The European Commission's Joint Research Centre has published the latest Prospective Insights on R&D in ICT (PREDICT) Key Facts report.
It provides a complete analysis of the Information and Communication Technology (ICT) industry in Europe and beyond, including spending on research and development (R&D) in ICT, from 1995 to 2015 (with estimated figures for 2016 and 2017).
The report's broad perspective, spanning 20 years and 40 countries, shows how the value added (the difference between production costs and the price charged for a product or service) of the ICT sector has tripled in this period. ICT services represent 74 % of the total value added of the ICT sector globally.
The PREDICT data have fed into the Digital Economy and Society Index (DESI) report, published on 18 May 2018.
To allow cross-country comparability with non-EU countries, the report uses a narrower definition of the ICT sector than the comprehensive definition by OECD.
With the same aim, national currencies have been converted into euro Purchasing Power Standard (PPS), a unit based on current euros, to account for the effect of differences in price levels across countries and of movements in exchange rates.
5.2 % increase in value added for the EU ICT sector in 2015
In 2015, the EU ICT sector value added amounted to € 581 billion, 5.2 % more than the previous year.
The sector employed 5.8 million people and spent € 30 billion on business R&D expenditure (BERD).
The ICT sector contributed 3.9 % of the total value added in the EU, 2.5 % of total employment, 15.7 % of total BERD, and 18.6 % and 20.6 % of the total R&D personnel and researchers in the EU respectively.
ICT BERD intensity (measured as the ratio of BERD to total value added in nominal terms) was 5.2%, four times the intensity for the economy as a whole; and its productivity amounted to € 100 000 per person, 54 % higher than total economy productivity.
1995-2015: the EU ICT sector evolved better than the economy as a whole
A comparatively high research and development intensity and productivity level are distinctive features of the ICT sector compared to the economy as a whole, meaning that it is strategic for productivity growth. Between 1995 and 2015, the ICT sector in the EU improved its performance, according to most indicators, more than the whole economy.
It multiplied its value added in real terms by a factor of 3.5, while the economy as a whole did so by 1.4.
The growth of employment in the ICT sector was more moderate: in 2015 it had multiplied its 1995 value by a factor of only 1.5, although still more than the whole economy.
Labour productivity growth was much faster (both in terms of persons and hours worked) than in the total economy, multiplying its 1995 value by a factor of almost 2.5 in 2015.
Business R&D expenditure in the ICT sector also showed more dynamic behaviour than the total economy. Between 1995 and 2015, BERD in ICT multiplied its value by a factor of 3.5, while BERD in the total economy did so by a factor of only 1.7.
China ranked first worldwide in ICT value added in 2015 for the first time
When converting national currencies into a common currency, Purchasing Power Standard (PPS), to account for the effect of differences in price levels and exchange rates, the EU ranked third after China and the US in ICT value added in 2015.
The three together totaled 2000 billion PPS. China has been moving upwards fast since 2001, and now ranks first with € 715 billion PPS, overtaking the US for the first time.
Other Asian countries are catching up: the five Asian countries included in the report – China, India, Japan, South Korea and Taiwan – accounted for 50% of global ICT value added in 2015.
Some of these economies are still small in global terms, but are developing a very strong ICT sector.
This is the case with Taiwan, which in 2015 stood out with the highest share of ICT sector value added in GDP: 15.8%. It also holds the first place in ICT sector share of employment (9.0%) and of proportion of ICT R&D researchers (almost 70% of all researchers are in the ICT sector), and is second only to the US in ICT sector productivity (129 000 € PPS/person).
South Korea showed the highest ICT BERD intensity; and India has the highest differential productivity in the ICT sector compared with its whole economy.
Regional specialisation patterns in ICT production
The ICT industries display regional differences in terms of manufacturing and services specialisation.
While 75% of the global ICT sector's value added is supplied by ICT services (such as telecommunications, computer-related services such as software, programming, data processing, repairs), Asian countries are in general stronger in manufacturing (producing electronic components, communication equipment, computers, and consumer electronics), with the exception of India.
ICT manufacturing reached 85% of total ICT value added in Taiwan in 2015, 66% in South Korea, and 46% in China. Western countries are mostly driven by ICT services: in 2015, 84% of ICT value added in the US was produced by this subsector; it reached 90% in the EU, which is the world leader in "computer and related activities".
In addition to its dominant manufacturing activity, China had a very active role in telecommunications, becoming the world leader in this services subsector.
The ICT sector received 24 % of the total business R&D expenditure at global level in 2015
In 2015 almost a quarter of total business R&D expenditure (BERD) originated in the ICT sector at a global level (15.7% in the EU).
The United States was the leader, spending € 84 billion PPS in 2015, followed by China (€ 39 billion PPS) and the EU (more than € 30 billion).
Together with South Korea (€ 23 billion PPS) and Japan (€ 20 billion PPS), these five geographical areas represented 89% of ICT BERD in the 40 countries in the study.
R&D intensity is increasing in most of these countries, with the exception of the EU, which has seen a decreasing trend since 1995 and a stagnated value of around 5.2% since 2004. South Korea led in BERD intensity in 2015 with 19.9 % and the US is second (12.0 %).
The PREDICT Key Facts report, shedding light on R&D in the ICT sector, contributes to the recently published Digital Economy and Society Index Report 2018, particularly its chapter 6 on ICT sector and R&D.
It focuses on 40 advanced and emerging countries – the EU28 plus Norway, Russia and Switzerland, as well as Australia, Brazil, Canada, China, India, Japan, South Korea, Taiwan and the United States.
The 2018 edition of the PREDICT Key Facts Report and Dataset is based on the latest data available from official sources, such as the Statistical Office of the European Communities (Eurostat), the Organisation for Economic Co-operation and Development (OECD), and national statistics authorities.
The data and analyses available here are mostly based on data from National Accounts and R&D statistics.
To allow broader analysis of trends and comparisons, the report provides data from 1995 to 2015, the most recent year for which official statistics are available, and additional estimates for 2016 and 2017 for the main variables and ICT sector aggregates.
The report is a joint project of the European Commission's Joint Research Centre (JRC) and its Directorate General for Communications Networks, Content and Technology (DG CNECT). Since 2013, data collection and analysis has been carried out jointly by the JRC and the Valencian Institute of Economic Research.
The JRC has been producing statistics and analyses on the ICT industry and its R&D activities in Europe and beyond since 2006.
In the 2018 PREDICT Dataset, the ICT sector is defined according to the "comprehensive definition" provided by the OECD in 2007 on the basis of the NACE nomenclature Rev.2 (2008).
To allow comparability with non-EU countries not offering sufficiently disaggregated data, the study also uses a reduced "operational definition" of the ICT sector. Figures in the 2018 Key Facts Report and this note refer to the operational definition.
National currencies have been converted into euro Purchasing Power Standard (PPS), an accounting unit based on current euros, to account for the effect of differences in price levels across countries and of movements in exchange rates. More information can be found at the 2018 PREDICT Dataset Methodology.