The digital transformation affects all industries – including both manufacturing and services – albeit at different speeds and scales. The extent to which digital-intensive industries are integrated into global value chains (GVCs) can be measured by tracking the origins of value added embodied in final demand. Estimates of foreign value added in domestic demand highlight the importance of production activities abroad in producing final goods and services for domestic consumers, both directly (through imports of final goods and services for consumption) and indirectly (as a component of domestic output consumed locally).
While digital-intensive industries account for about 44% of global production, on average in the OECD, they are the origin of half of the foreign value added needed to satisfy domestic demand. There is some variation across countries, with shares of over 60% in Ireland and Switzerland (representing 31% and 20% of total final demand, respectively), while in Latvia and Lithuania only 40% of foreign value added in final demand comes from more digital-intensive sectors.
Large economies such as Brazil, China, Japan and the United States, have much lower shares of foreign value added in domestic final demand, as they have a greater internal capacity to produce final goods and services (and the necessary intermediate products) to meet domestic demand. However, while the United States has the lowest share of foreign value added in domestic demand of OECD countries (12%), the sheer size of its economy means that in USD terms it is by far the biggest consumer of foreign value added: 2.2 USD trillion, of which, 1.2 USD trillion (55%) comes from more digital-intensive industries.
In the specific case of information industries, on average in 2015, 45% of the value of information industry products produced worldwide consisted of foreign value added (compared to 39% in total manufactures and business services). This value ranged from more than 80% in Luxembourg and 60% in Estonia to less than 20% in Israel and the United States. Regional interdependence is clear, especially in EU countries, for which other members are a key source of demand for information industries’ products.
The production of manufactured goods relies on a range of intermediate service inputs, from wholesale and transport to IT, finance and other professional business services. This is reflected in the service content of manufactured exports which, on average, accounted for one-third of the value of manufactured exports in OECD countries in 2015. Of this, 75% came from digital-intensive services activities (both domestic and foreign). In other words, on average, 25% of the value of manufactured exports comes from digital-intensive services industries such as ICT and financial services. For some countries, notably Ireland, Luxembourg and the Netherlands, this share exceeds 30%, while for most large countries the shares range from 18% to 23%.
