ICT Industry Trends Germany - 2022

According to the German digital association Bitkom, domestic spending on information technology and telecommunication increased by 4.2% in 2021. In 2022, sales are forecast to grow by 4%, up to EUR 176 billion. As in 2020 and 2021, sales of IT software and hardware will remain robust. Businesses and the public sector made IT purchases at short notice during the pandemic and are now strategically investing in new equipment. At the same time, telecommunication and consumer electronics sales have slowed down to normal levels after a sharp increase at the height of the pandemic.

After a marked deterioration in March 2022 due to economic impact of the war in the Ukraine, ICT business confidence rebounded again in April, driven by full order books. However, German ICT and electronics production remains impacted by semiconductor shortage, leading to less output in the computers & office equipment and electronic engineering segments. Production of electronic components has decelerated since 2021 due to supply-side bottlenecks and labour shortages.

Semiconductor bottlenecks will remain an issue, at least until the end of 2022. While higher costs for chips, commodities and transport have driven production prices upwards, ICT businesses are able to pass on those price increases to end-customers due to ongoing solid demand. Profit margins of most companies therefore continue to improve.

Payments take 30-60 days on average, and payment behavior in the industry has been good during the past two years. The number of payment delays and insolvencies has been low in the past 12 months. However, with the expiry of Covid-related fiscal support measures, we expect that business failures will increase in the coming twelve months -- from an artificially low level in 2021 back to normal levels seen in 2019.

Across all main subsectors, our underwriting stance is generally open. However, a marked deterioration of consumer and business confidence caused by the economic impacts of the war in the Ukraine remains a downside risk for domestic sales growth. At the same time, semiconductor shortage is still an issue that could affect production even beyond 2022.