Published on the 17/11/2023 | Written by Heather Wright
On track for $30b market in next decade…
New Zealand’s top 200 technology export companies logged more than $17 billion in revenue in FY23, with fintech surpassing healthtech to become the countries biggest grossing tech sector, and North America on track to surpass Australia as the biggest geographic market.
The latest Technology Investment Network (TIN) Report shows total revenue for the top 200 Kiwi technology export companies was up 11.8 percent – or $1.8 billion – to $17.1 billion. Seventy-seven percent – or $13.2 billion – was earned offshore, securing tech as New Zealand’s second largest export earner, behind dairy, for the third consecutive year.
“When the tech sector is doing well, everyone is going to do well.”
Speaking to iStart ahead of today’s launch of the TIN Report, Alex Dickson, report author and TIN head of research, says in the next decade the sector could double to over $30 billion for the TIN 200 companies – so long as skills and capital are forthcoming.
“The growth of the New Zealand tech sector over the last five years has been strong and reliable and it has accelerated a little bit in the last couple of years. Tech looks increasingly resilient – it’s not getting hit by some of the global shocks and flux we’re seeing, so we don’t see growth abating,” he says.
But the insatiable demand for tech skills and capital to support the growth are two areas where New Zealand could come unstuck. Tightness in the job market continues to drive up tech wages – which are now pushing $100,000 for the average worker.
The sector doubled in size in the last 10 years, largely due to the doubling of companies with revenue over $50 million – up from 33 in 2013 to 65 in 2023, with the ecosystem achieving a critical mass of profitable firms that have achieved economies of scale and self-sustaining growth, driven by the expansion of their global footprint.
The kind of technology New Zealand is producing is also giving confidence for a strong future, he says.
“The world is looking for solutions that make commerce more efficient, improve agri particularly in respect to carbon emissions and there’s always demand for new technology in health care and those are all things New Zealand does well, and it seems to be working for us so far.”
Kiwi fintech, agritech, healthtech and even aerospace offerings are seeing strong demand.
In something of a surprise, fintech, after five years of very strong growth, has overtaken healthtech to become New Zealand’s biggest grossing sector this year. It has expanded at a rate of 22.7 percent per annum for the last five years, and now accounts for one in every six tech dollars captured by the top 200 kiwi tech companies.
Dickson points to substantial growth in the North American market – where revenues were up 19.4 percent, or $682 million, to $4.2 billion – as another surprise.
“It looks as if North America will become the most important destination for New Zealand tech exports possibly next year. That would take them ahead of Australia. That’s huge.”
Other traditional markets, including Australia (up 10.5 percent to $4.3 billion) and Europe (up 11.6 percent to 2.1 billion), also saw substantial growth.
Company-wise, Fisher & Paykel Appliances was the top company by revenue for 2023 – logging $1.7 billion, followed by F&P Healthcare ($1.6b) and Datacom ($1.5b). Xero logged the highest dollar growth, followed by F&P Appliances and RocketLab. Among the scale-ups, Pacific Edge, Quick Circuit and Nautech Electronics were the top highest dollar growth tech firms.
Perhaps foreshadowing Dickson’s concerns about capital, investment deals for the year were down, with total capital raised also dropping from $984 million to $670 million as offshore investors scaled back amid a global start-up funding crunch. The average pre-series A raise also dropped, but series A+ raises were up.
M&A activity also fell.
And while the TIN 200 firms recorded underlying profit of $2.4 billion, that’s still below the 2021 highwater mark, the report notes, with biotech, and ICT firms, which banked profits of 5.1 percent and 10.1 percent of total revenue, respectively, were investing higher portions of revenue in R&D than high-tech manufacturers, who recorded returns of 18.7 percent of sector revenue.
The report notes that job growth fell from 8.5 percent to 3.1 percent, with onshore jobs falling by 193 to just over 32,700.
However, Dickson says that’s a market correction after a flurry of local hiring in the last two years, and offshore growth looks like it is about to surpass onshore growth – indicative of the reliance of TIN 200 companies on offshore markets and wanting boots on the ground to serve them. That growth – offshore workforces were up more than 2,100 to 31,145, is coming through both hiring of teams, and through acquisitions in some markets.
Productivity also increased, with tech workers delivering more bang for buck. The report says $268,170 of value was contributed per employee in 2023, up 8.5 percent on the year prior.
“It’s really positive to see labour productivity up,” Dickson says.
“New Zealand has struggled with productivity for quite a long time and the tech sector as a whole and its ability to provide innovations across different industries whether agriculture, commerce or manufacturing, is going to lift productivity as a whole.
“When the tech sector is doing well, everyone is going to do well. It’s high value, high wage, so if we want to improve productivity in-house doing it through the tech sector is a really good way to do it.”