Germany's dependence on digital imports is growing

End devices, semiconductors and software top the list of digital imports
Two thirds worry about excessive dependence on China
Companies call for Germany's digital sovereignty to be strengthened

Berlin, 17 January 2024 - Whether hardware, semiconductors, software or programming services: The vast majority of companies in Germany consider themselves dependent on importing digital technologies and services from abroad. 62 per cent of companies with 20 or more employees even describe themselves as "highly dependent", with a further 32 per cent describing themselves as "somewhat dependent". Not even one in twenty companies (4 per cent) consider themselves (somewhat) independent of digital imports. The USA and China, but also the EU countries, are the most important sources of supply. Overall, 95 per cent of companies in Germany source digital technologies and services from abroad. Conversely, 31 per cent export corresponding goods and services. These are the results of a representative survey of more than 600 companies from all sectors in Germany with 20 or more employees, which was conducted on behalf of the digital association Bitkom. According to the survey, there is a broad, cross-industry consensus that Germany needs to reduce such dependencies and expand its own digital sovereignty to a much greater extent. 86 per cent call for more investment, particularly in key technologies such as artificial intelligence.

"A country is digitally sovereign if it has its own substantial capabilities in key digital technologies and can decide for itself which countries it sources digital technologies from. Germany's dependence has grown in recent years. We can and must reverse this trend," says Bitkom President Dr Ralf Wintergerst. "If we now specifically promote key digital technologies and ramp up investment in digitalisation, we can strengthen our digital sovereignty and thus Germany's overall competitiveness." A first important step would be to develop Germany into a hot spot for the chip industry. "We need a turnaround and we need it now. Strengthening our digital sovereignty and competitiveness should be at the top of the agenda in the second half of the legislative period."

Without imports, every second company would only be able to survive for a short time

A large majority of companies that import digital technologies or services from abroad believe that they would only be able to survive for a short time if imports were suddenly no longer available from abroad. Just over half (57 per cent) could survive for 13 to 24 months. 19 per cent would be able to survive for seven to twelve months, and 12 per cent only for up to six months. Seven per cent of companies could survive for longer than two years.

At the top of the import list are end devices such as smartphones or laptops, which 94 per cent of companies import. Three quarters (76 per cent) import digital components or hardware components such as chips, semiconductors or sensors. Two thirds (69 per cent) source software from abroad and 67 per cent cyber security applications such as firewalls. The proportion of companies that source digital devices and machines for production from other countries (63 per cent) is similar to that for digital services such as app programming or IT consulting (55 per cent). Dependence on raw materials for IT hardware, such as metals or rare earths, is lower than generally assumed. They are only imported by 3 per cent of companies.

Digital business with Russia has come to a complete standstill

The most important countries and regions of origin are the EU, the USA and China. 84 and 83 per cent of companies source their digital technologies or services from the EU and the USA respectively. Half of them even import digital technologies or services from there frequently, and one in three in individual cases. China follows in third place, with 74 per cent of companies importing digital technologies or services from there (frequently: 50 per cent, in individual cases: 24 per cent). Japan and Taiwan follow a long way behind with 29 and 28 per cent respectively. (Japan 8 per cent frequently, 21 per cent in individual cases; Taiwan 10 per cent frequently, 18 per cent in individual cases). The United Kingdom (UK) is close behind with 25 per cent (frequently: 9 per cent, in individual cases: 16 per cent). India is gaining in importance, with 15 per cent of companies now sourcing digital technologies or services from there (frequently: 9 per cent, in individual cases: 6 per cent). Ukraine also plays a major role for German companies as a supplier of digital technologies or services: a total of one in ten (frequently: 3 per cent, in individual cases: 8 per cent) imports from there. Every twentieth company (4 per cent) sources digital technologies and services from Israel. However, not a single company surveyed named Russia as a trading partner. "The German economy needs strong, trustworthy partners for the digital transformation. However, it must also avoid one-sided dependencies," emphasises Bitkom President Wintergerst.

Digital exports mainly go to EU countries

A good third of German companies (31 per cent) export digital technologies and services abroad - predominantly to EU countries (96 per cent), but also to the USA (54 per cent), Japan (52 per cent), the UK (51 per cent), India (47 per cent) and China (43 per cent). Almost 3 in 10 companies (30 per cent) export digital goods and services to Israel and 11 per cent to Ukraine. Exports to Russia, on the other hand, have virtually come to a standstill. Which applications are at the top of the export list? 23 per cent sell software, just as many (23 per cent) sell digital services such as app programming or IT consulting. The figures are slightly lower for digital parts and hardware components (15 per cent), digital devices and machines (13 per cent), end devices (7 per cent) and cyber security applications (4 per cent). 66 per cent of German companies do not sell any digital technologies or services abroad.

