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This page has been designed to give an overview of domestic production in Canada. Particularly in the areas of research and development, software development, and hardware manufacturing. These topics will highlight some statistics about hardware production by category and the major players are in the field. The size and complexity of software development is important therefore, the analysis will take a look at package software and services with particular attention to the key players. Finally, Canada is on the forefront of information technology and has current initiatives to become a world leader. This analysis will discuss how Canada has positioned itself to be a global leader and the amount, if any, of  ICT exports.

Hardware Manufacturing

There have been many changes in this industry over the last decade and the impacts have had a great deal to do with specific information technology leaders, Canada is no exception. Back in 1994 the computer hardware industry was comprised of approximately 300 companies employing 14, 000 people and ranked #6 in the world in the amount spent on IT Hardware Manufacturing (see figure 3).

Canadian Computers and Peripherals Equipment Sector 

The computers and peripherals equipment industry in Canada manufactures a wide range of products used in various computing applications, including computer systems, (e.g. mainframes, personal computers, and work stations); peripheral equipment (e.g., printers, plotters and scanners); computer storage equipment and devices (e.g., hard and floppy disk drives, optical disk drives and disk arrays); loaded computer-processor boards; unpacked computer subsystems (e.g. video and audio boards, process controller boards, local area network (LAN) interface boards, telecommunication network interface and other peripheral performance enhancing boards; and computer terminals, i.e. computers without a central processing unit (CPU) microprocessor). The task of classifying computer goods within the appropriate industrial and harmonized trade classification code is increasingly challenging. Much of this difficulty is brought about by the rapid technological advances and the convergence of analog and digital processing equipment. Computer technology is converging with the consumer electronic industry (household computers, monitors, HDTV, CD-ROM, and electronic games) and the telecommunications equipment industry. Comprised of approximately 200 manufacturers in Canada, this industry employs an estimated 14,000 people. The Canadian computers and peripherals market is heavily influenced by the presence of several U.S. multinationals. It is estimated that 66 percent of Canadian output in this sector is produced by foreign multinationals operating in Canada. Canada's computers and peripherals equipment output is estimated at US $5.7 billion in 1997.

Only a third of the establishments in Canada have 10 employees or more. Geographically, the industry is concentrated in Ontario (70 percent of shipments) and Quebec (20 percent of shipments), with a small but growing number of firms in British Columbia. The Canadian computers and peripherals industry exports between 80-85 percent of its production, as compared to about half for other Canadian manufacturing industries. During the 1988-95 period, Canada's exports in this sector have increased at a rate of 16.2 percent per year, reaching US $4.5 billion in 1995. In contrast, total Canadian imports of computers and peripherals have grown at an average annual rate of  5.9 percent during this period. Corresponding to this modest growth in imports, Canada's domestic market for computers and peripherals has grown at a slow pace of three to five percent annually, reaching an estimated US $5.7 billion in 1997.

Since the majority of Canadian computer hardware and peripherals companies are small and medium-sized firms, with limited product lines, the Canadian computer hardware and peripheral equipment market presents many opportunities for U.S. manufacturers. U.S. computers and peripherals equipment manufacturers account for 58 percent of the total Canadian computer hardware and peripheral equipment market.

Canadian Computer Storage Devices Sub sector Overview

The Canadian computer storage devices (CSD) market was valued at US $770 million in 1995. In 1996, CSD sales totaled US $897 million and are projected to continue expanding in 1997 by a real rate of 13.8 percent, reaching an estimated US $1.04 billion. Projected CSD real market growth of 13-16 percent per year during the period 1998-2000 will be fueled by information dependent businesses that demand higher capacity devices to accommodate emerging technologies such as intranets, the Internet and LAN-based client-server products that require high capacity storage solutions.

With exports to Canada estimated at US $381 million in 1997, U.S. manufacturers will account for 37 percent of total Canadian CSD market demand. U.S. CSD exporters will have good future sales opportunities in Canada for Hierarchical Storage Management (HSM) systems, Intelligent Storage Management (ISM) systems, Digital Video Disk (DVD) and Redundant Array of Inexpensive Disks (RAID) storage technologies.

