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Producers

A CSO Frontier Series Output- What is this?

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The ICT value chain in Ireland is dominated by the very high output of foreign MNEs. The most important of their activities are the sale of online advertising services, computer licences, cloud services, hardware and royalties. Royalties, as mentioned in the chapter on Capital, are fees for the right to use intellectual property (IP) products. The main costs of the ICT sector are also royalties. These fees are usually paid abroad to other firms in the same group of companies. Almost all of the sector’s production is sold internationally, mostly to Europe and the United States.

As seen previously in the publication, the domestic firms as producers have a very different profile to that of the sector as a whole. Their output and costs are lower and are also more domestically oriented. They relate mainly to the purchase of software, hardware services and consultancy services.

The ICT sector also provides supply chain management services, accountancy services, software product support and product research and development (R&D). However, the product variety of ICT is only partly visible in the national accounts. Similarly, the accounts do not fully reflect the variety of firms in this value chain and the activities being undertaken across it. This challenge arises from the difficulties in categorising rapidly evolving ICT products and activities and is currently being addressed by the international statistical system.

In this chapter, we discuss the products of the ICT sector, which are generally, but not always aligned to the economic activity categories. For example, a software company may also produce IT consulting services.

Output

Total output produced by the ICT industry was €128bn in 2019. Foreign firms made up €122bn or 96% of this output. The ICT industry used €76bn worth of intermediate consumption (the inputs used in production), of which €74bn was by foreign firms. The industry produced €51bn of Gross Value Added (GVA). At 6%, domestic firms made up a slightly larger share of overall GVA than output, contributing €3bn out of €51bn GVA. 

Table 5.1 Output, Intermediate Consumption and Gross Value Added for ICT Sector €m
ESA CodeDescriptionDomestic ForeignTotal
P.1Output5,592122,375127,967
P.2Intermediate consumption2,53473,96076,495
B.1gGross value added3,05848,41551,472

Ireland’s output of €128bn in ICT products was the third highest in the EU in 2019, after Germany and France. Germany’s ICT output was €310bn while France’s output was €223bn. At €126bn, Italy’s ICT output was just below Ireland. Ireland’s output was considerably larger than countries with similar populations in the EU.

X-axis labelICT OutputICT Output
Germany310.2070
France223.4020
Ireland0127.9665
Italy126.31380
Spain92.0440
Netherlands88.6110
Sweden68.51250
Belgium41.37160
Poland40.65080
Austria28.92830
Denmark26.74920
Finland24.6540
Czechia21.82420
Romania21.160
Luxembourg18.71450
Portugal14.49180
Greece10.71150
Hungary10.69750
Slovakia7.98030
Bulgaria6.99020
Cyprus4.70910
Croatia4.10140
Slovenia3.570
Lithuania3.05420
Estonia3.04510
Malta2.61330
Latvia2.55930

Get the data: Eurostat Database

Output by Product

The ICT sector produced a variety of products in 2019. Table 5.2 groups these products into three categories: Information Technology (IT), Communications and Other. IT products accounted for €115bn or 90% of the sector’s overall output. Communications products accounted for €5.5bn, or 4% of the sector’s output. The ICT sector also produced €7bn worth of other products (mostly R&D).

Foreign firms’ output of €122bn mostly went to IT (91%). Communications products made up 4% of foreign firms’ output while other products made up 5% of their output. The domestic firms’ output was also concentrated in IT (68%) however a higher share of their output was related to Communications (10%) and Other products (22%), relative to foreign firms. Domestic ICT firms produced €3.8bn worth of IT products, €558m worth of Communications products and €1.2bn of Other products.

Table 5.2 Output by product grouping and foreign and domestic firm for ICT Sector €m
ProductDomesticForeignTotal
IT3,793111,644115,437
Communications5584,9515,509
Other1,2415,7807,021
Total5,592122,375127,967

We now consider these three product categories in more detail, beginning with IT, and this is subdivided into domestic and foreign firms.

cpa_labelOutput
(620) Computer Programming & Consultancy3492.89126399961
(582) Software Publishing356.848291669847
(631) Data Processing, Hosting and Web Portals87.7016457298001
(639) Other Information Services60.5286289079

Get the data: PxStat VCA24

Figure 5.2 displays a detailed breakdown of IT products of domestic firms using the Classification of Products by Activity (CPA). Most of the IT products from domestic ICT firms consisted of computer programming and consultancy services, worth €3.5bn. In addition to this, firms produced €357m worth of software publishing and €88m worth of data processing, hosting and web portals. The remainder, other information services, accounted for €61m.

