Electronics Industry Anticipates Production Decline and Job Cuts

The German electronics and digital manufacturing sector is bracing for another challenging year, as industry representatives forecast a contraction in production and potential job losses. The sector's association emphasizes the need for immediate reforms from the newly elected government to instill confidence among business leaders.

The ZVEI (Zentralverband Elektrotechnik- und Elektronikindustrie) predicts a two percent decrease in the inflation-adjusted production of electrical and electronic goods produced in Germany for the current year. Although this decline is not as severe as last year's drop, the ZVEI president expresses caution, noting that there are currently no signs of a trend reversal, only some faint glimmers of hope.

Many companies have delayed necessary workforce reductions, but with a pessimistic outlook for 2025, this is likely to change. The ZVEI president indicates that the industry is now addressing the adjustments that were postponed in 2024, under the false assumption that conditions might improve.

He remains cautiously optimistic about maintaining stable employment levels, anticipating a decrease of only one to two percent. However, he acknowledges that this stability is heavily dependent on the political events that unfold in the coming weeks and months.

Furthermore, the ZVEI president, who leads the sensor manufacturing company Pepperl+Fuchs, points out that the German industrial landscape is overly regulated and costly, hampering entrepreneurial initiatives and diminishing international competitiveness. He notes that global production has been growing at a faster pace than Germany's for the past 15 years, raising concerns about the country's potential decline.

Excessive bureaucracy is seen as a barrier to innovation, and there is a call for the corporate tax burden to be reduced to a level that is competitive on an international scale. Additionally, the high electricity prices are a concern, with a push for the electricity tax to be lowered to the European minimum rate for all consumer categories.

The previous year was marked by significant setbacks for Germany's electronics and digital manufacturers:

• The adjusted production showed a decline exceeding nine percent from January to November compared to the same period the previous year. This figure was worse than the October forecast, which had already predicted a seven percent decrease.
• In terms of nominal revenues, the sector experienced a drop of six and a half percent over the first eleven months of the year. The ZVEI estimates that total revenue for 2024 will be around EUR223 billion, down from EUR238 billion in 2023.
• Exports in the electronics sector fell by four percent from January to November, with all major markets, including China and the United States, reporting decreases.
• Employment in the industry has also declined, with approximately 892,000 people employed, reflecting a two percent drop compared to the previous year.

To avert another year of recession, the ZVEI president stresses the urgency for the new government to act decisively. There is a call for a shift towards greater efficiency--not only in technology but also in political and regulatory frameworks. A reduction in bureaucracy, increased freedom for entrepreneurial activities, and more room for innovation are essential for revitalizing the sector.