The surprising comeback of a key German industry

Andreas Gontermann had to look at the numbers twice. The production volume of the electronics industry in Germany has been declining for several months. The chief economist of the Association of the Electrical and Digital Industry (ZVEI) actually wanted to correct the annual forecast for the 200 billion euro industry. But then came the August statistics - and they run completely against the previous negative trend.

The production volume has increased by almost ten percent, reports Gontermann in an interview. And price-adjusted. At the same time, the order intake, which is certainly price-influenced, even increased by 13.2 percent. And not for the first time this year. The forecast is therefore not being shaken after all - unlike recently in some other industrial sectors. The machine builders, for example, had to correct themselves twice in the course of the year.

Production in the German electronics industry is expected to grow by four percent in 2022. The number for the period from January to August, which has been statistically recorded so far, is still slightly lower. However, the company's order books are still so full that Gontermann no longer fears a complete collapse in the final quarter. There is enough work for almost six months - the range of orders has never been so large in the industry.

And so far there have only been isolated cancellations. In addition, the supply chains seem to have stabilized somewhat again, so that companies are better able to access the necessary preliminary products. Short-time work is therefore practically not an issue. Only 8,200 of the 886,000 employees are currently forced to work less. For comparison: In May 2020, i.e. during the first corona shock, there were almost 182,000 employees.

The surprisingly good development in view of the general recession tendencies is supported by the persistently high demand for semiconductors and other electronic components, but also by industry segments such as household appliances, automation or medical technology and energy technology, show the figures that are exclusively available to WELT.

"Behind this are mega trends such as electrification and digitization," explains Wolfgang Weber, Chairman of the ZVEI Management Board. "Both of these issues cannot be managed without our industry." In addition, there is currently increasing pressure on companies to produce more energy-efficiently. "Our products are also needed for this," describes Weber. In any case, the topic of energy efficiency could develop into a major driver.

On the other hand, it looks difficult in the particularly energy-intensive area of ​​cables and insulated wires, and also in lighting technology. The providers of electrical installation systems, on the other hand, fear for their new business in the coming months and maybe even years in view of the emerging crisis in construction.

Geographically, the US business stands out in the electronics industry, which is usually strong in exports, which was up almost 20 percent in August and had also shown significant growth rates in the months before, as reported by the ZVEI.

Safra Sarasin's chief economist, Karsten Junius, assesses the Gas Commission's proposals as positive overall. Nevertheless, he criticizes the "watering can principle" and sees it as not very targeted.

Source: WORLD / Dietmar Deffner

But sales to the Netherlands, which with its ports are considered an important transshipment point around the world, are clearly in the double-digit range, and France, on the other hand, is at least approximately. China, on the other hand, is weak among the top 5 markets in the German electronics industry. Although exports to the People's Republic increased in August, they were below average at 4.3 percent.

Industry representatives Weber are less worried about exports than about imports, which have risen sharply recently. "Import pressure has increased significantly," says the ZVEI boss, according to which in 2022, for the first time in more than 20 years, more electronic products and components will be imported than exported.

In addition to the high energy prices, Weber sees the reasons for this as the general conditions in Germany, which have been deteriorating for years - specifically the high wage costs, constantly increasing bureaucracy, long approval processes and, last but not least, a lack of skilled workers. According to the ZVEI, the industry now lacks more than 30,000 experts.

For Weber, however, the most urgent concern for the future of Germany as a production location is the future development of energy prices. Especially since the costs for electricity and gas will probably no longer reach the level of the past.

And Germany was always at the upper end of the price range in Europe even before the historic increases of the past few months. Currently, however, it is about acute help for the companies. And the ZVEI welcomes the Gas Commission's relief proposals as an important cost damper across the board.

"But where much more needs to happen is the issue of electricity," Weber demands. For him, the current energy price debate focuses too one-sidedly on gas. “The federal government must now set an example and bring significant relief to electricity, too,” warns Weber.

For example, what is needed is a reduction in value-added tax on electricity to seven percent and in addition the electricity tax to the EU minimum rate. "Electricity is the energy source of the 21st century and the raw material of the energy transition," explains Weber, according to which all available power sources must also be exhausted.

"This means an extension of the service life for the existing nuclear power plants, but also more coal-fired power generation, at least temporarily."

German mechanical engineering would also benefit from lower electricity prices. According to a recent survey by the German Engineering Federation (VDMA), companies' production and ability to deliver are currently coming under increasing pressure due to price increases and the lack of availability of natural gas and electricity.

“About two-thirds of the companies looking for a fixed-price contract for natural gas do not find what they are looking for because there is a lack of offers from the suppliers. In the case of electricity, it is even seven out of ten companies. Not infrequently, short-term requirements can only be covered via the spot market - at volatile prices and without reasonable planning security," warns VDMA chief economist Ralph Wiechers.

In any case, the war in the Ukraine and the resulting consequences are taking their toll on the machine builders. "The mood of optimism after the corona easing at the beginning of the year has turned into uncertainty and concern," says the current mechanical engineering barometer from the consulting firm PriceWaterhausCoopers (PwC). Half of the decision-makers surveyed expect a clear negative development for mechanical and plant engineering in Germany.

At the beginning of the year, this share was just 16 percent. "The survey results point to a shrinking of the industry," comments Klaus-Peter Gushurst, head of the Industries division

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.