Crisis Hit Companies Depress The Spanish IT Industry

It has been a dire year for Spain’s economy, and for Spanish citizens, with government cuts in various key social areas, an increase in VAT on purchases, and rising unemployment which made it the country with highest number of unemployed in the European Union. But how is the Spanish IT industry faring?

The crisis has spawned fear, as  negative information bombards consumers, entrepreneurs and investors, both in Spain and abroad. Many experts think worse is to come in 2013.

Innovation was stabbed with a large knife in November 2011 when government grants and loans for science and technology were cut by €600 million (£488m).

Tech sales are down

All this has influenced the technology sector. Quarter after quarter, sales for computers are low, and basic phones have gone down, although smartphones and tablets maintain their popularity.

Nothing seems to help the computer industry. Not even the arrival of thin, light ultrabooks, has helped the industry to pick up sales. Computer manufacturers are having a hard time worldwide (some studies estimate that this will be its worst year of the past 20), but in Spain it is far worse, and has been that way since 2011.

In the fourth quarter as PC sales fell by 16 percent across EMEA, Spanish sales went down by no less than 30 percent. And in the absence of official figures, the forecasts paint an even worse picture.

The situation is the same in software. A recent study by Context found that software revenues in Europe rose 11 percent during the first three quarters of 2012 , compared to the same period in 2011. Spain was one of the few countries in Europe that showed a drop in revenue, by 6.9 percent.  Even booming new technologies such as cloud computing and Big Data have not helped Spain over the hump.

Tablets in Spain

While tablets have been blamed for the fall in computer sales. These devices cannot replace the PC for work such as content creation, but they can comfortably handle jobs like reading and consuming content. And, in times of crisis, consumers prefer to invest in novel devices while making their old equipment last longer. Thus tablet sales have increased substantially in 2012 in Spain.

Mobile phones have been driven by the success of smartphones, but this year suffered a major setback when Vodafone and Telefonica announced in March their intention to stop subsidising customers’  terminals. Orange described the move as “harmful”, and Vodafone was forced to recant and return to the old model. But compared to 2011, mobile phone sales in Spain fell ten percent.

TVs also suffered, with Toshiba predicting sales could drop by 19 percent compared with 2011. Printers were already down by six percent in 2011, and it’s predicted there will be a still worse decline in 2012, according to figures from Context.

A good year for e-commerce

Is there anything positive to say? For one thing, as users have less money in their pockets, they have become more cautious, and more apt to compare prices. This has benefited online retail companies.  So  e-commerce has been a tech winner this year, giving users the option to find more deals and shop from home.

Besides the fact that users have more Internet-capable devices, experts think the economic crisis will be a major driver in a shift towards online activity. The Spanish telecom regulator, CMT, says there were 36.7 million transactions recorded in the first quarter, totalling  €2,452 million (£1,992m), well above the figures recorded in previous years. In the first half of the year, e-commerce growth hit ‘record’ levels, with e-commerce turnover at €2,640 million (£2,146m) between April and June, which is 13 percent more than the same period last year 2011, according to the CMT

Spain expects a bad Christmas economically, compared to previous years, but it may be in line with the rest of Europe. Deloitte estimates that each household will spend an average of €680 (£553)on Christmas, down from the €708 (£575) spent in 2011 and well below the average of €910 (£739) in 2008, when the crisis first hit Spain.

However, compared to the rest of Europe, Spain is the fifth biggest spender in Europe, after Ireland, Switzerland, Luxembourg and Finland, countries where wages are, on average, much higher than in Spain.

The article was originally published in ChannelBiz Spain, one of NetMediaEurope’s network of European sites, and translated into English by Peter Judge, editor of TechWeek Europe