With an estimated value of US $115 million in 1997, Canadian production of CSDs is small relative to overall market demand. U.S. CSD exporters to Canada face stiff competition from Asia-based manufacturers. However, the North American Free Trade Agreement (NAFTA) provides trade advantages to U.S. CSD exporters which are not available to third country suppliers in Canada. U.S. CSD exports to Canada are projected to grow at a real rate of 13-15 percent annually during the period 1998-2000.

[source: Industry Canada]

The Canadian computers and peripherals market is projected to grow at a real rate of  8.2 percent to US $10.5 billion in 2000. Canada is a prosperous country, with a population of 31 million and approximately 9 million households. While demand for computers from the business sector is large, the major force in the computer market will be household demand. This growth is a result of lower component prices, which led to the introduction of high performance PCs under US $1,000. Canada has the world's highest penetration of PCs on a per capita basis and is one of the best-wired nations on earth. 

Canadian governmental organizations and corporations of all sizes will continue to invest in computers and peripherals as part of their corporate strategy to maintain competitiveness in the global economy. Computers are used to automate back and front office operations for work tasks and enhanced efficiency. 

Applications such as e-commerce, the Internet and telecommuting are also fuelling purchases of new equipment and peripherals in all segments of the Canadian market. e-commerce and the Internet in particular are strong drivers of networking hardware, one of the most dynamic sectors of the computer hardware industry. 

US companies are expected to remain the primary suppliers of computer hardware and peripherals to Canada. American companies with competitively priced products, effective distribution channels, and strong customer service programs can expect to profit from the growth in computer hardware and peripheral sales in Canada well into the millennium. 

ICT revenues were estimated at $123 billion in 2001, a decrease of 8.2% from 2000.

The ICT manufacturing and wholesaling industries' revenues dropped by 30.2% and 7.1% respectively in 2001. These declines are following a period of strong growth which reached its peak in 2000. The most affected industries were the wired communications equipment industry (-50.1%) and the semiconductor and other electronic component industry (-38.1%).

Revenues in the ICT services industries kept growing in 2001 (7.9%), with a substantial increase of $2.5 billion in software and computer services. Revenues in the other ICT services industries also went up (by 5.7% in telecommunications services and 14.1% in cable and other program distribution). 

The decline observed for 2001 in ICT manufacturing and wholesaling industries, combined with continuous growth in ICT services industries, significantly changed the distribution of ICT revenues. Indeed, the share of services industries increased to 53.5%, while the shares of manufacturing and wholesaling industries went down to 26.0% and 20.5% respectively. 

Revenues for the entire ICT sector grew at a CAGR1 of 8.2% over the 1995-2001 period. Once again, the software and computer services industries showed the strongest growth with a CAGR of 17.1%. 

1 Due to methodological changes in both 1997 and 1998, data covering the 1995-1996 period are not strictly comparable to data for subsequent years.
2 Due to methodological changes in 1997, data are not strictly comparable to data for previous years. Starting in 1997, data are the aggregation of NAICS 51121, 514191, 51421 and 54151.
3 Due to methodological changes in Telecommunications Services and Software and Computer Services, data covering the 1995-1996 period are not strictly comparable to subsequent years.

[Sources: Statistics Canada and Industry Canada].
All underlined figures are Industry Canada estimates

Software Development

Canadian Computer Software Market Overview

The Canadian software market was valued at US $3.1 billion in 1997 and US $3.5 billion in 1998. In 1999 this market is projected to be worth US $4.1 billion and is expected to grow at an annual rate of approximately 12-14 percent between 1999 to 2001. Software sales in Canada will be driven by continued growth in the use of the Internet, Intranets and deployment and development of associated applications. The universal acceptance of Intranets, the need to connect heterogeneous computers with a wide range of processors, operating systems, configurations and devices will continue to require connectivity software. IT systems in today's enterprises are no longer processor or server-centric but network-centric. Application development is no longer process-centric, but data-centric. Similarly, information technology is moving toward being business-centric, rather than technology-centric. These shifts result from the need to provide information on demand and will continue to propel software demand in Canada.

