Why this is important to Wisconsin businesses: Wisconsin companies can help German companies get up to speed with cybersecurity and automation/robotics in particular.
The German economy has traditionally been strong. Its GDP for 2018 ($3.7 trillion) ranked first in Europe, with a share of 21%. Yet, an economic slowdown is in progress, as GDP growth for both 2016 and 2017 was 2.2%, while for 2018 it was only 1.4%. Incoming foreign direct investment in 2018 suffered a 30% reduction, dropping to $25.7 billion. The main reasons for this were the political uncertainties of Brexit and the global protectionism trend, which negatively influenced the economy worldwide for 2018 and 2019.
Despite these negative trends, Germany’s economy is expected to grow by 0.5% in 2019 and by 1% in 2020. In the broader picture, the country remains economically stable because of its established manufacturing tradition and globally recognized product quality.
The German machinery industry has a market size of around $1.6 trillion and generates 30% of the country’s GDP. The sector numbers more than 6,520 companies, of which 90% are small and midsize enterprises that specialize in the production of small-series and custom-made products.
Germany ranks in the top three worldwide for 25 out of 31 machinery subsectors, with a 16% share of the global trade in machinery. Unlike other industries, the German machinery sector showed extreme resilience in 2018, as revenue for the industrial subsector reached $256 billion (up 2.8% from the previous year), and for the electrical subsector $212 billion (up 1% from the previous year). This makes it the second-largest industry in Germany. The positive movement for 2018 came from 5.3% growth in exports and resulted in 33,000 newly hired employees, for a total workforce of around a million people along the value chain.
The German machinery industry generates 79% of its revenue from exports, so despite the lucrative year 2018, the world economic slowdown took its toll. For 2019 the industry logged a 2% production loss, and the prognosis for 2020 year is for this trend to remain—yet, no grand economic crisis is expected due to the stable markets.
In 2017, Wisconsin was responsible for 1.2% of total U.S. machinery exports to Germany, which means that the German demand for U.S. machinery is higher than what Wisconsin has been providing. New opportunities arise in the fields of Industry 4.0 and the industrial internet of things (IIoT), as Wisconsin’s expertise matches rising demand in Germany.
While roughly 50% of Wisconsin’s manufacturers will invest more in Industry 4.0 in the next two to three years, for Germany that figure is only 8.6%, as German small and midsize enterprises remain hesitant to apply solutions like machine learning, cloud computing and predictive maintenance. The main reasons for this are the fear of changing their business model, data security concerns and fear of losing capital—yet, 70% of them are prepared to explore those options with the help of external investments, and especially due to the economic slowdown are willing to innovate in order to retain their competitive advantage. Therefore, Industry 4.0 is expected to grow by 20% year-over-year, reaching $18.7 billion in two years’ time.
Within this niche of the German machinery industry, Wisconsin’s rich experience, especially in cybersecurity and automation/robotics, can help German small and midsize companies resolve their fears of implementing new technologies.
Germany’s high-quality machinery products, combined with its stable economy and the importance of the industry on both the national and international level, present good opportunities with potential for high return for U.S. companies in the IIoT sector. Wisconsin companies can discover the abundance of possibilities by attending a German trade show, such as the world-renowned Hannover Messe (April 20-24, 2020), whose main theme for 2020 is the Industrial Transformation. Hannover Messe is an international industrial connection hub that promises 6.5 million business contacts, with the participation of 6,000 exhibitors in 1,400 separate events.