German ICT Sector Builds on Previous Success

In 2017, the information and communication technology (ICT) sector in Germany managed to increase its gross value added to 108 billion euros. This corresponds to a four per cent increase compared to the previous year. The number of employees subject to social insurance contributions and self-employed persons has risen to just under 1.2 million, meaning that a total of almost 250,000 new jobs have been created in the ICT sector since 2010 – an increase of 27 per cent. These and other findings can be found in the most recent DIGITAL Economy Monitoring Report, compiled by the Centre for European Economic Research (ZEW), Mannheim, in collaboration with Kantar TNS on behalf of the Federal Ministry for Economic Affairs and Energy.

Since 2010, gross value added – i.e. the value of all products and services minus expenditure for intermediate inputs – in the ICT sector has grown by a total of 30 billion euros. In this regard, the ICT sector is well ahead of traditional industries such as mechanical engineering or the chemical and pharmaceutical industries. The significant increase in gross value added in the ICT sector can be attributed entirely to the increase in value added generated by ICT service providers and compensates for the decline in value added among ICT hardware manufacturers. The figures for the ICT sector are also impressive when it comes to innovation: “The ICT sector has recently invested around 17 billion euros in innovations. With a 48 billion euro turnover, however, it managed to almost triple the value of its investment with new products and services,” says Professor Irene Bertschek, head of the ZEW Research Department “Digital Economy”.

Despite a decrease in the overall start-up activity in Germany, the rate at which new firms are established in the ICT sector is far above average, with around 6,000 new businesses in 2017. This means that, taking all new businesses founded in the past three years into account, an average of 6.4 per cent of companies in the ICT sector are start-up companies. By comparison, the overall start-up rate in the German economy is merely 4.9 per cent.

“The ICT sector both provides the basis and gives new impulses for the digitalisation of the entire German economy. This is why a positive development of this sector is so crucial. The drivers of this positive trend are the ICT service providers, who managed to significantly improve their figures compared to hardware manufacturers,” says Irene Bertschek.

Rising turnover in the German internet economy

The German internet economy also grew in 2017 and generated around ten billion euros more turnover with web-based goods and services than in the previous year. Recording a turnover of 119 billion euros, the internet economy accounts for a share of 3.7 per cent of the German gross domestic product (GDP). With a turnover per capita of 1,442 euros, Germany ranks sixth in international comparison – behind South Korea (2,906 EUR), the US (2,685 EUR), the UK (2,312), Finland (1,955 EUR) and Japan (1,648 EUR).

The greatest share of turnover is generated through the provision of stationary and mobile online access, for which each consumer spends an average of 518 euros. “While the turnover achieved through online access has decreased by four per cent, all other sectors in the internet economy – in particular e-commerce – have seen a positive development,” explains Irene Bertschek. “This means that the German internet economy was not only able to compensate for this loss, it even managed to achieve a significant turnover growth of nine per cent.”

About the DIGITAL Economy Monitoring Report

The DIGITAL Economy Monitoring Report, which is published on an annual basis by the Federal Ministry for Economic Affairs and Energy, is compiled by ZEW in collaboration with Kantar TNS. The report consists of two major parts: the DIGITAL Location Index and the DIGITAL Economy Index.

The recently published report focuses on the DIGITAL Location Index, which compares the technological performance and competitiveness of the German digital economy (ICT sector and internet economy) to those of nine other countries. The DIGITAL Location Index encompasses indicators from various national and international studies conducted by ZEW and Kantar TNS as well as indicators and findings from other renowned studies. In addition to the DIGITAL Location Index, the most recent DIGITAL Economy Monitoring Report also includes findings and analyses on the economic significance of the digital economy for Germany.

The first part of the DIGITAL Economy Monitoring Report with a focus on the DIGITAL Economy Index was already published in July 2018, which placed particular emphasis on the level of digitalisation of ten relevant comparable industries as well as the overall commercial economy in Germany. The DIGITAL Economy Index is based on a survey among 1,061 companies, which was conducted by Kantar TNS in March and April 2018 within the framework of this project. In addition to the companies’ assessment regarding the current and future development of digitalisation up until 2023, the survey also investigated the drivers and barriers of digitalisation as well as the use of artificial intelligence in companies.