U.S. companies continue to be the dominant suppliers of computer software to the Canadian market with a 52.4 percent share of the total market. However, Canada's indigenous computer software industry has developed strong companies that have achieved international recognition as market leaders in their product niches. Third-country competitors that supply less expensive programming and software services continue to maintain a presence in the Canadian software market and should not be ignored by U.S. suppliers.

Canadian Speech Recognition Software Market Overview Speech recognition is a rapidly growing area of the Canadian software market. Rapid advances in computing power accompanied by exponential decline in the price of Speech Recognition Systems (SRS) has given speech recognition wide acceptance in Canada. While SRS was historically more accepted in vertical markets, the industry is moving toward the development of horizontal speech recognition applications for commercial and mass-market applications. SRS has the potential to radically change the way Canadians interact with computers. 

In the short term, the impact of SRS will be seen mostly in the consumer market, particularly in consumer electronic products and in telephone-based applications for e-commerce. Developments in mobile applications will also drive the SRS market in Canada Canada's wireless communication industry is growing rapidly.  Over the next decade, mobile wireless products for personal communication are expected to be used by almost 40 percent of Canadians. The move toward standardization in speech technology will result in the development of a wide range of SRS applications and will further SRS market growth in Canada. Excellent SRS sales opportunities are also expected in Canada's data processing/business sector. However, the consumer market will offer the greatest potential, especially in high volume consumer electronics products.

No statistics are available on the Canadian SRS market, but the market in Canada mirrors that in the United States. IBM, Dragon Systems, and Lernout and Hauspie dominate the SRS market in Canada. Northern Telecom's recent efforts to establish itself in the SRS market will make it a considerable force in the SRS arena. Currently, most Canadian developments related to SRS revolve around the resale, integration and customization of SRS. Under the terms of the North American Free Trade Agreement, there are no tariff barriers to computer hardware and software trade between Canada and the United States. All U.S. computer hardware and software exports to Canada are duty free. The North American Free Trade Agreement (NAFTA) provides trade advantages to U.S. SRS exporters, which are not available to third country suppliers in Canada.

Software sales in Canada will be driven by continued growth in electronic commerce, the Internet, Intranets, and the development and deployment of associated applications. The universal acceptance of Intranets and the need to connect heterogeneous computers with a wide range of processors, operating systems, configurations, and devices will continue to require connectivity software. The industry is concentrating its efforts on developing Internet-based software to complement the Internet's growth. 

The need to provide information on demand will continue to propel the software market in Canada. The software industry is focusing its efforts on converting software products to web-enabled applications, making it possible for companies to instantly update their software on all types of computers simultaneously. This concept enables companies to outsource the maintenance and administration of software to systems integrators and application service providers. 

US companies are the dominant suppliers of computer software to Canada with a 52 percent share of the total market. However, Canada's indigenous computer software industry has developed strong companies that have achieved international recognition as market leaders in their product niches. Third-country competitors supplying less expensive programming and software services also have a presence in the Canadian software market. 

Research & Development (R&D)

Total Canadian private sector R&D expenditures are expected to be $11.2 billion in 2002, down 6.1% from 2001. Despite a decrease of 13.4% in 2002, the ICT sector remains the largest private sector R&D performer in Canada with total expenditures of $5.2 billion. This decline is mainly due to major reductions by the communications equipment industry (including wires and cables) which is planning to cut its R&D expenditures by 21.7% or $726 million in 2002. Nevertheless, with planned expenditures of $2.6 billion, this industry still accounts for half of ICT sector and almost one quarter of total Canadian private sector R&D expenditures. Despite the decline expected for 2002, R&D expenditures in the ICT sector grew at a CAGR1 of 7.8% compared to 5.2% for the Canadian private sector over the period 1997-2002. As a result of this higher growth, the ICT sector's share of all private sector R&D expenditures grew from 40.7% to 45.9% during this period. 

[Source: Statistics Canada]