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Telecom. IT: Software industry still on the rise as sales of electronics and appliances drop
In 2023, the technology sector was under the sign of Artificial Intelligence, which took a big leap forward with generative AI. It should not come as a surprise that there will be generative AI tools in all the devices we use, with new apps and features that will change the way we interact with technology. Changes will also appear in the way business is conducted in various sectors, as new processes are being developed with the help of generative AI.
As far as sales on the electro-IT market are concerned, they followed the trend seen across the economy in 2023, meaning lower volumes due to declining demand and higher prices. According to GfK data, the sales of appliances went up, with big numbers for fryers and vertical vacuum cleaners, but there were double-digit drops for laptops, PC units, and printers. Interestingly, the data suggests that consumers have more money to spend on things that they could not afford in the past. Sales of laptops and smartphones—devices people need for work—were down all over the world as many consumers had already changed their devices in recent years.
The situation is similar on the smartphones market. The volume of sales went down by 5-6%, but the total value of the 3 million smartphones sold during the year went up, according to estimates, by 8-10%, to about EUR 1.5 billion. The main reason is that superpremium phones, priced at over EUR 1,000, now account for a third of the entire market. Meanwhile, premium devices, worth over EUR 600, have a market share of about 60%.
The increase in the average price of a smartphone in recent years, from EUR 150-200 to EUR 400, is mimicked by other segments as well, including TVs or household appliances, as Romanians’ purchasing power has gone up. “In terms of value, in the first nine months of the year, sales of surveillance cameras and digital cameras increased compared to the same period of 2022, while office equipment suffered, especially multifunction devices and printers. Also, after two years of sustained growth, sales of laptops and desktop computers got on a downward trend, with consumer needs having already been covered by purchases they made during the pandemic,” GfK representatives wrote.
As for PC units and laptops, global sales will see a record drop of almost 14% in 2023 compared to 2022, according to International Data Corporation (IDC), to 252 million units. For 2024, analysts estimate that the market will return to growth, with a 3.7% rise compared to this year, to 261.4 million units. That level will be higher than 2018’s (259.6 million), but still below 2019’s deliveries.
THE SOFTWARE INDUSTRY
On the services side of the industry, the one that is producing 8% of the GDP, in 2022 there were 29% more companies in the Romanian software industry that saw turnover growth compared to 2021, according to a study by KeysFin. 2023 data has not yet been made available by the Ministry of Finance.
“Despite the growth rate tempering, we estimate the uninterrupted trend of the last 10 years to continue and reach a new all-time high this year, of over EUR 14 billion. We have chosen to publish the results of the latest report on the development of the software industry close to December 1st, because we can see that software is consolidating its key role in the development and digitalization of the economy and turning Romania into a regional hub, with one of the fastest growth rates in the last 10 years, if not the fastest, its value having multiplied more than fourfold,” said KeysFin economic analyst Diana Florescu.
In 2022, over 37,000 companies were operating in the software industry in Romania, 19% more than in 2021 and 148% above the 2013 level. Of these, 35,500 were microenterprises, 1,200 were small companies, 398 mediumsized companies, and 32 were categorised as large companies.
UiPath remained the industry leader by turnover after the largest annual nominal advance of EUR 126 million and the largest annual percentage increase in the top 10 of 38%, to EUR 459 million in 2022. Bitdefender stayed in second place, with a turnover of almost EUR 295 million in 2022, followed by Endava Romania, which surpassed IBM Romania, with an annual increase of 37% to a turnover of EUR 261 million in 2022.
The combined turnover of the 10 largest companies in the industry reached approximately EUR 2.2 billion, representing 17% of the market’s total.
The net profit recorded by companies in the local software industry in 2022 increased substantially to almost EUR 2 billion, 28% above the 2021 level and almost 9 times that of 2013. At the same time, the software industry generated 77% of the net profits recorded by the entire IT&C sector and over 5% of the net result of all non-financial companies in Romania in 2022.
CONTRIBUTION TO THE LOCAL ECONOMY
Romanian software companies’ share of total turnover in the IT&C sector increased from 40% in 2013 to 64% in 2022, thanks to a much faster advancement of the software component. Their turnovers saw a fourfold growth compared to a 2.6-fold increase in the overall IT&C sector since 2013. As a share of the total turnover generated by non-financial companies in Romania, the software industry’s turnover increased from almost 1.3% in 2013 to over 2.5% in 2022.
COMPUTING SERVICES EXPORTS
Exports of computing services increased by 17%—to EUR 5.8 billion in the first 9 months of 2023—compared to the same period of the previous year, as did imports, to EUR 2.1 billion, according to data from the National Bank of Romania. This means a record trade surplus in computing services reaching EUR 3.7 billion in the first 9 months of 2023. Data on export and import of services is compiled according to the methodology ensured by the IMF’s sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) and classified according to EBOPS (Extended Balance of Payments Classification).