The detailed breakdown of foreign ICT firms’ IT output cannot be shown due to confidentiality reasons. Much of it relates to items such as sales of software and software services, marketing and content moderation. Focusing on the product breakdown by CPA category, the largest was Computer Programming and Consultancy. The second largest was Software Publishing. This mostly consisted of licensing services for the use of computer software. The third largest was Data Processing, Hosting and Web Portals.  

Figure 5.3 compares exports and output by product category for domestic companies in the ICT sector. Of the €3.8bn output of IT products, €1.9bn (49%) was exported, while for Communications €61m (11%) of the €558m output produced was exported. A far smaller proportion (6%) of Other products were exported. In total, the ICT sector exported €2bn of the €5.6bn produced by domestic companies, resulting in 37% of the output being exported.

 

X-axis labelDomestic ExportsDomestic Output
IT1878.9993793.000
Communications60.744558.000
Other72.9141241.000

Figure 5.4 displays output of Communications products by the ICT sector in 2019. This was worth a total of €5.5bn and was mostly sold to the domestic market. Foreign firms produced 90% of the value of this product grouping. Wired Communication Services was the largest product category, with an output value of €1.9bn. This refers to the provision of wired internet, television and phone services for commercial and retail purposes, such as broadband and digital television. The next largest category was Satellite Communications, valued at €1.6bn. This included satellite broadband and television provision, associated installation services and sales abroad associated with this activity. The third category was Wireless Communication Services worth €1.5bn. This consisted of mobile network services and wireless broadband, as well as installation services for these products.

cpa_labelOutput
(611) Wired Telecommunications1941.87520030139
(613) Satellite Telecommunications1559.2482696108
(612) Wireless Telecommunications1546.97549279505
(619) Other Telecommunications461.3610203633

Get the data: PxStat VCA25

Figure 5.5 displays output of other products by the ICT industry, worth €7bn. The largest product type in this category was Licensing Services for Intellectual Property (€4.8bn). The next largest product category was R&D in Natural Sciences and Engineering valued at €1.4bn. The third largest category was Non-Software Media. This was primary production of the publishing sector (NACE 58.1), the motion picture and video sector (NACE 59) and the broadcasting sector (NACE 60). While these culturally important activities are covered within the industry grouping of the ICT sector (NACE J), they are not the analysed further in this economically-focused publication.

X-axis labelOther OutputICT Output
(774) Licensing Services for the Right to Use Intellectual Property4783.87
(721) R&D in Natural Sciences & Engineering1391.97
(581, 59 and 60) Non-Software Media844.75

Get the data: PxStat VCA25

Outputs versus Exports

The ICT sector in Ireland is very export-oriented: of the €128bn produced by the ICT sector, €117bn (91%) was exported. Table 5.3 displays exports by broad product group. Practically all of the €115bn IT products were exported (96%), while only 7% of Communications products and 70% of Other products were exported. Of the remaining €11.4bn output that was not exported, €1.3bn was R&D which provides the capital assets for future production while €10.1bn was used in the Irish economy as either inputs into other production or consumption by households.

Table 5.3 Output by exports and non-exports for ICT Sector €m
ProductExportsNon-exportsTotal
IT111,342,6204,094,341115,436,961
Communications388,0005,121,4605,509,460
Other4,879,8652,140,7147,020,579
Total116,610,48511,356,515127,967,000

To have a better idea of the composition of the exports, Table 5.4 summarizes the values by Balance of Payments service item. Due to confidentiality considerations, this table is summarised into a few broad categories. The largest value of exports is attributed to Telecommunications, Computer, and Information Services (94%) followed by royalties (4%). On the imports side, Other Business Services formed the largest component of imports at 54% of total services imports in 2019. Other Business Services includes the large IP assets discussed in the Capital chapter, as well as Professional and Management Consulting Services and Technical, Trade-related and Other Business Services. Charges for the Use of Intellectual Property, i.e. royalties, were among the highest values of imports, accounting for 40% of the total.