Prices and legal certainty are the most important criteria when choosing business partners

When choosing foreign business partners in connection with digital products and services, security and trust play a decisive role in addition to price and performance. Almost all companies (98 per cent) cite financial conditions as an important criterion and 91 per cent the technical expertise of the business partner. Legal certainty in the country of the business partner (97 per cent) and the IT security standards of the partner company (89 per cent) are ranked similarly highly. The social or ecological commitment of the business partner is an important criterion for 63 per cent.

Companies are taking targeted measures to strengthen their independence and digital sovereignty, particularly through diversification. In their supply chains, 61 per cent ensure that they source components and services from different countries or regions. 58 per cent have already significantly reduced business relationships in certain countries due to political developments. However, every second company (53 per cent) also admits that they are forced to take risks with regard to the reliability of policies at their partners' headquarters. 39 per cent see virtually no defence against foreign partners or governments putting them under pressure.

Concerns about dependence on China in particular

Confidence in the global economic areas varies. More than two thirds (69 per cent) are concerned about the German economy's dependence on China - 38 per cent say the same about dependence on the USA. Wintergerst: "Germany's own competences are essential in order to be able to act on an equal footing internationally. This is only possible if Germany strengthens its position."

Companies rate political efforts with a grade of 5.1

A look into the future also shows how urgently this is needed. Currently, 88 per cent of companies believe that Germany is heavily dependent (39 per cent) or somewhat dependent (49 per cent) on digital technologies and services from abroad. Only a minority of 6 per cent assume that this dependency will have decreased in five years. A third (36 per cent) expect the status quo to continue, while one in two companies (55 per cent) anticipate an increase in dependency. So far, companies are not very satisfied with the German government's current efforts to increase Germany's digital sovereignty and only rate the relevant measures with a school grade of 5. Wintergerst: "The figures must be a wake-up call for politicians. Strengthening our digital sovereignty will determine our future competitiveness and resilience. In the digital space, Germany and Europe must become a strong, self-confident, digitally sovereign player."

Bitkom proposals for digital sovereignty

Wintergerst believes that both the German government and the EU have a duty to take a more strategic approach to the issue. The coalition agreement and the digital strategy contain a wealth of goals and individual measures - from the activation of private capital for start-up financing to the further development of the data economy - but as is so often the case in digital policy, there is a lack of a joint, cross-departmental approach. This will be difficult to achieve in the current legislative period, but should already be at the top of the to-do list for political decision-makers. Wintergerst: "Firstly, the ball is in the EU's court. In recent years, the EU has unleashed a tsunami of regulation and tightened the corset around the digital economy, often driven by Germany. In future, the main question must be how the conditions for local innovation drivers can be improved in a targeted manner so that they strengthen our digital sovereignty as an economy and thus our resilience as a country. Germany and Europe need an agenda for digital sovereignty."

From Bitkom's point of view, three areas need to be addressed:

Increasing competitiveness: creating framework conditions that promote innovation, including by closing the IT skills gap, reducing bureaucracy and digitalisation in administration and striking a new balance between data protection and data use.
Strengthening key technologies: Moving away from the scattergun approach still practised in research funding towards focussed funding of key digital technologies with a leverage effect. Such key digital technologies include, in particular, artificial intelligence, quantum computing, the industrial metaverse and IT security. The expansion of Germany into a hot spot for chip production is also part of this. National measures must be closely dovetailed with activities at EU level.
Promotion of fields of application: Focus on technology interfaces between strong industries established in Germany and digital applications. There are worthwhile fields of application in digital medicine and autonomous, intermodal mobility, among others. Digital ecosystems need to be established in these areas. The introduction of super depreciation could massively increase the necessary digital investments.

Bitkom President Dr Ralf Wintergerst: "Despite all the crises: We are living in an era of opportunity. Never before has such a wealth of new, fascinating technologies emerged in such a short space of time. Germany missed out on the first two waves of digitalisation, which were driven by the Internet and the smartphone. With AI, quantum computing and the industrial metaverse, Germany now has the chance to play a leading role again. We must and can develop core competences in key digital technologies. Establishing digital sovereignty must become the core of German economic policy in the future."