant it exceeded by far the level of growth of the economy as a whole, even if the productivity of the EU ICT sector remained markedly behind that of the US.

The productivity of EU ICT sector is anyway ahead of that of Japan, and China, the latter resembling in this respect the patterns of emerging economies.

Publicly funded ICT R&D

ICT R&D public funding reached an estimated €6.3 billion in 2015, representing 6.7 per cent of EU total government budget allocations for R&D.  The EU lags behind both the US (8.3%) and Japan (10.2%). No data on ICT R&D public funding are available for other countries.