Information and Communications Technology: A Value Chain Analysis 2019

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. 

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.

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.

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

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.

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.

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.

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.

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.