IT industry on road to recovery: OECD report

The worst of the recession may be over for the Information and communications technology (ICT) industries, according to a new OECD report.

The OECD report, which compares the current economic crisis with the 2001-2002 “dot-com bust”, said a sudden upturn in global sales of ICT goods in May and June suggests the industry may have reached a turning point and be on the road to recovery.

The Organisation for Economic Co-operation and Development (OECD) also attributed the reversal of fortunes to government economic stimulus packages, such as the universal service commitment in the UK.

Digital Britain will pump £200 million into the ICT industry as the government strives to roll out 2Mbit/s broadband to every household in the country. A further £150-175 million a year will be raised for the Next Generation Final Third project, which is aimed at replacing fixed copper lines with next generation networks.

The report also said there have been clear regional and industry sector differences in the effects of the crisis. Production of PCs plunged by as much as 40 percent on an annual basis in Japan, Korea, China and other Asian economies in early 2009 as exports collapsed, which has hurt Asian OECD countries.

The semiconductor market, a bellwether for the ICT industry, witnessed a sharp rebound in May after a severe collapse in orders in the first quarter of 2009.

In the early stages of the economic crisis, hardware firms were more affected than ICT services firms, which was also the case in 2001-2002.

"But ICT services have also slowed, and year-on-year growth of IT services and software both turned negative in the first quarter of 2009, with Internet business growth around zero," the OECD report said.

"Internet and software firms saw steep falls in growth of over 20 percentage points in the last four quarters, in sharp contrast with their recent performance."

But overall, hardware sectors such as semiconductors and communications equipment are declining less than in 2001-2002, and in comparison some ICT services are performing worse than in 2001-2002.

The global ICT industry appears on the brink of recovery, according to the report.

"In general, despite a very difficult first quarter large firms in the ICT sector were stronger at the end of Q1 2009 than following the 2001 bust," the report said.

Employment has also dropped as the IT players have announced major lay-offs. But job cuts have been more pronounced in the semiconductor sector than in IT services, software, and Internet-related businesses.

Copyright © 2009 IDG Communications, Inc.

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