InnovationExport Market Share: Office Machinery and Computers
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[ February 2010 ]
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Putting trade in office machinery and computers in context
The office machinery and computers sector includes computer CPUs, storage devices, buses and peripherals, as well as typewriters, photocopiers, calculators, and sorting machines. Although trade in this industry can indicate a country’s ability to transform science into innovative products, Canada and its peers in the Organisation for Economic Co-operation and Development (OECD) have gradually seen a decline in this type of manufacturing over the past few decades. With the rise of global supply chains, high-performing Asian economies have taken over as leaders in the manufacture of high-tech equipment, by producing goods for global markets at a much cheaper cost. Many of the countries in the Conference Board comparison are rapidly transforming themselves into high-tech service providers, rather than manufacturers of high-tech equipment.
Data on the breakdown of value added in supply chains for office machinery products and computers, together with a country’s position in these supply chains, would provide a better measure of innovation in this industry. Unfortunately, comparable data at this level are not available. Therefore, despite its limitations, export market share in the office machinery and computers industry is used as one proxy measure of the impact of high-tech industries. Export market share provides a snapshot of the presence of globally competitive companies.
How does Canada’s export market share for office machinery and computers compare to that of its peers?
Canada’s peers that have scored well on this indicator are either home countries to major global manufacturers or have become export platforms for leading foreign high-tech companies. Canada, along with 12 other countries, earns a “D” grade.
A ratio above 1 indicates that the country has a comparative advantage in that industry. Canada’s ratio of 0.36 means that it does not have a comparative advantage in the office machinery and computer industry.
Ireland is miles ahead of its peers on this indicator. Ireland has had great success leveraging regional assistance from the E.U. to support clear national strategy goals in this industry. Leading software producers Microsoft and Oracle and computer maker Dell have all established significant operations in Ireland. The Netherlands—home to electronics giant Philips N.V.—comes in a distant second place and gets a “B” grade.
What if Ireland is removed from the comparison?
Ireland’s outstanding success in this industry means that only three other countries get a grade higher than a “D”. If Ireland is removed from the comparison, the Netherlands moves into top spot and the U.S. moves up to a “B”, creating room for Japan, the U.K., and Germany to move up to “C”s. Eleven countries, including Canada, remain as “D” players.
What does the Canadian industry look like?
Canada has a trade deficit in the office machinery and computers industry. In 2008, exports from this industry were US$4.2 billion, while imports were US$13.1 billion. Canada’s industry is well integrated in North America, but the direction of Canada’s exports is shifting away from the U.S. to Mexico and China. Canada is also losing U.S. market share.1
The largest subsector of the office machinery and computers industry is the computer and peripheral equipment manufacturing industry. Canada has over 400 companies in this subsector, employing roughly 8,000 people and generating C$6.5 billion in sales a year, of which more than $3.8 billion comes from exports. Imports amount to more than three times exports, at $12.8 billion. R&D spending, at $116 million, is about 3 per cent of domestic sales.2
Business spending on R&D in the office machinery and computers industry has fallen over the years. In the late 1980s and early 1990s, business spending on R&D in the office machinery and computers industry accounted for 6 per cent of total business spending on R&D in Canada. In 2006, R&D business spending in this industry was $299.9 million, representing 2.4 per cent of total business spending on R&D.3
Has Canada’s performance improved over time?
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Canada’s market share in this industry has been declining since the 1980s except for a brief rise during the high-tech boom of the 1990s. This largely reflects increased offshoring of manufacturing to Asian economies.
Canada, along with 11 of its peers, has been a “D” performer since the 1980s.
By contrast, Canada’s share of gross value added by knowledge-intensive services has been growing over the same time period.
Taken together, these two data sets reveal an economy that is rapidly transforming from a high-tech equipment maker to a high-tech service provider.
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Use the pull-down menu to compare the change in Canada’s office machinery and computers export market share with that of its peers.
Should Canada be trying to improve its trade shares in this industry?
This category is, in some ways, problematic as an indicator of innovation, owing to its heavy reliance on electronics hardware and simultaneous exclusion of fast-growing applications and equipment that are not in the office category. For example, Canada is a leader in a number of space-based applications, as well as in the production of interactive computer games and training simulations. Canada is also a pioneer in computer-generated graphics for special effects in movies and video game design and manufacture. As the speed of processing and the merging of different applications and devices continue, Canada’s advantages in these industries will become more evident. The Conference Board acknowledges that this category may be due for revision as a measure of knowledge-based innovation.
1 OECD, Main Science and Technology Indicators, Online database.
2 Industry Canada, Trade Data Online. [Online, cited January 19, 2010]. Note: this data corresponds to NAICS code 33411. The values shown are in Canadian dollars. The OECD data used to calculate the export market shares for the 17 countries corresponds to ISIC Rev.3 code 30. Computer and peripheral manufacturing make up the greatest proportion of exports and imports in the “Office Machinery and Computers” industry classification.
3 OECD, Main Science and Technology Indicators, Online database.
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