The outlook for the information and communications technology (ICT) sector is much less favourable than in recent years. With economic conditions deteriorating, recession in the OECD area and business and consumer confidence falling sharply, global projections for ICT spending have been revised sharply downwards. Macroeconomic forecasts, short-term cyclical output indicators and business and consumer activity show ICT growth in OECD countries to be slower in 2008 than in 2007 at around 4%. But growth has not yet collapsed as it did in 2001-02 with the ending of the ICT bubble, and so far it has remained somewhat stronger than OECD economies’ performance as a whole.

The current outlook for the ICT sector is much less favourable than at the time of the last edition of this publication, in 2006. The macroeconomic outlook has progressively worsened and both business and consumer confidence in OECD countries have fallen sharply. Projections both in general and for the ICT sector have been successively revised sharply downwards. Macroeconomic forecasts combined with business and consumer sentiment suggest that ICT growth in OECD countries slowed rapidly in 2008 but is unlikely to collapse as it did in 2001. Overall, the near-term outlook for OECD countries is for a maximum of 4% ICT growth in 2008 and zero or below until the end of 2009, with very different performances across segments and markets. As in the last downturn, there is also likely to be considerable pressure on OECD ICT employment owing to increasing competition from non-OECD economies and global industrial restructuring in ICT goods and services. Global ICT markets are also shifting to non-OECD economies, and the top 250 ICT firms include increasing numbers of non-OECD firms. The long-term performance of the ICT sector will depend on whether new goods and services will continue to prompt businesses and consumers to keep investing in and buying ICT output and the extent to which non-OECD economies maintain their more dynamic growth paths.

Global restructuring of ICT production continued in 2007 and 2008, with Asia, Eastern Europe, Mexico and some new locations becoming increasingly important as producers and growth markets. Global ICT trade has expanded strongly and was almost USD 1.5 trillion higher in 2007 than the peak of 2000. ICT trade slowed in 2007 and the first half of 2008 as world economic conditions weakened. Nevertheless, ICT trade continued to increase, due to the resilience of some OECD ICT imports and strong demand from some emerging markets. An important question is whether the demand for new ICT products, coupled with growth in emerging economies (in Asia but also in other countries) will compensate for the very sharp downturn in OECD countries. ICT-related FDI increased to historically high levels in 2007 with non-OECD economies increasingly active, notably in ICT mergers and acquisitions, but with a marked slowdown in global merger and acquisition activity and FDI flows in 2008 as the OECD area went into recession. 

The ICT sector is in the lead for R&D expenditures, employment, and patents. The software and semiconductor segments are particularly R&D-intensive. The share of ICT R&D conducted in non-ICT industries is also high (about one-quarter of total ICT R&D) and in some non-ICT sectors, ICT R&D spending (especially softwarerelated) makes up a large share of total R&D budgets. The United States and Japan still have a large lead in terms of ICT R&D expenditures by businesses, but countries such as Korea and some non-OECD economies are catching up. The organisation of ICT R&D is continuing to develop and change around new kinds of business collaboration and internationalisation. 

Use of the Internet and broadband is spreading rapidly, and 1.5 billion people now have Interent access. Their socio-economic characteristics influence how they use the Internet, and there is evidence that new kinds of “digital use divides” based on these socio-economic differences are appearing as the original digital access divides narrow. These new divides will need policy attention if they are to be overcome. 

Digital content is an important driver of the ICT industry, spurred by the rapid increase of OECD broadband subscribers, mobile broadband technologies and development of the participative Web. Digital content markets have annual growth well over 20% in the industry sectors analysed in this chapter (advertising, games, music, and film) and increasing shares of total revenues, but with significant differences among them. As new revenue streams and business models develop, functions and control along the value chain are shifting among established and new participants to dominate different parts of it. Cross-industry collaboration and new business partnerships are developing and new entrants and online business models are emerging. Despite fast growth the goal of digital content “anywhere, anytime and on any device” is still hampered by structural factors. 

Broadband and networked ICTs are diffusing rapidly, but there are significant differences in use among countries, sectors and firms, and their manifold impacts are only beginning to be felt. Broadband and networked ICTs are important for meeting environmental, health and demographic challenges, and policy plays an important role in expanding their use and enhancing their impact. 

Information and communication technologies are increasingly seen as a source of innovation, growth, and employment. ICT policies are being integrated into longterm socio-economic strategies and co-ordinated across government, but levels of co-ordination differ. This chapter outlines recent policy changes and continuities in national ICT policies. Highly prioritised policy areas include: fostering innovation in and through ICT R&D, improving online government activities, spreading broadband, increasing the diffusion and use of ICTs, raising ICT skills and employment, and supporting digital content development. Policies to promote RFID applications are relatively new, but dedicated programmes are in place in one half of OECD countries. Lack of consistency in policy assessment and evaluation remains an important weakness, including evaluation of broadband uptake and use. 

This annex describes the definitions and classifications adopted in Chapters 1, 2 and 3 of this edition of the OECD Information Technology Outlook. These definitions and classifications, and the data collected on the basis of them, draw wherever possible on work by the OECD Working Party on Indicators for the Information Society (WPIIS) which seeks to improve the international comparability and collection of statistics and data on the information economy and information society.