Table 5.4 International Trade Value by Service Item and Activity Sector J (€m)
CodeServiceExportsImports
SHCharges for the Use of Intellectual Property NIE4,78450,681
SITelecommunications, Computer, Information Services109,5105,237
SJOther Business Services76269,390
SNNon-Attributed Services1,4060
 Residuals (Confidential)1481,895
TOTTotal116,610127,202

Intermediate Consumption by Producers

Domestic firms in the ICT sector consumed €2.5bn worth of intermediate inputs. These are shown by product category in Figure 5.6. The largest item of intermediate consumption was Computer Programming and Consultancy worth €1.1bn. This consisted of computer programming services, computer consultancy services, computer facilities management services and Other IT and computer services. The next largest item was Motion Picture and TV Production worth €146m. The third largest item was Computer, Electronic and Optical Products, worth €124m.

cpa_labelIntermediate Consumption
(62) Computer Programming & Consultancy1061.49966919377
(59) Motion Picture, Video & Television Programme Production146.360264638532
(26) Computer, Electronic & Optical Products123.544039618022
(70) Head Offices & Management Consulting121.071574548823
(61) Telecommunications Services111.670345224792
(63) Information Services97.9214822611182
(82) Office Administrative & Support Services77.697655749719
(35) Electricity, Gas, Steam & Air Conditioning Services75.1230890401031
(20) Chemicals & Chemical Products69.3199119141984
(58) Publishing Services68.2402947112648

Get the data: PxStat VCA26

Foreign firms in the ICT sector consumed €74bn worth of intermediate inputs in 2019. Figure 5.7 shows a top ten breakdown of these products. At €51bn, most of the consumption was Rental and Leasing Services. This consisted of royalties paid to affiliates abroad for permission to use Intellectual Property. Computer Programming and Consultancy (€7bn) was also a large item of intermediate consumption. Other Professional, Scientific and Technical Activities (€5bn) covered a wide variety of activities, including graphic design, energy consultancy, architecture, printing and various types of consulting. Publishing Services accounted for €2bn worth of intermediate consumption.

Intermediate Consumption by Foreign ICT FirmsIntermediate Consumption
(77) Rental and Leasing Services50.680674484
(62) Computer Programming & Consultancy6.65658451072102
(74) Other Professional, Scientific and Technical Services4.70706957717259
(58) Publishing Services2.35053176757483
(82) Office Administrative, Office Support and Other Business Support Services1.19484200661058
(73) Advertising and Market Research Services1.0430974528428
(69) Legal and Accounting Services0.791030028105986
(63) Information Services0.764670464847806
(61) Telecommunications Services0.653052814645256
(26) Computer, Electronic and Optical Products0.649490567976602

Get the data: PxStat VCA26

Total exports for the ICT sector were €117bn in 2019. Map 5.1 shows the destinations of these exports, grouped into several categories for confidentiality purposes. The United Kingdom and the United States were the two countries that received the largest amounts of ICT exports from Ireland in 2019, with export totals of over €10bn each. The next largest trading partners were EU countries such as Italy, France, Spain, and Germany, as well as Asian countries such as India and China, all receiving between €1bn and €10bn in ICT exports from Ireland.

Map 5.2 shows the sources of the Irish ICT sector’s €127bn in imports in 2019. Similar to Map 5.1, this graph has also been summarised to preserve confidentiality. The most important countries for the export of ICT products were the United States and the Netherlands, both providing imports of at least €10bn. The next most significant countries in terms of imports were France, Germany, Finland and the UK as well as China and Australia.

Conclusion

As is evident in this chapter, the ICT sector in Ireland is highly globalised and interconnected with many countries worldwide, with high volumes of products being exported and imported. The sector’s output is dominated by IT services, with Telecommunications and Other services making up a relatively small proportion of the total. The output of domestic enterprises is a relatively small part of total production in the economy although they still export a significant proportion of their IT services output.